Franchisee 101: Lack of Personal Training and Personal Jurisdiction

Lewitt Hackman

A Michigan federal district court dismissed a franchisee’s claims against its franchisor's CEO and several individuals responsible for negotiating its franchise agreements, for lack of personal jurisdiction.

F45 Training Inc., the franchisor of fitness studios, entered into franchise agreements with a franchisee for the operation of three F45 training studios in Michigan. After signing the agreements, the franchisee disputed selected provisions of the franchise agreements and brought suit against F45, its CEO and four other individuals involved in the franchise sales process.

The franchisee alleged F45 and the individual defendants fraudulently induced the franchisee to enter into franchise agreements for the training studios. Specifically, the franchisee’s complaint alleged breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud and misrepresentation, among others. The franchisor and the individual defendants moved to dismiss all claims, and four of the five individual defendants brought a motion to dismiss the complaint for lack of personal jurisdiction.

Four of the individual defendants were not Michigan residents; instead, they were each Australian citizens. One defendant lived in Australia, two lived in Texas, and one lived in California. The court found that being officers of the franchisor was insufficient to create personal jurisdiction. Rather, the franchisee needed to present evidence that the individual defendants were actively and personally involved in the conduct giving rise to the claims at issue for the court to potentially exercise personal jurisdiction. The court found the franchisee failed to provide sufficient evidence of specific actions giving rise claims.

Franchisees should consult with counsel prior to bringing suit to ensure they are filing in a jurisdiction that can support personal jurisdiction over each principal of the franchisor.

Functional HIIT Fitness, LLC v. F45 Training Inc., No. 22-10168 (E.D. Mich. Sep. 28, 2023)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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