New York Attorney General Letitia James today announced that the Office of the Attorney General (OAG) has secured its largest ever financial settlement related to violations of New York’s Franchise Sales Act. Following an OAG investigation, California-based fitness studio company Xponential Fitness, Inc. (Xponential) and its current and former subsidiaries will pay $3,971,250 for illegally misleading small business owners. The investigation found that Xponential and its subsidiary brands, which own thousands of fitness studios across the country, misled prospective franchise owners about the timeline for opening a new location while selling them franchise licenses. Xponential’s subsidiaries included a group of fitness brands that sell franchises of their boutique exercise studios, including AKT, Body Fit Training, Club Pilates, CycleBar, Pure Barre, Rumble, StretchLab, and YogaSix.
“New Yorkers who take the risk of opening a local franchise should be able to trust that the companies they are going into business with will treat them fairly,” said Attorney General James. “Xponential misled small business owners with false promises and caused them to lose significant amounts of money. My office has secured restitution for the business owners who were misled by Xponential, and I will continue to enforce the law to ensure small businesses in New York have a fair shot at success.”
Small business owners who want to open a franchise location depend on a clear timeline from the franchising company to forecast costs, take out loans, and anticipate revenue. Franchisors are required to provide Franchise Disclosure Documents (FDDs) with accurate information about their franchise offering to prospective franchisees. These FDDs must also be filed with OAG.
From January 1, 2020, through December 31, 2024, Xponential and its subsidiary brands filed approximately 33 FDDs with OAG that represented estimated studio opening times of three to six months. However, OAG’s investigation determined that, on average, these fitness studios took more than 13 months to open from the date the franchisees executed their agreements.
Xponential knew the timelines reported to OAG and franchisees were misleading because they reported substantially longer time periods in annual reports with the U.S. Securities and Exchange Commission (SEC). In those reports, Xponential disclosed that it would take up to 12.2 months in 2022, 10.5 months in 2023, and 15 months in 2024, all far beyond the three to six months reported in the FDDs filed in New York. Xponential’s misleading timelines led to significant financial losses for some franchisees, while others were ultimately never able to open their locations.
As a result of OAG’s investigation and settlement, Xponential is required to pay $3,971,250 into a restitution account that will be distributed to impacted franchisees. $3,000,000 will be distributed to 70 franchisees who were harmed by longer-than-disclosed opening timelines. 25 franchisees who never opened a studio will receive $971,250 as compensation for franchise and transfer fees they had paid to Xponential. Franchisees eligible for restitution under this settlement will be contacted directly by Xponential.
Attorney General James is a leader in protecting small business owners from fraud and exploitation. In December 2025, legislation advanced by Attorney General James to protect consumers and small businesses from fraud was signed into law. In January 2025, Attorney General James secured a $1 billion settlement with predatory lender Yellowstone Capital for harming small businesses. In September 2024, Attorney General James secured $4.6 million for small businesses from Northern Leasing Affiliates for taking advantage of business owners with predatory lease agreements for credit card processing equipment. In April 2023, Attorney General James shut down two websites that impersonated the New York State Department of State and significantly overcharged aspiring small business owners for services provided for free from state government.
This matter was handled by Franchise Section Chief Joseph Punturo and Senior Enforcement Counsel Hannah K. Flamenbaum, with assistance from Assistant Attorney General Kate Fine, Law Intern Zackary Rettig, Legal Assistants Charmaine Blake and Renata Bodner, and Principal Accountant Sharol Thomas, as well as the entire Franchise Section. The Franchise Section is part of the Investor Protection Bureau which is led by Bureau Chief Shamiso Maswoswe and Deputy Bureau Chief Kenneth Haim. Data Scientist Casey Marescot and Akram Hasanov provided additional support, under the supervision of Deputy Director Gautam Sisodia and Director Victoria Khan, and all of the Research and Analytics Department. The Investor Protection Bureau is part of the Division of Economic Justice, which is led by Chief Deputy Attorney General Chris D’Angelo and overseen by First Deputy Attorney General Jennifer Levy.
