CURVES Franchise Owners React to Comments That They’re Being “Pruned”
July 10, 2010
Curves President Mike Raymond Says Widespread Franchise Closures Part of Plan to “Prune the System”; Franchisee Responses Invited Read more
CURVES: 1000 Franchise Clubs Failed Last Year
July 8, 2010
The Wall Street Journal has confirmed what Curves franchise owners have been reporting on UnhappyFranchisee.com for the past two years: Curves franchise owners are closing their clubs, and losing their significant investments, in alarming numbers.
The statements of Curves International President Mike Raymond in Richard Gibson’s article also confirm what franchise owners have told us in more than 1000 posted comments: The franchisor that invited them to get into business “for themselves but not by themselves” remains both profitable and coldly indifferent to their plight.
More than 2500 Clubs, 1/3 of Curves U.S. Franchises, Have Failed Since 2007
According to the Journal:
Over the past three years its U.S. franchisees have been closing outlets at a rapid rate, shrinking the chain by about a third: to 5,208 U.S. sites at the end of last year from 7,748 at the beginning of 2007, according to a recent franchise disclosure document the company filed with state regulators. More than 1,000 Curves vanished across the country in 2009, while just 35 new locations opened.
While the financial toll taken on the owners of 2500 failed clubs is devastating enough, the number is actually understated. Many Curves clubs have actually been sold once or more before they were closed – so the number of individuals and families who lost significant savings, retirement accounts even homes could far exceed 2500.
U.S. taxpayers have also helped foot the bill for these losses. Many Curves franchises were funded by SBA-backed business loans, and the Curves concept consistently ranks as one of the highest-defaulting franchises. So your tax dollars have been repaying banks for loans on Curves franchise defaults.
Curves International Profitability Rises Despite Franchise Failures
The WSJ reports that while Curves franchise owners were losing their businesses in record numbers, the franchisor actually increased its own profitability. Gibson states that Curves financial statements reveal that, for the year ended Dec. 31, Curves earned $16.4 million on revenue of $84.1 million (19.5%) compared with earnings of $17.2 million on revenue of $128.7 million (13.36%) the prior year.
The decline in revenue reflects lower franchising royalties and equipment sales, but profitability actually increased. However, struggling Curves franchisees and ex-franchisees have complained that CI has callously tried to squeeze every last cent from them, even as they fended off bankruptcy and foreclosure.
It’s not clear how much of the $16.4M in earnings came from closing fees and liquidated damages (future royalties) that Curves International and its collection agency demanded from the thousands of dead and dying Curves franchise locations.
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Read 1000+ Comments from Curves franchise owners.
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Failure Rates of the 10 Most Popular Franchises
April 26, 2010
Failure Rates of the 10 Most Popular Franchises What are the failure rates of the 10 most popular franchise opportunities? Read more
CURVES: Should Failed Franchises be Resold?
March 31, 2010
The Curves franchise on Thorold Stone Road, Niagra Falls reportedly closed overnight.
According to the Niagra Falls Review, members reportedly “worked out the day before and no one said anything and then came in the next morning and it was all dark and empty.”
The sign on the door read: "Attention Curves members. Sorry closed for business. Thank you for your past support."
Members complained that they had just paid for the month and were given no notice whatsoever. However, members are free to continue their memberships at other area Curves clubs.
CI’s main concern: Finding a new owner
The Niagra Falls Review interviewed Becky Frusher, head of corporate communications at the Curves International Inc. head office in Texas:
She said the company will try to find a new owner for the women-only club so members are not disrupted.
"We regret to see any club close," she said. "Our main concern is getting the club back up and running, so that members can continue to enjoy the health benefits of our workout."
Shouldn’t Curves’ main concern be determining the reason for the failure?
While it may seem to members that their Curves franchise club closed overnight, it’s unlikely that it did.
After all, a franchise owner had a significant investment sunk into that club. The odds are that they have tens of thousands of dollars in outstanding liabilities… money owed to CI, to their landlord, and to other creditors. Isn’t it more likely that the club closed after a long and protracted effort to keep the club profitable and open?
The more than 500 comments posted here by struggling Curves franchise owners support that conclusion.
Shouldn’t Curves International’s priority be to determine whether the Niagra market could not support that club, rather than to put another owner in the same situation?
And if they find a new owner who reopens the club… will the surrounding clubs then lose the members they took in from the closed club?
