Club Physical takeover by Jolt Fitness

[Pseudonym]

At about 4pm on Friday, signs were pulled down at three of [Club Physical's] Auckland branches and the sites rebranded as Jolt Fitness. Staff at those locations were fitted with new uniforms.

Members turning up for their usual workout were stunned to find a completely new gym.

Club Physical owner Paul Richards posted on the company's Facebook page soon after, explaining his version of events to baffled members.

Richards claims he received a lawyer's letter at 4pm stating that one of his franchise owners, Stuart Holder, had cancelled franchise agreements for Club Physical gyms at Westgate, Three Kings and Botany.

Read more here...

Any of you guys affected by this?

[drizzt]

Wow, sounds like how the Pro-fitness/Bodyworks takeover happened a few years back.

[maccaz]

im at whatwas cp westgate and apart from different uniforms i dont notice any difference.. i lold at club physicals facebook posts having a cry, posting a photo of their family to get extra sympathy.

bit of a bugger for people who want to use different branches, but as far as im concerened dont matter what the gyms called same staff same hours same equipment, and if people leave out of loyalty to the club physical name theyre retarded

[crazyfacials]

Used to go to the Botany one, Stuart as a person is a nice guy, but been told he is a bit stingy (from a few receptionist chicks, but if your contract was with head office then it's all good) had a chat to a mate of mine who still goes there, looks like they are going to be adding boxing classes/cross fit classes/boxfit classes/mma classes (no clue if it's done by proper instructors with black belts in their respective sport or just some PT who want to do some MMA fitness thing) as far as memebership goes my mate was told nothing happens and it will be carried over, guessing you still get access to the three Jolt gyms?

[Android]

So CP membership fees are paid to...CP.

Wonder how the new businesses are making money from CP members if the fees are going into the CP account....as someone said earlier contracts are with CP.

Will CP members be asked to cancel their memberships and re-sign or will the Jolt Fitness just wait out the contracts and re-sign them, in the meantime expect a strong recruitment drive for new members to pay the bills?

[Riccardo]

There are very few instances when you can break a franchise agreement and Stuart would have to prove that Paul has in some way breached/not lived up to his contractual obligations.

[I Declare War]

There are very few instances when you can break a franchise agreement and Stuart would have to prove that Paul has in some way breached/not lived up to his contractual obligations.

From the tone of the Herald article it seems as though this Stuart guy is a bit arrogant and possibly has a lot of money, he probably thinks he can lawyer his way out of it.

[crazyfacials]

There are very few instances when you can break a franchise agreement and Stuart would have to prove that Paul has in some way breached/not lived up to his contractual obligations.

From the tone of the Herald article it seems as though this Stuart guy is a bit arrogant and possibly has a lot of money, he probably thinks he can lawyer his way out of it.

They're both sharks....

Android ...I thought when you franchise something after you pay them for using their brand and all other bs ....YOU get the fees however you have to pay a % of it to the main company?

[HumanPerformance]

It hasnt affected me personally pseudonym, but all the group class instructors at those branches are suddenly out of a job with absolutely no warning.

Alot of westgate members have to left and come to the Albany branch as they feel what has happened is immoral and underhanded, although I feel as well alot of members want to get out of the jolt gyms before the shit hits the fan and they have no where to train.

Pauls legal team applied to the High Court this afternoon for an injunction. Which according to my one of my clients (who has a law degree) means all the Jolt gyms could be shut down in a matter of days, locks changed on the premises and a court order being issued to say it is illegal to trade untill this is all sorted out. So thousands of members could turn up to train at a gym they are currently paying for and be locked out.

This is apparently going to be a test mark case. As if the Jolt owners get away with it, it sets a president for all other franchised buisnesses throughout NZ. In theory they could all just change thier signage and then refuse to honour thier franchise obligations. For this reason those who know about such things are saying that there is no way they will be able to get away with it.

[Android]

There are very few instances when you can break a franchise agreement and Stuart would have to prove that Paul has in some way breached/not lived up to his contractual obligations.

From the tone of the Herald article it seems as though this Stuart guy is a bit arrogant and possibly has a lot of money, he probably thinks he can lawyer his way out of it.

They're both sharks....

Android ...I thought when you franchise something after you pay them for using their brand and all other bs ....YOU get the fees however you have to pay a % of it to the main company?

could be the case, you'd think Head Office dealt with AdFit as a single large client, and then dishes out the memberships minus the percentage but that's up to the Franchisor....there's no single way to run a franchise.

