What is the nature of the 'Covenant Claim' that the AKT Plaintiffs have brought against Bft?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
Chordock, Elizabeth "Liz" Batterton Cooper, Alexander Cordova, Lance Freeman, Ryan Junk, Megan Moen, John Meloun, Sarah Luna, Tori Johnston, Justin LaCava, Bobby Tetsch, Brandon Wiles, Jason Losco, Brittney Holobinko, Amy Wehrkamp, Scott Svilich, Sarah Nolan, Emily Brown, Rachel Markovic, and Brenda Morris (collectively, the "AKT Defendants"): (a) violated pre-sale disclosure obligations under the California Franchise Investment Law, the Michigan Franchise Investment Law and the Florida Franchise Act by failing to provide a compliant Franchise Disclosure Document and failing to disclose certain information they contend was required to be disclosed by, and making certain statements they contend were incorrect and prohibited under, those laws some of which they contend were erroneous (the "Pre-Sale Disclosure Claims"); (b) fraudulently induced them to purchase franchises; (c) breached the implied covenant of good faith and fair dealing (the "Covenant Claim"); (d) breached a purported agreement to provide certain financing; and (e) engaged in unfair and deceptive trade practices. The AKT Plaintiffs seek rescission of various franchise agreements, actual and special damages, attorneys' fees, costs and interest. AKT Defendants have been served with the complaint, and each AKT Defendant has filed a demurrer to the complaint and/or a motion to quash the complaint.
Source: Item 3 — LITIGATION (FDD pages 14–18)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, the 'Covenant Claim' in the AKT Lawsuit refers to the allegation that the defendants, including AKT Franchise, LLC, breached the implied covenant of good faith and fair dealing. This claim is part of a larger lawsuit initiated by former AKT franchisees and their owners. The original action began when AKT sought damages from these franchisees for breaches of their franchise agreements.
The AKT Plaintiffs allege several violations, including pre-sale disclosure violations under franchise laws in California, Michigan, and Florida. They claim that the Franchise Disclosure Document was non-compliant and that certain required information was not disclosed or was incorrect. Additionally, they assert that they were fraudulently induced into purchasing franchises and that the defendants engaged in unfair and deceptive trade practices.
The plaintiffs are seeking various remedies, including rescission of their franchise agreements, actual and special damages, attorneys' fees, costs, and interest. The defendants in the AKT Lawsuit have responded by filing demurrers and/or motions to quash the complaint, indicating their intent to challenge the legal basis and validity of the claims. This lawsuit is one of several listed in the FDD involving Xponential Fitness brands and franchisees, suggesting a pattern of disputes within the franchise system.