What fraudulent omissions are alleged against Bft regarding the Xponential franchise system in the Nickle Acquisition Lawsuit?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
Nickle Acquisition LLC v. Xponential Fitness, Inc. et al., filed February 3, 2025, Superior Court of the State of California, County of Orange, Case No. 30-2025-01459041-CU-AT-CXC (the "Nickle Acquisition Lawsuit"). This action was filed by Nickle Acquisition LLC ("Nickle Acquisition"), a former franchisee of the BFT and CycleBar franchise brands, and its purported owners, Michael D. Nickle and Jana Nickle ("Nickles" together with Nickle Acquisition, "Nickle Plaintiffs"), asserting that one or more of XFI, CB, CB SPV, BFT, BFT SPV, Xponential, Xponential Intermediate Holdings LLC, Assetco, H&W Franchise Intermediate Holdings LLC, LAG FIT, Inc., H&W Investco LP, H&W Investco II LP, MGAG LLC, Anthony Geisler, Mark Grabowski, Trevor Lucas, Lou DeFrancisco, Ryan Junk, Sarah Luna, Lance Freeman, Kristie Lavasile, and Navitas Credit Corp. (collectively, the "Nickle Defendants"): (a) violated the California Franchise Investment Law for allegedly (i) failing to disclose directors, principal officers, and individuals with management responsibility and litigation and material terms of settlements in Franchise Disclosure Documents; (ii) willfully making untrue statements regarding franchisee's estimated initial investment and time to open studios in the in Franchise Disclosure Documents; and (iii) failing to timely disclose the Franchise Disclosure Documents; (b) willfully made untrue financial performance representations and other representations and failing to disclose financial performance representations in Franchise Disclosure Documents; (c) breached the franchise agreements and covenant of good faith and fair dealing by allegedly undercutting membership sales; (d) made fraudulent omissions by allegedly failing to disclose kickbacks, financial relationships, lack of standard due diligence, and material facts regarding the Xponential franchise system; and (e) committed fraudulent inducement by allegedly making misrepresentations regarding the Castle Pines CycleBar studio performance. Nickle Plaintiffs seek declaratory judgment that the franchise agreements, including the arbitration provisions, are void and unenforceable, and rescission of the franchise agreements, actual and special damages, attorneys' fees, costs, and interest.
Source: Item 3 — LITIGATION (FDD pages 14–18)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, the Nickle Acquisition Lawsuit includes allegations of fraudulent omissions against Bft and other related entities within the Xponential franchise system. Filed on February 3, 2025, the lawsuit claims that the Nickle Defendants, which include Bft, made fraudulent omissions by allegedly failing to disclose kickbacks, financial relationships, lack of standard due diligence, and material facts regarding the Xponential franchise system.
This lawsuit, initiated by a former Bft franchisee, seeks a declaratory judgment that the franchise agreements are void and unenforceable. The Nickle Plaintiffs are also seeking rescission of the franchise agreements, actual and special damages, attorneys' fees, costs, and interest. The allegations suggest a lack of transparency and potential conflicts of interest within the franchise system, which could significantly impact franchisees.
For a prospective Bft franchisee, these allegations raise concerns about the integrity and transparency of the franchise system. The failure to disclose kickbacks, financial relationships, and lack of due diligence could indicate potential risks and hidden costs associated with the franchise. It is important for potential franchisees to conduct thorough due diligence, seek legal counsel, and carefully review the Franchise Disclosure Document to understand the potential risks and obligations before investing in a Bft franchise.