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CURVES: 5 West Virginia Curves Close Abruptly
February 22, 2010
5 West Virginia Curves fitness clubs closed abruptly with no more than a voice mail to notify members.
The closed Curves for Women fitness clubs are:
Curves, Wheeling,
Curves, Martins Ferry,
Cuves, St. Clairsville,
Curves, Cadiz
Curves, Wintersville
According to a news story on the Curves closures, all 5 locations are owned by the same Curves franchisee:
Curves in Wheeling, Martins Ferry, St. Clairsville, Cadiz and Wintersville closed suddenly Monday, with only a voicemail message saying the closure was permanent and that it was due to national and local economic conditions.
But other club owners say it certainly was not a national thing, and that other Curves locations in this area and across the nation are still going strong.
Linda Mayberry, owner of the Barnesville Curves, has gotten frantic phone calls from members, fearing that all Curves clubs were closing.
She says only five have closed, all owned by the same Wheeling owner….
Mayberry emphasizes the closure was not nationwide.
She said Moundsville, Barnesville and Cambridge are going strong and would warmly welcome members from the clubs that are closed.
West Virginia has the third highest rate of adult obesity in the nation, at 31.1 percent and the eighth highest of overweight youths (ages 10-17) at 35.5 percent. It trails only Mississippi and Alabama as the fattest state in America.
Many Curves clubs across the country are closing as the economy and member boredom take their toll.
Also read:
CURVES: Can Indie Clubs Thrive Where Curves Failed?
CURVES: Complaints of Unauthorized Membership Charges
CURVES FOR WOMEN: An Unhappy Franchisee Tale
Tip of the hat to Fitdude for the link to this story
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CURVES: Can Indie Clubs Thrive Where Curves Failed?
January 19, 2010
Rande LaDue, distributor of PACE hydraulic exercise equipment, is seeing a fitness industry trend: independent express fitness clubs opening in markets and locations that could not sustain a Curves franchise.
PACE sells hydraulic exercise equipment like the machines used in Curves franchise clubs*. In fact, the first Curves club in Harlingen, TX originally used PACE equipment, according to LaDue. Ironically, PACE is finding a new niche where Curves clubs are struggling.
In an interview posted on FranBest.com, (see PACE Express Circuit Training Equipment) LaDue states:
One of our biggest areas of growth right now is selling into markets where a Curves club has just gone out of business. There may have been 50-60 loyal members who loved working out but have been left high and dry; maybe this was not enough members to cover the high franchise fees, but usually more than enough to cover basic expenses.
LaDue gives the example of Kimberly Ellingsen, a former Curves member who opened her independent New Image Fitness when the local Curves club closed. According to LaDue, Ellingsen “had over 50 former Curves members signed up before she opened her PACE club, then recently had her grand opening and signed up dozens of new people.”
[Pictured, above right: Rande LaDue, Owner, Hydraulic Fitness Products. For information on PACE exercise equipment, email PaceEquipment@gmail.com]
Independent clubs pay no franchise fees or royalties.
How could an independent club – with no established branding or name recognition – survive where a powerhouse like Curves could not?
The most obvious reason is cost. Independent clubs cost less to start, and less to operate. In some low-volume locations, that cost difference could be the difference between success and failure.
According to the Curves website, the cost of a Curves franchise is $24,900 (new equipment) or $19,900 (refurbished equipment) with delivery of the Curves equipment ranging from $3,000- $5,000. A PACE new equipment package is well under $15,000, with training included (normally a $1000 option).
According to Curves, “Curves charges a monthly franchise royalty and a monthly advertising royalty based on a percentage of gross revenues….The franchise royalty is 5% of gross revenues, with $795 being the maximum monthly payment by a franchisee and $195 being the minimum. The advertising royalty is 3% of gross revenues, with $395 being the maximum monthly payment by a franchisee and $95 being the minimum.”
Independent clubs pay no franchise or advertising royalties, as opposed to yearly costs ranging from $3480 to $14,280 Curves owners must pay. Additionally, Curves owners have other costs, including mandatory purchases and program participation costs.
Independent clubs have freedom to experiment.
Franchises like Curves are based on conformity and compliance; they build their brand by enforcing consistent standards throughout their international network of clubs. Curves franchise owners do not have the freedom to, say, add a line of retail products on their own, or to promote their club as co-ed. In smaller, extra-competitive or nuanced markets, finding new and creative ways to add revenue or grow membership may require out-of-the-box initiatives that would not be approved by a national franchise.