For all we know Paul may not even have a restraint of trade on the franchisees since he seemed surprised that someone could just stop a franchise it seemed to have caught him off guard.

I hope he's protected, it's unethical for Jolt to do it in this manner....although the Franchisee will say it was the only way (imagine giving Paul, trainers, and members notice of what they're plotting...oops, I mean planning). But that's business, who's sole purpose is to make a profit for the owners.

Perhaps Paul didn't keep up his end of the contract...then you're entitled to challenge the validity of it and this is the challenge?

Dunno :doh:

[Pseudonym]

Perhaps Paul didn't keep up his end of the contract...then you're entitled to challenge the validity of it and this is the challenge?

That seems to be what Jolt is saying in their email to members:

As background, on Friday 8, February we regrettably had to take steps to end our franchise agreements with Club Physical in Westgate, Botany and Three Kings because we believed the franchisor had not been meeting its obligations to us and that this was putting the future of the clubs - your clubs - in jeopardy.

This wasn't a decision we took lightly, but we had to do this in order to offer you the best possible fitness experience.

But it's a bit light on the details! :think:

[Riccardo]

I spoke with a lawyer I know and they said that what Stuart has said in his email is pretty much the only way you can get out of the franchise agreement. It would have to be something pretty significant to warrant such an aggressive action without attempting to remedy the situation first.

I guess more details will come to light as things develop. Would be interesting to know how Stuart is claiming Paul did not live up to his obligations under their franchise agreement.

[genetic freek]

The franchisor should hold the lease (if they don't they are retarded) and if they do... Get the f*ck out of my building.

[Gym rat]

This reminds of the thread when City Fitness taking over Body works and I can recall a few guys in Wellys saying that you are looking at other gym options in the Wellington area plus staff members from Body works leaving and going to other gyms in the Wellington area.

[Optimass]

The memberships are owned by the club they are signed too... and are signed over to the franchisee on sale of the business. Adfit has an agreement to supply funds to the franchisee for this reason and cannot withhold income.

I would say that despite changing the brand etc - they are probably paying the fees into a trust until the outcome of the High Court findings. IMO I don't think the high court would simply lock down operations until a proper investigation into the claims are known.

Franchise gyms are notably not equitable businesses based on current franchise law in New Zealand being very broadly represented. Ask any franchise law specialist ... very common thought.

Interesting that there are claims about staff losing jobs?! Aerobics instructors are contractors the same as contract PTs .... they are not employees of the gyms as such but contract to the franchisor.

Seems to be a lot of backlash directed at the actual staff of those gyms too - sad really as they are actually employees of the gyms and still have to feed families etc.

This one is going to go all the way by the sounds of it - good too - so easy for franchisors to offload poor performing businesses with little regard for those undertaking them. The best franchises come with guarantees ... good luck finding a gym franchise that has one of those lol.

[genetic freek]

The memberships are owned by the club they are signed too... and are signed over to the franchisee on sale of the business. Adfit has an agreement to supply funds to the franchisee for this reason and cannot withhold income.

I would say that despite changing the brand etc - they are probably paying the fees into a trust until the outcome of the High Court findings. IMO I don't think the high court would simply lock down operations until a proper investigation into the claims are known.

Franchise gyms are notably not equitable businesses based on current franchise law in New Zealand being very broadly represented. Ask any franchise law specialist ... very common thought.

Interesting that there are claims about staff losing jobs?! Aerobics instructors are contractors the same as contract PTs .... they are not employees of the gyms as such but contract to the franchisor.

Seems to be a lot of backlash directed at the actual staff of those gyms too - sad really as they are actually employees of the gyms and still have to feed families etc.

This one is going to go all the way by the sounds of it - good too - so easy for franchisors to offload poor performing businesses with little regard for those undertaking them. The best franchises come with guarantees ... good luck finding a gym franchise that has one of those lol.

What a load of shit, if you buy a buisness and you know what your buying and what the return is, no one holds a gun to your head. No point crying after you have purchased it because you were too dumb to do the research and seek advice.

[Optimass]

Actually gf you have no idea what u are talking about. I know that particular franchise agreement better than anyone. If you think everything is transparent in this business or any other based on what you read in the paper or on the net, just demonstates how very little you actually know. (Not just this but business in general)

Due dilligence is not full proof especially when the person you are purchasing the business from with holds information. The challenge on the other end of that is in order for you to prove it and get some compensation is a long expensive drawn out process. People lie ... or are you not familiar with this concept? :roll:

[AgentOrange]

I preferred your earlier (now deleted) response. Much more accurate in addressing this user.

