Fifteen Hours a Week: The Arithmetic That Never Closed
Fifteen hours a week.
Somebody sat down, did the arithmetic on a martial arts school, and arrived at fifteen hours a week. Then they said it out loud to a prospective buyer. Then they said it again, and again, and — according to the FTC’s complaint — more than 200 consumers believed it enough to pay initial franchise fees of $49,500 or more, and borrow hundreds of thousands more to build out a storefront.
I want to be precise about what I’m reacting to, because the legal posture matters and I’m not going to be sloppy about a live case. On October 5 the Federal Trade Commission announced proposed settlements with Premier Franchising Group — the franchisor of Premier Martial Arts — and with Franchise Fastlane, its former franchise sales organization. The FTC alleges that the two companies represented that people with no martial arts background could profitably operate one or more studios on a semi-absentee basis, working under fifteen hours a week. It alleges that the Franchise Disclosure Documents for 2020 through 2022 reported the earnings of existing studios without a reasonable basis for believing new franchisees would do the same, and did not disclose that the existing studios ran 2,000 to 7,000 square feet while new buyers were steered toward 1,200 to 1,600, or that most existing franchisees had martial arts experience while most of the new ones did not. The proposed orders have Premier Franchising Group paying $650,000 against a judgment of $3,875,424 and Franchise Fastlane paying $1.2 million, with the money earmarked to compensate franchisees, and they require that certain franchisees be told they may cancel their agreements without penalty. The Commission voted 2–0. Nothing binds anybody until a judge in the Eastern District of Tennessee signs it, and Franchise Fastlane neither admits nor denies the allegations. That’s the FTC’s own account of it, and our news desk covered the settlement itself here.
So that’s the file. Now let me tell you what I actually think, which is a different thing.
The fifteen-hour school is a stupid idea on the face of it, and the reason it survived long enough to need a federal enforcement action is that our industry has spent twenty years pretending otherwise. Not one brand specifically. Our industry. We built a vocabulary — passive income, scalable, multi-unit, semi-absentee, exit strategy — and we borrowed it wholesale from businesses that sell objects to strangers. A martial arts school does not sell an object. It sells a forty-five-minute relationship between a seven-year-old and an adult who notices her, repeated twice a week for four years. You cannot run that on fifteen hours a week for the same reason you cannot be a part-time parent.
The number that gives it away
Here’s what tells you the claim was never serious, and you don’t need a lawyer to see it.
Prime time in a martial arts school is four to eight in the evening, Monday through Thursday. That’s sixteen hours. Add a Saturday morning block and you’re at nineteen or twenty hours of class instruction alone, before anyone has answered a telephone. Mothers of prospective students call between nine and eleven in the morning, Monday through Thursday — that has been true for as long as I have been tracking it, and most schools still don’t answer the phone before four in the afternoon. That’s another eight hours of somebody’s attention that has to exist. Then introductory lessons, which don’t fit in prime time because prime time is full. Then the follow-up calls on the leads who didn’t convert, which is where the money actually is: I’ve watched schools run 5% conversion on follow-up when 16% is sitting there for anyone willing to make the twentieth call after seventeen no-answers.
Twenty hours of mat time. Eight hours of phone coverage. Intro lessons, follow-up, staff training, billing, the parent whose kid is about to quit. Fifteen hours a week does not cover the classes. It is not a conservative estimate or an optimistic one. It is arithmetic that does not close, and anybody who had run a school for six months would have known it in the first meeting.
Which is the actual indictment here, and it isn’t about one brand. The claim survived because it was made by people who were not in the trenches, to people who had never been in the trenches, with nobody in the room who knew what Tuesday at 5:15 p.m. feels like.
The quick list: how a school gets sold to someone who can’t run it
Strip out the legal language and the mechanism is simple enough to put in a list.
- The buyer is recruited from outside the industry. That’s not inherently wrong — I’ve seen career-changers build excellent schools. But a buyer from outside has no way to audit the claim. Tell a restaurant operator a location does $40,000 a month and he’ll ask about covers and ticket average. Tell a retired engineer a studio does $40,000 a month and he has no question to ask.
- The earnings number comes from a different business than the one being sold. The FTC’s allegation is that the reported studios ran 2,000 to 7,000 square feet while new buyers were steered toward 1,200 to 1,600, and that most of those existing franchisees had martial arts experience the new buyers didn’t have. A 6,000-square-foot school run by a black belt and a 1,400-square-foot school run by an investor are not the same business with different decor. They have different class capacity, different staffing, different student value, different everything.
- The owner’s labor is priced at zero and then removed anyway. This is the trick that makes the whole thing look like it works. If the owner teaches, the P&L never carries his salary, so margin looks healthy. Then you tell the buyer he doesn’t have to teach — but you don’t add back the cost of the instruction you just deleted from his schedule. The model only closes while an unpaid owner is standing on the mat.
