On March 18, 2026, the Federal Trade Commission (FTC) announced a record-breaking settlement against Xponential Fitness for deceptive practices under Section 5 of the FTC Act and the Franchise Rule. The $17 million settlement is the largest monetary redress for franchisees in a Franchise Rule action.
What is the FTC’s Franchise Rule and what does it require?
The Franchise Rule, promulgated by the FTC in 1978 and substantially revised in 2007, governs required presale disclosures by franchisors to prospective franchisees nationwide. The rule establishes comprehensive disclosure requirements that franchisors must satisfy when offering or selling franchises in the United States.
The Franchise Rule aims to prevent deceptive trade practices by requiring franchisors to provide franchisees with accurate and complete franchise disclosure documents (FDDs) at least 14 calendar days before a prospective franchisee signs a binding agreement or makes any payment. The Franchise Rule provides detailed instructions on how to prepare FDDs. The rule requires specific formatting and that FDDs contain detailed disclosures across 23 categories of information, including details about the franchisor’s business, the franchises offered, financial performance representations, initial and ongoing costs, and the franchisor’s litigation history.
What were the FTC’s allegations?
In its complaint, the FTC alleged that Xponential failed to live up to its legal obligations to franchisees. Specifically, Xponential failed to provide prospective franchisees with legally mandated information to evaluate the costs, risks, time to open and operate studios, and other essential details about the company’s operations.
According to the FTC, Xponential falsely claimed that franchisees could typically have their franchise studios fully operational within six months of signing the franchise agreement. In fact, studios typically required more than a year to open, and in multiple cases, they never opened at all. Xponential knowingly misrepresented the time required for a franchise to become fully operational, and as a result, franchisees incurred unexpected and substantial costs.
The FTC also alleged that Xponential failed to disclose that CEO Anthony Geisler engaged in the sale and operation of the franchises and that Geisler had repeatedly been sued for fraud. Further, Xponential neglected to inform franchisees that its former president of franchise development had filed for bankruptcy. These material details about Xponential’s executives are all required disclosures under the Franchise Rule.
The FTC further alleged that Xponential failed to report the names and contact information of franchisees that had ceased operation within the past year in violation of the Franchise Rule. When contact information was disclosed, the information was often outdated. Xponential’s failure prevented prospective franchisees from fully assessing studio turnover rates and obtaining information from prior purchasers.
Lastly, the FTC alleged that Xponential failed to provide accurate and complete FDDs to franchisees within the 14-day requirement. Xponential’s failure prevented franchisees from reviewing vital information about Xponential’s offerings and risks before they entered into a 10-year franchise agreement and paying, on average, $45,000 per studio.
What penalties were imposed?
The FTC and Xponential agreed to a monetary settlement of $17 million to provide relief to affected franchisees. This settlement was touted by the FTC as the largest consumer redress amount from an alleged Franchise Rule violation in its history. The settlement also prohibits Xponential from making misrepresentations to prospective franchisees in the promotion, sale, or offering for sale of any franchise and requires Xponential to otherwise comply with the Franchise Rule and provide a compliance report one year after the settlement is entered into.
Conclusion
This settlement was one of the first major actions by the FTC's Joint Labor Task Force and the first under the Franchise Rule. This action makes clear that the Franchise Rule and companies subject to its provisions are of interest to the Trump-Vance FTC. Companies with significant franchise operations should consider taking this announcement as an opportunity to evaluate their own compliance with the Franchise Rule and the sufficiency of their FDDs. Failure to comply with the rule’s detailed provisions can result in significant financial penalties, conduct restrictions, and reputational harm.
If you have any questions, or would like additional information, please contact one of the attorneys on our Consumer Protection/FTC team.
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