[Optimass]

I preferred your earlier (now deleted) response. Much more accurate in addressing this user.

Agree. Even mods get modded

[genetic freek]

Actually gf you have no idea what u are talking about. I know that particular franchise agreement better than anyone. If you think everything is transparent in this business or any other based on what you read in the paper or on the net, just demonstates how very little you actually know. (Not just this but business in general)

Due dilligence is not full proof especially when the person you are purchasing the business from with holds information. The challenge on the other end of that is in order for you to prove it and get some compensation is a long expensive drawn out process. People lie ... or are you not familiar with this concept? :roll:

Unfortunately for you I know as I own a number of franchises. There probably is not a business purchased in NZ where the buyer is actually 100% aware of what the state of the business is in as its very easy to hide money etc. That's the risk we all take.

Going out and re branding is stupid - & shows to me by this act that they were already stupid when they purchased the business. A couple of PT's get together and think we can run a business & then find out its a bit harder than what they thought.

[nate225]

Lmfao @ you two!

Currently I'm sitting in the Court of Appeal and reckon I could sub either one of you in here and everyone would think you're barristers, including the Chief Justice lol

[Optimass]

Time will tell but if you choose to franchise a business but fail to deliver what you promise the franchisee should have some kind of protection. But there is no supporting legislation so concerns are just defaulted back to a signed agreement which is often unfairly leveraged against the franchisor.

Agree that peolle randomly throwing ageeements out is not the way to go . But when you are quoted one thing and delivered simething costly and counter productive then a franchisee should have somekind guarantee the things will be heard. If a franchisor for example changes pricing structures for the benefit of their own corporately own business due to localised competitor activity, which then has a detrimental and substancial impact on the franchised businesses then they are not acting in the best interests of the francisee ... they are greasing their own pan so to speak.

[genetic freek]

In a franchise agreement as in any agreement there are a set of rules upon both parties agree on, which forms the basis of the agreement. In it will include all the expectations of the franchisee & franchisor. In it will include rules on what happens if standards arnt met by either party.

You would assume the franchisee has gone back to the franchisor asking them to meet their obligations - from there a resolution should come about.

To my knowdge this process has not been followed & they have gone out & dropped the brand. They may think they have a loop hole in the agreement but there will be many things in it the franchior can go back at them with.

There is no such things as quotes or guarantees - your not hiring a plumber or chippy. There is an agreement which both party's are bound by with rules & regulations.

Clearly they knew that they would come back at them in the courts, small business can't sustain big court cases - even if they win the money spent fighting the case will almost certainly out weigh any gains they thought they were getting by dropping the brand. By doing so your making a statement saying I can run a far greater & more profitable business with out the brand.

Time will tell but my money's on me

[iwilson]

Since as far as I'm aware no one here is privy to the actual CP franchise agreement it's all speculation. However the courts have on many occasions thrown out so-called agreements when they were not worth the paper they were printed on.

Case in point contractors vs. employees. The ERA (Employment Relations Authority) has ruled on a number of occasions that companies claiming 'staff' were contractors were in-fact employees in the eyes of the law and their contracts were worthless.

What I suspect you have here is a case of a franchisee in some financial pain due to competition but unable to respond to that competition due to the limitations imposed by the franchise agreement. Jolt have been very quick to move to Radical fitness for their group fitness requirements as they possibly feel CP's offering is not current. Might be wide of the mark of course but I do know with all the Snap's and Jetts's popping up a lot of 'traditional' Clubs are finding the going very hard either through their own inability to make the changes necessary or through franchise agreements that restrict there ability to meet the market.

However if the CP agreement is legally binding then tough poppie to Jolt, there are clearly advantages in entering into a franchise agreement with a chain like CP, no doubt they picked up plenty of members because of the brand awareness CP has. You can't have it both ways i.e. pick up loads of members of the back of CP's brand and then reduce your costs by not paying the royalty charges. I think it will end in tears for Jolt, but may be a wake up call for CP that they need to shake things up in their Club's. Time will tell...

[Optimass]

Clearly they knew that they would come back at them in the courts, small business can't sustain big court cases - even if they win the money spent fighting the case will almost certainly out weigh any gains they thought they were getting by dropping the brand. By doing so your making a statement saying I can run a far greater & more profitable business with out the brand.

Time will tell but my money's on me

^^ This .... as you say mate time will tell.