The Federal Trade Commission announced Oct. 5 that Premier Franchising Group, the franchisor behind Premier Martial Arts, and its former franchise sales organization, Franchise Fastlane, agreed to proposed settlements totaling $1.85 million. The FTC says the companies misled buyers about what the franchise could earn and broke the agency's Franchise Rule.
According to the complaint, the companies claimed that people with no martial arts background could profitably run one or more studios on a semi-absentee basis, working under 15 hours a week. The FTC says more than 200 consumers, including veterans, paid an initial franchise fee of $49,500 or more. They then spent hundreds of thousands of dollars building and running studios, and many took on significant debt.
The complaint also says Premier's 2020 to 2022 franchise disclosure documents reported strong studio earnings without a reasonable basis to say new franchisees could match them, because existing studios were often larger than the ones new owners were advised to open. It adds that sales staff made income claims that were not in the disclosure documents.
Under the proposed orders, Premier Franchising Group faces a $3,875,424 judgment that is partly suspended once it pays $650,000, and Franchise Fastlane will pay $1.2 million. The money is meant to compensate franchisees. Premier must also send certain franchisees a notice offering the right to cancel their agreements with no penalty. The orders carry the force of law only once the federal court in the Eastern District of Tennessee approves them.