Madabolic Franchise

Financing Details

Madabolic Franchise System, LLC does not offer any direct or indirect financing to its franchisees and does not guarantee any of their notes, leases, or obligations. However, the franchise notes that some franchisees choose to finance or lease the Fitness Equipment Package through unaffiliated third-party lenders or equipment leasing companies. If a franchisee opts for this, the lender or leasing company would remit payment directly to Madabolic Franchise System, LLC, and the franchisee would then make payments to the respective lender or leasing company. Madabolic Franchise System, LLC does not have any formal agreements or relationships with these potential lenders or leasing companies.

Litigation Summary

Madabolic Franchise System, LLC, through its CEO Rick Del Sontro, has been involved in several legal matters. One case, United States of America v. Rainy Day Holdings, LLC et al., filed in 2015 and settled in 2018, involved Mr. Del Sontro's prior charity artificially lowering delinquency ratios for FHA-insured loans. Mr. Del Sontro agreed to pay $150,000 and is prohibited from future involvement in federally-related loan programs. More recently, between 2020 and 2022, multiple Zippy Shell franchisees filed separate arbitration demands against Zippy Shell Incorporated and its affiliates, including Rick Del Sontro. These arbitrations alleged breaches of franchise agreements by allowing a competing business to operate within exclusive territories, misrepresentation, breach of good faith, tortious interference, fraudulent inducement, and RICO violations. Most of these cases were settled in 2022, with Zippy Shell making settlement payments ranging from $1,050,000 to $7,375,000 to the franchisees. However, one specific arbitration involving franchisee Brian Poggi, which closed in December 2022 with an award issued in January 2023, found Zippy Shell, Gareth Taylor, and Rick Del Sontro jointly and severally liable for $1,464,048 for breaching exclusivity, good faith, and fraudulent inducement. In September 2023, Madabolic Franchise System, LLC, its parent company ZGrowth Partners, LLC, and its CEO Rick Del Sontro, along with Executive Vice President Albert V. Mendoza, were subject to three separate Consent Orders by the State of Washington Department of Financial Institutions. These orders addressed allegations of offering franchises in Washington without proper registration as franchisors or brokers, and engaging an unregistered broker. The outcome included payment of $6,000 for investigative costs, denial of franchise broker registration for Mr. Del Sontro and ZGrowth, and prohibitions against future unregistered franchise sales activities by all parties. The parties involved neither admitted nor denied the findings of fact or conclusions of law in these Consent Orders.

Renewal Conditions

To renew their franchise, Madabolic Franchise System, LLC franchisees must provide timely notice of intent to renew between 270 days and one year before the current term expires. They must not be in default under any agreement, sign the then-current version of the franchise agreement and all ancillary documents, and sign a general release of claims. Franchisees are also required to pay a renewal fee equal to 25% of the then-current initial franchise fee, remodel their facility, upgrade all furniture, fixtures, and equipment to meet current brand standards, and extend their lease for the duration of the renewal term.

Staffing Notes

Madabolic Franchise System, LLC requires that only certified Trainers teach classes at a Madabolic Business. Franchisees must have a minimum of four certified Trainers to open and operate their business, and must appoint a Lead Trainer who will help recruit, hire, and train new Trainers, conduct evaluations, and prepare schedules. New Trainers must complete Fitness Instructor Training. Managing Owners or a trained general manager must be present for onsite management and supervision for a reasonable period each week. Franchisees are solely responsible for hiring, training, supervising, and compensating their employees, who are considered employees of the franchisee and not Madabolic Franchise System, LLC. Franchisees must ensure all employees sign a prescribed acknowledgment form about the franchise relationship and post a notice confirming their role as the sole employer.