Common stock investors sue Driven Brands
A class action lawsuit was filed Monday against Driven Brands Holdings and certain named company senior executives on behalf of investors in the company’s common stock for securities fraud following the disclosure of accounting errors and internal control failures.
Driven Brands’ Board of Directors Audit Committee reported late last month that there are material errors in the company’s previously issued consolidated financial statements for fiscal years 2023 and 2024.
The errors were found in the company’s annual report on Form 10-K for the fiscal year 2024, and in its unaudited condensed consolidated financial statements for each of the quarterly and year-to-date periods within fiscal year 2024, as well as the periods ended Sept. 27, 2025, June 28, 2025, and March 29, 2025.
A press release from the plaintiffs’ law firm, Bleichmar Fonti & Auld, notes that the announcement caused Driven Brands’ stock to drop from $16.61 per share on Feb. 24 to open at $9.99 per share on Feb. 25, a decline of 39.8%.
The lawsuit alleges Driven Brands issued false and/or misleading statements and/or omitted disclosing necessary material information under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and other federal laws.
“Throughout the relevant period, Driven Brands assured investors that its financial reporting was accurate and that its internal controls were effective,” the release states. “These statements were materially false and misleading because Driven Brands suffered from pervasive accounting errors, including lease accounting issues, unreconciled cash balances, improperly classified expenses, and improperly recognized revenue, spanning fiscal years 2023 through 2025.”
The class period is May 9, 2023, through Feb. 24, 2026.
“Defendants misled investors as to the company’s financial condition and the effectiveness of its internal controls over financial reporting through a series of inaccurate financial reports filed with the Securities and Exchange Commission (SEC) from May 9, 2023, to Nov. 5, 2025,” the suit states. “Among many other errors, the company’s balance sheets contained an unreconciled cash balance originating in 2023, which resulted in revenue and cash being overstated in 2023 and 2024, and operating expenses being understated over the same period.”
It notes that Driven Brands’ Feb. 25, 2026, 8-K identified at least 10 categories of errors that “pervaded the company’s financial reporting,” including:
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- “Errors relating to the recording of leases which primarily impacted the right of use assets and right of use liabilities recorded in the consolidated balance sheet as of December 28, 2024, and September 27, 2025;
- “Errors in reporting opening and ending cash balances and operating cash flows, which resulted in overstatements of cash and revenue and understatement of selling, general, and administrative expense in the consolidated statement of operations for fiscal years 2023 and 2024;
- “Errors in reporting supply and other expenses as company-operated store expenses in fiscal years 2023 and 2024;
- “Errors relating to income tax provision;
- “Errors relating to supply and other revenue;
- “Errors relating to fixed assets;
- “Errors relating to cloud computing;
- “Errors relating to lease cash applications;
- “Errors relating to balance sheet and income statement misclassifications; and
- “Errors related to improperly recognized revenue in Driven Brands’ ATI business, primarily related to fiscal year 2025.”
The suit demands a jury trial and requests reasonable costs and expenses incurred, including attorney and expert fees and other costs and disbursements, plus all damages available under the Securities Exchange Act in favor of the plaintiff and class members.
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