In recent discussions on UnhappyFranchisee.com, some Curves owners have complained that they have trouble retaining members who plateau and/or get bored with the non-adjustable Curves hydraulic equipment, yet they are prohibited from going to weight-based machines or even the adjustable hydraulic machines offered by PACE.
Curves franchises face stiffer penalties for failure.
The penalties for failure also seem to be greater for Curves owners than independent operators. Many comments by Curves owners here (see the comments on Robert Lay’s Story) cite the fact that they are pressured to pay closing or “failure” fees if they cannot remain open for the full term of their agreement, and that they are pursued for “future royalties” despite having done their best to keep their Curves clubs open.
Independents stake their claims.
There’s no doubt that Curves pioneered the concept of circuit-based express fitness clubs. However, many, many franchise clubs are fighting for their survival in oversaturated or underpopulated markets. Where these clubs cannot survive, independent clubs – unburdened by franchise fees, royalties and corporate mandates – may be able to thrive. If they do, the independent owners and suppliers like PACE will have Curves to thank.
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* According to LaDue, PACE equipment differs from the Curves machines in that PACE equipment can be adjusted to increase or decrease resistance.
CURVES Franchisee Regrets Not Sticking It to Others
January 7, 2010
A recent New York Times article features comments from a Curves franchise owner who regrets not having dumped her four Curves for Women franchise locations on some other poor schmuck when her sales were good.
In a recent post on “You’re the Boss,” NYT editors solicited readers’ stories about businesses that did not survive 2009. The owner of four Curves franchise locations (Joan Donofrio of Concord, California) — shared this comment:
“I made my biggest mistake by not selling my first two clubs when they were raking in the money. I could have made a profit of $700,000. Instead I ended up broke and in bankruptcy court. Not knowing when to get out of a business is the biggest hurdle people make…Not having an exit plan is the biggest peril of all.”
According to the writer, business broker Barbara Taylor, the moral of the story is to make sure that when the music stops, you’re not the moron left without a chair . Writes Taylor: “It can be difficult to let go of your business in good times, as well as bad. No business owner plans to fail, but many — like Ms. Donofrio — fail to plan their exit strategy.”
Really? Donofrio’s biggest mistake was not sticking some unsuspecting buyer with her doomed clubs so they could lost $700K more than she did?
Did it occur to Donofrio that perhaps buying a concept that could not withstand overexpansion and/or an economic downturn was her biggest mistake? Or not taking steps to reverse her declining sales? Or perhaps not organizing with other franchisees to demand more support from the franchisor?
The irony of Donofrio’s statement was not lost on commenter Quasimoto, who responded:
Let me fix that for you.
“I made my biggest mistake by not duping an unwitting bagholder into overpaying for my first two clubs when they were raking in the money hand over fist by preying on insecure women that had access to credit. I could have made a profit of $700,000. Instead my greed landed me broke and in bankruptcy court. Not knowing when to get out of a Ponzi Scheme is the biggest hurdle people make…Not having a greater fool to bail you out of your greed laden binge is the biggest peril of all.”
So what was Joan Donofrio’s second biggest mistake?
Perhaps it was posting her true regrets to the New York Times for all to see.
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CURVES: Complaints of Unauthorized Membership Charges
November 18, 2009
Most of the Curves for Women comments and emails we receive are requests for guidance and/or complaints from struggling Curves franchisees. However, we do receive complaints about Curve franchisees. The most common complaint regards the unauthorized billing of membership fees from ex-members.
Curves ex-member still billed 5 years later
Several different scenarios have prompted these complaints. One of the strangest was the recent report in the Chicago Tribune of a member who was billed $117 by the Curves club in Park Ridge, IL 5 years after she had cancelled her membership. The franchise owner, Michelle Aviles, claimed “the $117 was withdrawn from Bichkoff’s bank account after Curves for Women changed its accounting system in July. Due to a glitch in the process, some former members were accidentally charged.”
The franchise owner apologized and promised a refund. Months passed. The member never heard from her, nor received the refund. The ex-member drove to the club only to find it shuttered. She called Curves International, which was no help. She only got action after getting the Tribune’s Consumer Watch columnist (The Problem Solver) involved. She’s still waiting for the check.
The franchise owner seemed contrite about the supposed “mix-up,” but why did they even have this ex-members credit card information on file after 5 years? Was this really an honest mistake? How many others were “accidentally” billed right before the club closed? Have they received refunds?