- The person doing the selling is paid on the close, not on the outcome. A franchise sales organization is compensated when the deal signs. Nobody claws anything back in month nineteen when the studio fails. The incentive is to find a yes, and a yes is easier to find in someone who cannot evaluate the offer.
- And then the buyer, having been promised fifteen hours, gives it fifteen hours. This is the part nobody writes about. The prophecy delivers itself. A school with an absent owner has no organized information call, no systematic follow-up, no intermediate goals, no renewal conversation — and it dies of the ordinary causes, on schedule, and everybody says the market was tough.
Where I part company with Michael Gerber
Somebody is going to write to me and say: Stephen, you’ve recommended The E-Myth for thirty years. Gerber’s whole argument is that you should work on your business instead of in it, build systems, make yourself replaceable. Isn’t semi-absentee just Gerber taken seriously?
No, and the distinction is the most useful thing in this column.
Gerber’s point is that the work should be systematized so it doesn’t depend on your memory, your mood, or your presence in a particular hour. He’s right, and most schools in this industry are run on the owner’s memory. Systematize the information call. Systematize the attendance follow-up — the attendance card is the crystal ball, and a system reads it whether the owner is in a good mood or not. Systematize the renewal conversation, the belt testing cycle, the staff training. Build what I call the Parthenon: many pillars of lead generation running simultaneously, so that no single channel failing takes the school down with it.
What cannot be systematized away is the judgment and the standing. Which eight-year-old is about to quit and why. Which assistant instructor is ready to run a class and which one is going to lose the room. Whether the mother who called this morning needs reassurance about her son’s confidence or about the price. Whether this town’s school district will return your call. I have never met a system that does those things, and I’ve been looking since 1983.
Gerber says build a business that doesn’t depend on you doing the tasks. He does not say build a business that doesn’t require an owner. Franchise selling collapsed those two sentences into one, and that collapse is worth $1.85 million this week.
The middleman just became the regulated party
Now here’s the part that makes this a structural story rather than one company’s bad week.
The International Franchise Association did not circle the wagons. On the day of the settlement, IFA President and CEO Matt Haller said the association “applauds the FTC’s action,” which “makes clear that the Franchise Rule applies to everyone involved in selling a franchise.” IFA called this the first time the FTC has brought a Franchise Rule enforcement action against a third-party franchise sales organization, said plainly that the current regulatory landscape allows “too many connections that are a poor fit,” and announced it is building a third-party seller education curriculum and compliance training. Haller added that a “modernized franchise disclosure regime is long overdue.” That’s the IFA’s statement, and it is a trade association telling its own members the enforcement was correct. That doesn’t happen often.
A day later, Michael Seid of MSA Worldwide — who has been advising franchisors since before most of today’s brands existed — argued that a franchisor using an outside sales organization should consider disclosing that organization’s enforcement history to prospective buyers, because a buyer reasonably treats the salesperson as the brand. His line was: “The people who actually manage the sale matter.” He frames it as a business judgment rather than a legal opinion, and he points at where this is heading.
Where it’s heading is registration. On May 4, 2026, the North American Securities Administrators Association adopted a Model Franchise Broker Registration Act after two years of comment. It requires brokers and their agents to register with state regulators, to disclose how they are compensated and any litigation or enforcement history, and to keep auditable records. NASAA President Marni Gibson put the rationale simply: “For many individuals, buying a franchise is the largest investment of their lives.” Theresa Leets, who chaired the project group, said the Act “fills a critical gap in the franchise sales process.” It is a model for states to adopt, and only a handful of states require broker registration today.
California has already moved. Under SB 919, franchise brokers must register annually with the Department of Financial Protection and Innovation beginning July 1, 2027, and must hand a prospective franchisee a Uniform Franchise Broker Disclosure Document before discussing an opportunity. The definition deliberately sweeps in franchise consultants, franchise sales organizations and broker networks regardless of what they call themselves. And the disclosure covers the broker’s compensation, commissions, incentives and other economic arrangements that could influence recommendations. Selling without an effective registration becomes unlawful, with stop orders, suspension and revocation available to the regulator.
Sit with that compensation clause for a second, because it’s the whole ballgame. For as long as I’ve been in this business, the single most useful question you could ask anybody selling you anything was how do you get paid when I say yes? — and the single most reliable thing about the industry was that nobody volunteered the answer. California is about to require it in writing. Not because brokers are villains; because a commission paid on the close and nothing paid on the outcome produces predictable behavior, and twenty years of predictable behavior finally produced an enforcement action.
The Bozo Explosion, with a commission structure
I’ve used the phrase “Bozo Explosion” for years to describe what happened to this industry: it filled up with people advising school owners who have never built a school. Consultants who’ve never signed a lease. Marketing experts whose entire portfolio is other marketing experts. It gets annoying listening to failing school owners share their secrets of failure, and it is worse listening to people who never owned a school at all explain the business to people who do.
