In June, DonutNV, a Florida franchisor of mini-donut trailers, filed one of its own franchise addenda in federal court. The addendum covers an owner in Colorado Springs that signed on December 23, 2022, under a development rider binding it to a second unit. It later got "a twelve (12) month extension of the development schedule," and by late 2025, the document says, it "is currently in default."
Then come the terms. DonutNV offered, as a one-time favor, to put off royalty and brand fund fees from January through March 2026. The addendum is frank about why: "The sole purpose of the Deferment Period is to allow Franchisee a limited opportunity to sell Franchisee's second trailer." After that, the owner had three doors, labeled "Waiver Election," "Territory Forfeiture" and "System Exit." None of it took effect unless the owner signed a general release. The whole deal was to stay in "strict confidentiality," on pain of "termination without an opportunity to cure." A DonutNV senior vice president signed it on Sunday, December 21, 2025. Twelve days earlier, the same executive had been quoted in a paid press release saying franchisees were "achieving strong results."
There is nothing strange in any of this. Most people who run franchise sales at big brands have drafted a cousin of this document. They would call it a kindness: the struggling owner gets breathing room and the franchisor gets its territory back, without a fuss. I think that view is now wrong. The documents written to close out a failed territory are the documents regulators and opposing lawyers read. This one is Exhibit B in a federal lawsuit, and DonutNV filed it.
Where the DonutNV Case Stands
On May 18, 2026, owners of 22 franchise companies filed for arbitration against DonutNV and its founders. They claim fraud, false statements and breaches of several states' franchise and consumer laws. Those are allegations, and DonutNV denies wrongdoing. Within days it filed 12 federal suits arguing that owners who signed releases had given up their claims. A judge threw out one of those complaints on procedural grounds in June, without prejudice. DonutNV refiled the next day, and the case continues. No one has ruled on whether anybody was defrauded.
How a donut-trailer company came to need addenda is no mystery. Its 2025 disclosure document shows 4 franchised outlets at the start of 2022 and 142 at the end of 2024. The company itself ran one. Its sales firm at the time, Franchise FastLane, said in October 2024 that 131 owners had about 250 territories. Sell that much territory that fast and the opening deadlines come due. Then somebody writes an addendum.
The most telling line in the court record is DonutNV's own. Among the costs of the group arbitration, its amended complaint lists "disclosure-related burdens." By that it means reviewing the case and updating its franchise disclosures. The papers were meant to close a file. By the franchisor's own account, they opened one.
What Regulators Read
Two franchise cases this year turned on numbers anyone could check against the company's own records.
On August 31, California's franchise regulator found that Dickey's Barbecue Pit had broken state law. Dickey's had reported 20 franchisees no longer in operation, and the department "found the actual number to be 36." It found the gap by going through Dickey's termination notices, franchise agreements and other files. The fine was $36,800. Dickey's called it "a minor administrative issue." (In dollars, that is fair.) The method is the part to study. The state took the company's own termination paperwork and counted.
This is where a confidentiality clause fools the people who write it. It binds the owner. It does nothing to the franchisor's own duty to list the owners who left in each year's disclosure document. An owner who takes the "System Exit" door has still left the system, and the addendum that records it is in the very file an examiner asks for.
The Federal Trade Commission's case against Xponential Fitness was about how long studios took to open. It settled on March 18, with a $17 million judgment to repay franchisees. The FTC alleged that Xponential told buyers a studio would usually open within six months of signing. In fact, the agency said, they usually took more than a year, "if they opened at all." Now read the DonutNV addendum again. A development extension is a signed, dated record of how long a territory took to open, or that it never did. The FTC has put a price on the distance between the promised opening and the real one.
Then there is the release. In it, the owner promises not to start or help with any proceeding or investigation against the released parties "in any court, agency, or other forum." Nor may the owner "(except as required by law) participate in" one. On July 12, 2024, the FTC said in a policy statement that franchise contracts "may not restrict franchisees' communications with the Commission or any other state or federal law enforcer or regulator about potential law violations." No court or agency has decided whether DonutNV's clause reaches that far, or whether it can be enforced at all. (The owner's lawyers call the release unenforceable.) I will leave the two texts side by side.
Is This a Crackdown?
No, and the best evidence comes from the man who runs the FTC. As a commissioner, Andrew Ferguson dissented from that 2024 statement, writing that it "goes too far and is an attempt to announce de facto rules." As chairman, in his statement on Xponential, he wrote: "Today's order is not a part of a crusade against the franchise industry."
He is right. Even California, in its Dickey's release, said federal enforcement had slowed. California passed a law in 2024 making franchise brokers register, and as of February 2026 the state had not paid for it. The FTC has brought a few large, clean cases, not a wave. Releases are legal, and putting off fees is often a gift.
But a regulator that brings few cases picks them carefully, and it picks the ones that can be proved from the file: the termination notices at Dickey's, the opening timelines at Xponential. With enforcement this scarce, the paperwork of failure is what an examiner opens first.
Which brings me back to a footnote in that same Ferguson dissent. A clause that specifically bars an owner from reporting to the government "would be a different story," he wrote. "I suspect that such a clause would in and of itself be an illegal threat of retaliation and an unfair act or practice for the reasons laid out in the policy statement." Ferguson is the friendliest reader a franchisor could hope to find at the FTC. A development executive could do worse than to take the company's standard addendum, release and confidentiality language out of the drawer. Then read it the way the chairman would, with that footnote open on the desk. The next person to read it closely may be an examiner counting departures, or a lawyer marking it as an exhibit.
