Is Bft obligated to provide financing information to potential franchisees?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
From January 2022 through March 2023, franchises for BFT-branded studios ("Studios") were offered by Predecessor. To facilitate the possibility of future funding and financing opportunities (each a "Financing Opportunity") for our parent entities, in March 2023, we and our affiliates engaged in an internal reorganization (the "Reorganization"), pursuant to which we acquired from Predecessor, and currently own, the Marks (defined below) and other intellectual property related to the development and operation of Studios and the BFT System. We began selling franchises for Studios as of April 4, 2023. The Franchise Agreements, area development agreements, and certain other agreements related to Studios that were signed by Predecessor before the Reorganization were assigned to us as of December 31, 2023.
Parents and Potential Financing Opportunity
As part of the Reorganization, our direct parent, XPOF Assetco, LLC ("Assetco"), was created. As described in Item 21 of this Disclosure Document, Assetco guarantees our obligations as franchisor. Assetco's current direct parent is Xponential Fitness, LLC ("Xponential"). Xponential, via an intermediate holding company, is controlled by Xponential Fitness, Inc. ("XFI"), which is a publicly traded company listed on the New York Stock Exchange under the symbol "XPOF." We anticipate that, if a Financing Opportunity occurs, it would be conducted by newly created indirect parents (immediately upstream of Assetco) and that our and Assetco's only involvement in the Financing Opportunity would be to guarantee the obligations of our newly created indirect parents who are involved in the transaction. We expect that guarantee would cause the leverage ratio of debt to "Adjusted EBITDA" of Xponential and its subsidiaries (including us) to increase in an amount not determinable unless and until the details of the Financing Opportunity are determined. "Adjusted EBITDA" means EBITDA (net income/loss before
interest, taxes, depreciation and amortization), adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance.
Source: Item 10 — FINANCING (FDD page 37)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, there is no mention of Bft offering or being obligated to provide financing to potential franchisees. The document does mention a potential "Financing Opportunity" for Bft's parent entities, which could lead to increased debt for Xponential and its subsidiaries, including Bft. However, this refers to Bft's own corporate financing activities, not direct financing for franchisees.
Item 1 discusses a potential "Financing Opportunity" for Bft's parent entities, mentioning that it could be conducted by newly created indirect parents of Assetco. Bft and Assetco's involvement would be limited to guaranteeing the obligations of these new indirect parents. The document clarifies that this guarantee might increase the leverage ratio of debt to "Adjusted EBITDA" of Xponential and its subsidiaries, including Bft.
While the FDD does not specify whether Bft provides financing to franchisees, it is important for prospective franchisees to discuss financing options directly with Bft. This would include inquiring about any preferred lenders or guidance Bft can offer in securing funding. Understanding the potential financial implications of Bft's parent company's financing activities is also crucial for assessing the overall financial stability of the franchise system.