Xponential Fitness defrauded its investors by making “materially false and misleading statements and omissions regarding Xponential’s business, financial results and prospects,” according to a lawsuit filed last month.
The corporate team at the Irvine, California-based company allegedly didn’t tell its investors that its franchisees “were largely failing” and eight of the 10 brands weren’t drawing a profit on a monthly basis, notes the class action suit, filed on behalf of Xponential shareholders.
Xponential’s revenue is mainly derived from franchisees. “Despite this grim reality, Xponential snookered new franchisees to sign up with the company with false and misleading promises of robust financial returns, misleading claims regarding past studio performance and deceptive assurances of corporate support,” the lawsuit alleges.
The lawsuit was filed in the US District Court in the Central District of California. Law firm Robbins Geller Rudman & Dowd filed the suit February 9 on behalf of the City of Taylor General Employees Retirement System, and several firms nationwide filed similar suits. The lawsuit alleges Xponential made the false representations between July 26, 2021, and December 7, 2023.