WASHINGTON, D.C. — Premier Franchising Group LLC and Franchise Fastlane LLC have agreed to pay $1.85 million to resolve Federal Trade Commission allegations that they misled prospective martial arts franchise owners about earnings potential and operating requirements, with some franchisees also gaining the right to exit their contracts without penalties.
The proposed settlement addresses allegations that Premier Franchising Group, or PFG, and its former franchise sales organization, Franchise Fastlane, used deceptive financial projections and misleading business representations to sell Premier Martial Arts franchises.
According to the FTC, more than 200 consumers purchased franchise opportunities after receiving claims that individuals without martial arts experience could profitably operate one or multiple studios while working fewer than 15 hours per week.
Buyers paid initial franchise fees of at least $49,500 and incurred additional expenses to establish and operate their locations. Some franchisees, including military veterans, accumulated significant debt, the agency alleged.
The FTC also challenged financial performance information included in PFG’s franchise disclosure documents from 2020 through 2022.
According to the complaint, PFG presented earnings figures from existing studios without a reasonable basis to determine whether those results were representative of what new franchisees could expect.
The agency cited substantial differences between established locations and the smaller studios recommended to new operators.
Many existing franchises occupied 2,000 to 7,000 square feet, compared with the 1,200 to 1,600 square feet recommended for new studios. Established operators also generally had significant martial arts experience, while most prospective franchisees did not.
The FTC alleged that PFG failed to disclose those differences, potentially misleading buyers about the financial performance they could reasonably expect.
The complaint further accused PFG of failing to disclose management roles held by Franchise Fastlane personnel involved in marketing and selling the franchises.
Both companies also allegedly made financial performance representations that were absent from the required franchise disclosure documents, violating the FTC’s Franchise Rule.
“Franchisors are legally required to be upfront and honest about earnings potential and the associated risks before franchisees pour their hard-earned money into a franchise opportunity,” said Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection.
Under the proposed orders, Franchise Fastlane must pay $1.2 million, while PFG must pay $650,000.
The order against PFG establishes a $3,875,424 monetary judgment, with the remaining amount suspended upon payment of the required $650,000.
The combined $1.85 million will be used to compensate affected franchisees.
PFG must also notify certain franchisees that they may cancel their existing agreements without financial penalties, providing relief beyond the monetary settlement.
Both companies would be prohibited from making the misrepresentations identified in the complaint or misrepresenting other material facts to prospective buyers. They would also be required to comply with the Franchise Rule.
The FTC voted 2-0 to authorize the complaint and proposed orders, which were filed in the U.S. District Court for the Eastern District of Tennessee.
The proposed orders will become legally enforceable once approved and signed by a federal judge.
Support the local news that supports Chester County. MyChesCo delivers reliable, fact-based reporting and essential community resources—free for everyone. If you value that, click here to become a patron today.