Anthony Geisler had been sued for fraud more than once. His company, Xponential Fitness, gave every franchise buyer a thick legal document that was supposed to list that fact. It did not. The Franchise Disclosure Document, the thing every buyer is told will protect them, was the tool that kept them blind.
Every franchise buyer hears the same pitch. The FDD is your shield. It runs hundreds of pages. Lawyers look at it. The risks are all laid out. The system is proven, and the proof is right there in the document.
The evidence suggests something most people find uncomfortable. The FDD is not built to protect the buyer. Left unaudited, it is the seller's best sales tool.
What the Buyer Paid Before the Truth Arrived
The FTC brought its case against Xponential and reached a $17 million settlement earlier this year. It is the largest amount ever returned to franchise buyers in an FTC case. The facts under that number are worth a close read.
Buyers paid an average of $45,000 per studio up front. They signed ten-year contracts. They were told the studio would open in about six months. The real timeline ran past a year. Some studios never opened at all. In many cases, the FDD was not even handed over fourteen days before signing, the bare minimum the law requires. The cost of trusting the document was already running before a single client walked in the door.
But the fees and delays were not the core failure. The core failure was in what the document chose not to show.
The One Section That Mattered
Franchise lawyers call Item 20 the single most important section in any FDD. Here is what it does. It lists every franchisee who left the system: names and phone numbers. A buyer can pick up the phone and call someone who closed. Someone who got terminated. Someone who chose not to renew. That call is the one form of due diligence that cuts through the sales pitch. It is the only place in the process where the buyer hears from someone with nothing left to sell.
The FTC alleged that Xponential gutted Item 20. Names of closed studios were pulled out. Where names stayed, phone numbers were dead or years out of date. A buyer who tried to reach those former operators would hear nothing.
Hold that image for a moment. A person at a desk. Phone in hand. Dialing the number the document gave them. The line rings out. Nobody answers. The one act of due diligence the document was built to make possible ends before it starts.
The Pattern, Not the Person
Geisler is gone from the company. But the structure he used is not gone from the industry.
Only about two-thirds of all franchisors even share financial performance data in Item 19 of the FDD. When Item 19 is missing and Item 20 is scrubbed, the only franchisees a buyer can reach are the ones still open. The ones who closed are gone from the record. There is a name for this in the literature. It is survivorship bias. In this case, it is survivorship bias by design.
The problem is not that one bad actor lied to his buyers. The problem is that the document's structure lets the lie sit in plain sight without anyone having to call it a lie.
Franchise lawyers who studied the Xponential case called the violations "simple and common" disclosure failures. Not a scheme. Not an outlier. The largest franchise settlement in FTC history grew from the kind of errors many franchise systems treat as part of doing business.
Read It as an Adversary
The replacement rule is plain: the FDD is not on your side until you prove it is. Once that frame is set, three moves follow from it.
Move 1: Audit Item 20
first Count every name on the list. Call every phone number. Track how many connect and how many are dead. A list with ten former franchisees and six dead lines is not a clerical slip. It is a signal that the section has been cleaned for the seller's benefit, not yours.
That one step will tell you more about the franchise than the whole sales deck ever will.
Move 2: Check for Item 19
If the franchisor chose not to share financial performance data, ask why. About a third of them skip it. That is legal. It is also a choice. A franchisor with strong unit numbers has every reason to put them on the page. One that hides them has a reason too.
Move 3: Cross-check the turnover rate
Item 20 lists how many units opened, closed, and changed hands over the past three years. Healthy franchise systems run single-digit annual turnover. If that number sits above ten or fifteen percent, the gap between the pitch and the operating reality is wider than anyone on the sales side will tell you.
What Becomes Visible
Running these three checks on a single FDD does something the standard review process never does:
The gap between the promised opening timeline and the real one shows up in the data, not the brochure.
The ratio of reachable former franchisees to missing ones shows how much of the story has been cut from the record.
The presence or absence of Item 19 tells you whether the franchisor wants you to see the math or just the brand.
The turnover rate shows what the system does to the people inside it, not what it promises the people trying to get in.
Three Questions at the End of the Review
→ How many former franchisees could I actually reach, and what did they say?
→ What data was the franchisor not required to hide but chose not to show?
→ What friction showed up more than once across different parts of the document?
That is the difference between reading a disclosure and auditing one.
Where You Stand
The FDD will still be sitting on the table the next time someone puts a franchise agreement in front of you. It will still run hundreds of pages. It will still look like protection. The question was never whether you would read it. The question is whether you read it as a customer or as an auditor. The Xponential case did not expose one broken company. It exposed a structure that works exactly as it was built to work, for the person who built it.