The broker economy is that same phenomenon with a transaction fee attached, and I want to be fair about it, because the IFA is right that a good third-party seller can genuinely match a buyer to a brand. The problem isn’t the existence of the middleman. The problem is that in a relationship business, the middleman’s product is a signature, and a signature can be obtained from someone who should never have signed.
And let me put my own name in this paragraph, because I’d be a hypocrite otherwise. I sell a coaching program. Martial Arts Wealth Mastery charges money, and I publish this magazine. The test I’d want applied to me is the one I’d apply to anybody: have you run a school, with your own lease and your own payroll and your own 5:15 p.m. on a Tuesday? How do you get paid when I say yes? What happens to your compensation if this doesn’t work for me? Ask me those. Ask the next person too.
What this does and doesn’t mean for your school
If you own an independent school, nothing in the FTC’s filing touches you directly, and I want to say clearly what the second-order effects actually are rather than inflate them.
First, some number of franchised studios are about to be offered a penalty-free exit. The proposed orders require that certain franchisees be notified of a right to cancel. Some will take it. That means locations closing, students looking for a new school, and instructors looking for work, in markets where the franchise presence was built on the semi-absentee pitch. That is not a reason to gloat — those are families mid-way through a belt system — and it is a reason to make sure your school is findable and your phone is answered between nine and eleven in the morning.
Second, and more durably: the credibility of the earnings claim in this industry just got repriced. For a decade the easy way to sell anything to a school owner was a number — a studio doing $40,000 a month, a campaign producing 100 students, a program generating a tenfold return. The FTC’s theory in this case is not that the numbers were fabricated. It is that real numbers from one kind of business were presented as predictive of a different kind of business. That’s a much more common sin, and most of us in the advice business have committed a version of it.
Third: history says don’t panic. I’ve been told this industry was finished more times than I can count. Enter the Dragon was going to flood us with people who’d quit in a month. The Karate Kid was a fad that would leave us overbuilt. The Ninja Turtles were going to cheapen the art. Tae Bo was going to take the fitness market. MMA was going to make traditional schools obsolete. None of those trends killed any schools. Owners who chased them badly killed their own schools. The same is true here: franchise regulation is not going to end franchising, and a bad week for one brand’s sales practices is not a verdict on the business model. What it is, is the market finally pricing in a fact the rest of us already knew: there is no martial arts school without an owner.
The simple business, again
Every few years something external — a lawsuit, a regulation, a recession, a trend — hands this industry a reason to believe the business has become complicated. It hasn’t. It has been the same REALLY Simple Business since Grand Master Jhoon Rhee was teaching it to me, and the reason I keep saying so is that the complication is almost always self-inflicted.
On any given evening in your school, three things matter: enrollments, retention, renewals. Everything else is Not Important. A fifteen-hour-a-week owner cannot do those three things, which is the entire reason the claim was always false — not because fifteen hours is too few hours in the abstract, but because those three things happen in precisely the hours the claim deletes. Enrollments happen on the introductory lesson and the nine-a.m. phone call. Retention happens when somebody notices a gap on the attendance card and picks up the phone. Renewals happen in a conversation about where a student is going next. All three are the owner’s judgment applied to a specific human being, over and over, in person.
Charge accordingly. Average student value in a professionally run school belongs at $250 to $300 a month, and the only way to stay employed at that number is to be worth twice what you’re paid. You get worth by being there. That’s it. That’s the whole secret the FTC spent an enforcement action discovering.
Do this before Friday
Not a summary. An assignment.
Open your calendar for last week — the actual one, not the one you’d describe to a prospective buyer — and count the hours you personally spent on three things: teaching on the mat, talking to a prospective student or their parent, and talking to an existing student or parent about where they’re going next. Write the three numbers down. Then write down the hours you spent on everything else.
If the first three numbers don’t add to at least twenty-five hours, you are running a semi-absentee school and nobody sold it to you. You did that yourself.
And if the fourth number is the biggest one, that’s your Gerber problem: those are the tasks that belong in a system or in somebody else’s hands, this month, so you can get back to the only three things that have ever mattered.
P.S. One more thing, and it applies to you even if you will never buy a franchise. Somebody is going to call your school this quarter and offer you something — a lead service, a territory, an AI marketing platform, a curriculum license, a coaching program. Before you listen to the pitch, ask the question California is about to force onto a disclosure form: how do you get paid when I say yes, and what happens to your pay if this doesn’t work for me? You’d be amazed how often that single question ends the call.
Stephen Oliver, MBA, 10th Degree Black Belt, is the founder of Mile High Karate and Martial Arts Wealth Mastery, the author of The Way of the Mile High Maverick and Six Simple Steps to Add 100 New Students, and co-author with Jeff Smith of Extraordinary Teaching.
Disclosure: the author publishes Martial Arts Professional and operates Martial Arts Wealth Mastery, a paid coaching program for martial arts school owners. The FTC matter described above is a proposed settlement of allegations that have not been proven in court; Franchise Fastlane neither admits nor denies them, and the orders take effect only upon approval by a federal judge.