Complaints about billing before a club closure
Member complaints have also been lodged by those who claim that they were charged for membership fees shortly before a Curves club closed. Members feel bad that the club closed, but protest that that’s not their problem. Curves franchise owners are entrusted with their private billing information. Some have asked: If owners abuse that trust and bill them for services they know will never be provided, isn’t that fraud? How can they complain about Curves International, they ask, when they are, in essence, stealing from their members?
Complaints about inflated memberships prior to selling a club
One of the most disturbing stories was from a franchisee who bought an established club from a Curves franchisee. The price was based on having an established base of paying customers. After the sale, the franchise buyer changed billing companies, which resulted in “Curves” showing up on credit card statements instead of a more generic company name used by the previous owner. Slews of outraged ex-members realized that they had been billed for membership dues long after they had terminated their memberships. The new owner not only claimed to be a victim of a fraudulent sale, but was maligned in the community for the unauthorized charges.
How many other credit cards of Curves ex-members are being charged each month? It makes you wonder.
Here’s the Question: How widespread is the practice of questionable or fraudulent billing by desperate Curves franchise owners?
CURVES: “Another Curves nightmare. Please advise!”
November 10, 2009
We received yet another sad email from a failed Curves franchisee reaching out for advice, this one with the subject line “PLEASE ADVISE ! (another curves nightmare)” Please feel free to share your experience, thoughts or helpful resources:
“It’s a huge relief to know that I have so much company who are walking in my shoes, but will that help??? I had my club for 7 yrs and just closed the end of Aug. The decision was made with only a weeks notice, but it was kind of the only chance because I was supposed to sign an amendment to my lease. Couldn’t do it because the business was already failing. Anyway, Curves was given a weeks notice, which was all I had to give and in all of my correspondence with them, I repeatedly told them I have NOTHING…No money, no credit, nothing in my name….
“Everything I did have I stupidly dumped back into the business thinking that I could somehow rebuild it and save it but then it only kept getting worse. I filled out their initial paperwork and had the equipment destroyed (what a shame…), & sent them the receipt to prove it. They asked me for the 10,000, knowing I don’t have it. Then offered I settle for 4000; told them I don’t have that either.
“I have not yet mailed them back their cylinders because I was told by another owner that it had cost a few hundred dollars when she mailed hers back. I told Curves I was trying to sell some stuff to make the money so that I could send them back. They then told me that I should just write that in the paperwork and send that, but at the same time they told me i hadn’t met the deadline for turning in my closing stuff so it was now being turned over to Legal.
“Last week I got paperwork from Legal stating I know owe everything (totals $28,175.00). It said that I had to respond within 10 days; haven’t done it because I have nothing. I don’t know what to do. I am considering filing for Bankruptcy against the Corporation, but will that help? I’m an S-Corp and I don’t know if since I signed the franchise agreement as an individual initially, does that mean that filing wouldn’t help? The attorney I spoke with doesn’t seem to be all that concerned with the franchise part of it all, but this is all just a nightmare to me without having any definite resolution in writing to protect me.
“I can’t move forward and take care of my family until I have the franchise, the landlord, and some tax issues resolved. It’s a relief not having to go to sleep every night and wake up every morning consumed with the struggle of drowning in Curves to keep it open, but all of that has been completely exchanged for the new nightmares of the aftermath of closing the doors… Does anyone have ANY advice???? “
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CURVES: Franchise Resale Complaints, Comments
October 31, 2009
Our previous post CURVES: Franchise Resale Buyer Alleges Fraud, originally published on the Franchise Pick website, generated some strong comments. The story was about a Curves owner who purchased an existing franchise club and felt she was defrauded by the seller. We’ve published them here in their entirety; feel free to add your own below.
April 2, 2009 Wipedout wrote:
Entrepreneur magazine shows that 940 Curves closed in 2008, from 7,269 to 6,329 still open in the US. That amounts to nearly 13% in just one year.
606 Curves closed in 2007.
2009 is sure to be even uglier for Curves…
Sounds like the owner and her relatives should take this “friend of the family” to court.
April 2, 2009 at 4:10 pm Carol Cross wrote:
Of course, in the resale of franchise units, the burden is on the seller of the franchise to “disclose” to the new buyer and BOTH the buyer and the seller will sign a release to the franchisor, and to each other, as a condition for the franchisor to approve the new franchisee, who will sign a franchise agreement with the franchisors. Resales are usually attractive if their P&L statements suggest to new owners that there is a job and profits and the price is right.
