Xponential Fitness, the parent company behind Club Pilates, has agreed to shell out roughly $3.97 million to New York franchise owners after state investigators found the company misled buyers about how quickly they could open their studios. The Office of the New York Attorney General (OAG) concluded that franchise disclosure documents touted buildout timelines of three to six months, even though many locations took more than a year to launch. The payout is set to reimburse dozens of small business owners, including some whose studios never opened at all.
The settlement surfaced publicly on June 10 in reporting by Crain's New York, which detailed the agreement and the OAG’s findings about Xponential’s disclosure practices. According to that coverage, the deal caps an investigation into dozens of franchise disclosure documents filed in New York over several years. Xponential runs a suite of boutique fitness concepts — including Club Pilates, Pure Barre and StretchLab — that it sells nationwide through franchise agreements.
What the attorney general found
Attorney General Letitia James cast the settlement as the office’s largest financial recovery to date under New York’s Franchise Sales Act and said Xponential “misled small business owners with false promises,” according to the New York Attorney General. The OAG said that from Jan. 1, 2020, through Dec. 31, 2024, Xponential filed about 33 franchise disclosure documents in New York that estimated openings within three to six months, while the office’s review found that actual openings took more than 13 months on average. Regulators concluded that the gap between the promised and real timelines saddled some franchisees with unplanned costs and kept others from opening at all.
Federal and state enforcement has piled up
The New York settlement comes on the heels of a major federal enforcement action in March, when the Federal Trade Commission ordered Xponential to return roughly $17 million to franchisees over similar alleged violations of the Franchise Rule, according to the FTC. A month later, Maryland’s attorney general reached a separate consent order with the company over comparable disclosure issues, the Maryland OAG said. Xponential’s 2026 filings with the Securities and Exchange Commission also note multiple state-level probes and temporary pauses on franchise sales while its franchise disclosure documents were revised, according to the company’s 10-K, underscoring how broad the regulatory pressure has become.
Who gets the money
Under the New York agreement, Xponential is required to place $3,971,250 into a restitution fund for affected franchisees. Of that total, $3,000,000 is earmarked for roughly 70 owners whose openings were delayed, while $971,250 is set aside for 25 franchisees who never managed to open at all, according to the OAG’s press release. The office says eligible owners will hear directly from Xponential with instructions on how to submit claims. The settlement resolves New York’s enforcement under the state’s Franchise Sales Act without Xponential admitting liability.
What this means for buyers
For would-be franchise buyers, the case is a pointed reminder that glossy timelines in a sales pitch or disclosure document should be treated with caution. Prospective owners are better off cross-checking franchise disclosure document estimates against other filings, demanding detailed buildout schedules and talking to existing franchisees before signing anything. With state and federal regulators now moving in tandem on disclosure issues, franchisors are likely to face more heat over any disconnect between their marketing materials, FDDs and corporate reports. In practice, that means buyers should view the FDD as just one piece of a heavier due-diligence lift that also includes legal review and conservative financial planning.
