Unleashed Brands
Unleashed Brands CEO Michael Browning is calling a recent arbitrator’s ruling against a former Little Gym franchisee in Maryland a win not only for his youth-focused franchise platform, but also a victory for the entire franchising industry.
“It’s a huge win for everyone who wants to protect their business and their brand. So, yes, I would call this ruling an important win for the entire franchising industry as it validates what we’ve all been doing all along,” Browning said following Arizona arbitrator Patrick lrvine ruled Unleashed was justified in the termination of ex-Little Gym operator Tiffany Cianci’s franchise agreement.
The ruling issued by Arizona arbitrator Patrick Irvine, dated June 8, determined the termination of Tiffany and Ryan Cianci’s Little Gym’s franchise agreement on May 20, 2022, “based on the claimants’ repeated failures to pay royalty and advertising fees when due” was warranted and the franchisor’s non-compete provision was enforceable. As a result, the Ciancis must immediately stop operating their competing kids-focused gym, Teeter Tots Music n Motion, in Frederick, Maryland, for two years, settle any outstanding franchise fees, and pay for Unleashed’s arbitration costs, including submitted attorney fees and interest incurred. Those costs were to be determined by the arbitrator 10 days after issuing the initial interim award ruling.
Additionally, the Arizona arbitrator ruled that any Little Gym manuals, content, social media pages and other sales and marketing materials the Ciancis are currently using for their new business be returned to Unleashed as a result of copyright infringement.
Tiffany Cianci did not respond to Franchise Times’ request for comment on the arbitration ruling or her next steps prior to the publication of this story.
Earlier this year, Cianci told Franchise Times the legal battle with Unleashed Brands, the parent company of The Little Gym, had already cost her hundreds of thousands of dollars and she would likely have to declare bankruptcy if she lost in arbitration. She also said at the time she was determined to continue her fight against private equity-backed franchisors that are only interested in the bottom line and in so doing so take advantage of franchisees.
“I have $23,000 plus $6,000 for depositions” owed for the most recent filings, Cianci said in late February. “I’m $300,000 in legal debt at this point. And everybody’s going to tell me to shut up and shut up and shut up. Everybody shuts up, and no one finds out” what’s going on.
Seidler Equity Partners purchased Unleashed Brands from its former private equity backers, including MPK Partners, the Texas-based firm that includes the Perot family as investors, and AHR Growth Partners, which exited in December. The ownership change came amid lawsuits from franchisees in two of the five brands Unleashed purchased since 2021, and follows an earlier lawsuit by franchisees of its original Urban Air Adventure Park brand.
Franchise Times confirmed in February the turmoil at Unleashed had spread to five of the six franchises under its umbrella, including four that were purchased in the previous 20 months—Snapology, Premier Martial Arts, Class 101 and The Little Gym.
Last fall, a group of 54 franchisees filed a lawsuit seeking class-action status against Premier Martial Arts, its parent company and CEO Michael Browning, among others. The suit claims violations of RICO, or the Racketeer Influenced and Corrupt Organizations Act, fraudulent inducement and breach of contract. A second lawsuit filed in May claims the alleged fraudulent activity is continuing since Unleashed’s purchase of Premier Martial Arts in January 2022.
The lawsuits claim “false statements” over sales and profits and a “bogus” business model, in one case, as well as “untenable” changes that “decrease profitability and increase costs” made without collaboration with franchisees.
The day after Cianci organized her fellow franchise owners into an association to push back against the changes made by Unleashed, she said she was told her franchise agreement was terminated on the grounds that she was chronically late in paying her fees. Given the timing of her termination in May 2022 by Unleashed, Cianci maintained in legal filings that the action by the franchisor constituted retaliation.
However, the Arizona arbitrator saw it differently, and ruled in favor of Unleashed, which was represented by DLA Piper in the case.
“It really came down to enforcing the franchise agreement, enforcing brand standards, and proves our termination of the Little Gym owner was valid and justified,” Browning said about the arbitrator’s ruling.
Michael Browning, CEO and co-founder of Urban Air Trampoline & Adventure Park, joined the umbrella brand movement in 2021 when he formed Unleashed Brands and acquired Snapology.
The Little Gym is Unleashed’s second-largest brand by unit count, according to Chief Growth Officer Josh Wall, with 186 open locations. Premier Martial Arts is its largest, with 272 units.
Browning said Dallas-based Unleashed has made a number of improvements to support its franchisees in the last year, including updates to technology platforms, hiring more support staff and increasing on-board training. He noted the company plans to continuing scaling its team as the organization grows.
Unleashed aims to keep expanding with new locations for its brands and also look at adding other concepts to its portfolio. “We’re going to continue to focus on people, sales, customer relations, data analytics and training, and look at expanding our portfolio in a few core areas with swimming, the fine arts and traditional sports being the priorities,” he said.