BeBalanced Hormone Weight Loss Centers is facing financial difficulties while the lawsuit between sibling owners continues.
David Cutillo said his sister was “trying to bleed us dry” when she filed a lawsuit against the company the siblings started together, BeBalanced Hormone Weight Loss Centers. Financial statements and interviews with franchisees bear out money and legal problems.
The franchise had $58,739 in cash as of June 2022, according to its franchise disclosure document. Total revenue was $356,969, down from $691,372 the prior year. Assets were $343,368 and liabilities were $748,816. Net loss was $69,106 on revenue of $356,969. A note from management said several factors “raise substantial doubt about the company’s ability to continue as a going concern.”
David Cutillo, majority owner and board chairman, declined an interview request but stated in writing, “The company has access to a line of credit for $100,000,” in regards to the financial health of the company. Cutillo also said revenue has continued to increase: “Royalties for the year increased by $123,000 or 37 percent. Royalties have increased year over year for the past five years and are expected to continue in 2022.”
As for the management comment, Cutillo wrote, “‘going concern’ is an accounting term that means our organization will meet its financial obligations when they become due. It means we are financially stable enough to meet our obligations.”
BeBalanced also had two prior lawsuits against it. Amber Quinn and Karilyn Barnett, both former franchisees, confirmed they reached a settlement. Neither could comment further due to signing nondisclosure agreements.
The current lawsuit between siblings Dawn and David Cutillo began in 2021, which Franchise Times previously reported on. In an email obtained by Franchise Times, Jennifer Cutillo, CEO and wife of David Cutillo, claimed that Dawn Cutillo, minority owner, was “doing some storytelling herself” in reference to the article about the siblings’ lawsuit. She claimed the narrative Dawn Cutillo “tried to create is yet another failed attempt to distract us from our work.”
A former franchisee, Kim Petry, initially signed on with the company in 2017. She was planning to sue for wrongful termination.
“I went to my lawyers and they were all ready to sue until they saw what was going on,” said Petry, referring to Dawn Cutillo’s lawsuit. “One of them is a friend of mine and he said, ‘Do you realize there’s not going to be any money here?’”
Petry came across BeBalanced when she was on her own weight loss journey and was sold on the idea. Going into the first meeting to learn about becoming a franchisee, she disclosed that the one particular area she was weak in was lead generation. She was assured that this wouldn’t be an issue for BeBalanced as the company handled its own marketing.
“This was a big mistake,” she said.
Petry’s location in Long Island, New York, received very little marketing. To address these issues, Petry tried to get in touch with corporate for help.
“They sent me in writing that they didn’t realize that the model doesn’t really work if there’s only one clinic in a market,” said Petry. “And that you really need to open three or four. I don’t have the money to open three or four.”
The advertising fee per month at BeBalanced, according to the 2022 FDD, is $3,500.
Because of the lack of support and low sales, several franchisees said they were forced to close their locations. As shown in the 2022 FDD, the company has continued to grow despite these closures, with at least one new location since 2019.
Item 19 in BeBalanced’s FDD reports gross sales in 2021 ranged from $137,951 to $534,252 at its franchise locations. The initial investment range for a store is $155,650 to $208,450. Opening a second franchise proved difficult for Petry and others, pushing them to leave the company and in some cases declare bankruptcy, Petry said.
Since her center had been shut down during the COVID-19 pandemic, Petry worked out a deal with her landlord and received approval from Paget Rhee, director of operations, to move into a renovated salon space. She said she couldn’t ask Jennifer Cutillo because Cutillo had “disappeared.”
“She takes off for an entire year, just leaves,” said Petry. “She decides to start an elf business in the middle of COVID where’d she come in dressed as an elf and tuck people’s children in at night time. I can’t make this up.”
Cutillo’s business, Elf Tuck-Ins (previously called Fairytale Tuck-Ins), was established in September 2021 and remains in business. In the statement submitted by David Cutillo, he said Jennifer Cutillo “worked round the clock leading efforts to transition the in-person wellness visits to virtual” from March of 2020 to December 2020.
Petry stated business was good in early 2022. Jennifer Cutillo came back to the company, as she was appointed CEO in April 2022, and claimed that Petry’s salon space was “not in line with BeBalanced,” she said.
“And she shut me off,” said Petry, meaning that her center could no longer receive product or operate. “On a Friday night.” Petry’s contract was terminated in 2022.