FTC Takes First-Ever Action Against Third-Party Franchise Sales Organization in $1.85 Million Settlement

Premier Franchising Group, the franchisor behind Premier Martial Arts, and Franchise Fastlane, its former franchise sales organization, have agreed to pay a combined $1.85 million to settle Federal Trade Commission (FTC) allegations that the companies misled prospective franchisees about the brand’s profitability and ownership requirements.

According to the FTC, the companies made deceptive and unsubstantiated financial claims that persuaded more than 200 individuals to invest at least $49,500 in franchise fees, with many taking on substantial additional debt to open their studios. The proposed settlement, which still requires court approval, includes $650,000 from Premier Franchising Group and $1.2 million from Franchise Fastlane. The funds will be used to compensate affected franchisees, and certain owners will be given the option to terminate their franchise agreements without penalty.

At the center of the FTC’s complaint were misleading claims about semi-absentee ownership and potential earnings. The companies allegedly told prospective franchisees they could profitably operate one or multiple martial arts studios while working fewer than 15 hours per week. The FTC also accused the franchisor of misrepresenting earnings in its Franchise Disclosure Document (FDD) and Franchise Fastlane of discussing profitability figures that were not disclosed in Item 19, violating the FTC Franchise Rule.

The case marks the first time the FTC has taken enforcement action against a third-party franchise sales organization for alleged Franchise Rule violations, potentially setting an important precedent for the broader franchising industry. Neither company admitted wrongdoing as part of the settlement.

Franchise Fastlane CEO Heather Harris said that the employees involved in the original sales process are no longer with the company and highlighted improvements to its compliance training and franchise sales procedures.

Meanwhile, International Franchise Association CEO Matt Haller praised the FTC’s action and called for greater accountability among parties involved in franchise sales.

“With the proliferation of new franchise brands and interest in franchise ownership in recent years, a modernized franchise disclosure regime is long overdue, as well as the resources to the FTC to increase enforcement to hold all stakeholders accountable,” Haller said. “This is why IFA continues to call for modernizing the Franchise Rule along with improving the state franchise registration process.”

Read the original FTC release here.

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