Explanation

The franchisor, iFLEX Franchisor LLC (iFLEX), relies entirely on a financial guarantee from its parent, Sequel Brands Holdings, LLC. This parent company is a new entity, formed in April 2025 with no operating history of its own. Its financial statement in Exhibit C only shows an initial cash contribution. This means the entity guaranteeing all of iFLEX's obligations is itself untested, which could present a significant risk to the long-term support and stability of the franchise system.

Potential Mitigations

• An experienced franchise accountant should analyze the parent company's limited financial statement and the terms of the guarantee.
• Understanding the full corporate structure and the inter-company flow of funds is a key discussion to have with your attorney.
• A business advisor can help you assess the risks of investing in a system backed by a new, unproven holding company.

Explanation

The data in Item 20 reveals a significant risk. In 2024, the most recent full year, four franchised studios opened, and one of those four has already ceased operations. This represents a 25% failure rate for new studios in their first year. For a young system, such a high rate of early-stage failure could indicate potential systemic issues with the business model, support structure, or franchisee selection, presenting a substantial risk to your investment.

Potential Mitigations

• It is critical to contact the former franchisee listed in Exhibit F to understand the specific reasons for their closure.
• Your accountant should help you model a worst-case financial scenario based on this high early failure rate.
• Discuss the implications of this turnover data and the potential for business failure with your franchise attorney.

Explanation

The iFLEX franchise system is extremely new. The franchisor was formed in late 2024 and acquired the brand from a predecessor who only began in 2022. As of the end of 2024, there were only three active franchised units. The parent company providing the financial guarantee was formed in April 2025. Investing in such a nascent system carries a higher risk due to the unproven nature of its business model, brand recognition, and support systems.

Potential Mitigations

• A thorough due diligence process, including speaking with all existing franchisees, is essential to validate the concept's viability.
• Your accountant should help you create conservative financial projections, given the lack of a long-term performance track record.
• A franchise attorney should be consulted to understand the risks associated with a new and unproven franchise system.

Explanation

The predecessor franchisor operated for only about two years. During that brief time, the franchise system experienced a 25% failure rate among its initial franchisees, as shown in Item 20. Additionally, the Item 19 Financial Performance Representation notes a studio permanently closed after only six months of operation. This history, though short, is marked by significant franchisee failure, which could indicate unresolved issues with the business model or support that have been inherited by the new franchisor.

Potential Mitigations

• Given the predecessor's history, a frank discussion with the franchisor about what has changed to prevent future failures is warranted.
• Your accountant should use this historical data to build highly conservative financial models.
• Discussing this negative history with your attorney is crucial to fully appreciate the investment risk.

Explanation

While iFLEX itself has no litigation history, its parent company's CEO, Anthony Geisler, is a named defendant in numerous lawsuits from his time as CEO of Xponential Fitness. These pending lawsuits, disclosed in Item 3, involve allegations from former franchisees and shareholders related to fraud and disclosure issues. Although these cases do not directly involve iFLEX, they represent a significant pattern of litigation associated with the key executive who leads and guarantees your franchise system.

Potential Mitigations

• Your franchise attorney must carefully review the nature and status of all lawsuits disclosed in Item 3.
• It may be prudent to have your attorney conduct independent research on these public court cases for additional context.
• Discussing the potential impact of this litigation history on the franchisor's management culture and risk profile with a business advisor is recommended.