Case Study | Non-Compete Violation | False Fitness

Non-Compete Violation | False Fitness

Franchises let corporations expand the reach of their business throughout the country, but sometimes the misbehavior of the franchisees can lead to disastrous results.

Lauth was contacted by a fitness conglomerate based in Massachusetts who had suspicions that their franchise, branding, and business model had been compromised by one of their franchisees, the Subject, local to the area. She claimed that she had sold her franchise to another owner and was only communicating with the new owner as a consultant, but the Client believed she still owned it, and had simply put her sister’s name on the LLC document.

The Investigation

Lauth reviewed court complaints and documents against the Subject, claiming that she had infringed upon a non-compete agreement that she signed when she agreed to be a franchisee.

Lauth investigators spoke to the Client, gathered information about the fitness studio, their business model, and the branding and markings associated with the franchise. The Client wished to have an investigator infiltrate the business as a customer, document the interior of the studio, learn about the employees, and what the Subject’s involvement was in daily operations. Lauth sent in an undercover operative to speak to the Subject about membership fees and programs, but the Subject was deliberately evasive. Investigators photographed the inside of the studio and confirmed that the Subject was still heavily involved in the daily operations of the studio.

The Solution

Lauth compiled a report containing an undercover investigation narrative, including comprehensive notes about the studio, its trainers, and the interior of the studio. It was Lauth’s conclusion that the Subject was still heavily involved in the business, down to the level of meal planning with members. This information was passed along to the Client for their legal purposes

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