However, If the selling franchisee doesn’t disclose adequately, how can you prove this in the courts when the asset-purchase agreement will probably bear terms that wiull protect the seller from the new buyer and neither the seller nor the buyer have any recourse against the franchisor?
Churning and turning of units in large systems is hard to uncover and those who have been “churned” to great disadvantage want to pass on the problem to the next franchisee and get out from under. If they believe they have been cheated and lied to by the franchisor, or whomever they bought the unit from, they rationalize that this is only fair, etc..
It is my opinion that a resale of a franchise does present better possibilities of doing better due diligence on the deal because you can demand to see the P&L Statements and the Business Tax Statements, etc… as a condition of purchasing the franchise.
As for recourse against the seller, read the terms of the contract. Could the seller be taken to court for “fraudulent inducement to contract” in a State Court if it could be proven that they intentionally misled and cheated the new buyer?
We know the franchisor is protected by public policy and the FTC Rule and the State UFOC/FDD from claims of fraudulent inducement to contract, but what about the owner of a franchise who commits fraud in the resale of the unit. Can the victim get satisfaction in the State Courts? I don’t think so but I’m not an attorney —just an observer of rhe law.
April 3, 2009 at 8:43 am Sean Kelly wrote:
Another lesson of this story is to check your credit card or bank statement carefully each month. Hundreds of women paid $29.00 every month to “merchant” without verifying what the charge was for. Amazing.
April 3, 2009 at 9:43 pm jd wrote:
Sean, there are so many things wrong with how this person went about their due diligence, it’s hard to figure out where to begin. First, if they were making $300-400k a year based on their tax return, the $350k price tag on the franchise was way too low.
Second, not requiring the seller to put at least a piece of the price into escrow is probably a trap that most people fall in to. If a seller has no problem putting a portion into escrow (paid for by the buyer and with some sort of interest on the funds to go to the seller if nothing was wrong), then there is probably a good case that they are being completely honest. Someone that doesn’t agree to this is probably ‘hiding’ something in the sales process.
I’m guessing that the buyer did not review any contracts or the appropriate files, if they knew that some contracts were ‘cancelled’ the price might have been less. Plus, this is something that could’ve been covered in an escrow agreement.
My guess, is that the buyer looked at the tax returns and didn’t do much additional research, and found out too late that the club wasn’t as good as shown. As for fraud, you’d have to prove that they intentionally misrepresented facts, which it sounds like they didn’t.
April 5, 2009 at 1:28 am Wipedout wrote:
I’ve heard one year’s revenue is a good selling price.
April 10, 2009 at 3:18 pm Fayaz Karim says:
Curves resale buyer
It is all about proper due diligence, seller’s disclosures, some seller financing (for insurance), and getting a second opinion from some qualified experts. What an amazing valuation methodology that defies all logic and reference to CASH FLOWS and an assessment of future revenue…….
mrfranchiseman, Franchise Valuations, Due diligence and more buyer services
April 28, 2009 at 12:27 am Wipedout says:
How would the new owner have known the old owner was still billing members who had quit? I think the new owner’s got a good case.
April 30, 2009 at 1:36 pm Curves Owner2 says:
You would think so, but you can’t win a fraud case like this. The seller sold 500 members per club. She was drafting 500 members and bringing in the income for 500 members. The buyer bought the assets. Yes, the seller was drafting deceptively, but it’s not against the law. Id this went to court, a judge would say, “The amount was coming out every month, it’s not the sellers fault, the women should have noticed it.” This is the problem. If there was a law that didn’t allowing drafting in this way, the buyer wouldn’t be in this situation.
May 28, 2009 at 8:46 pm unhappy says:
To all curves owners who have had problems with curves International and Gary Howie Havein please send your complaints to the BBB of your city and Waco TX. As well as the attorney general of your state and TX. And the federal trade commission. Below are web links where you can file the complaints on line.
http://waco.bbb.org/WWWRoot/SitePage.aspx?site=40&id=ab5100aa-4c5a-4314-8e1b-f5996973f10c
May 29, 2009 at 7:56 pm unhappy says:
the moral of the story is that even if the frachise is for sale for a buck thats right one losy dollar DON’T GET SUCKERED INTO THIS BUISNESS UNTIL THE CROOK HOWIE IS GONE OR YOU WILL BE VERY SORRY AND BROKE WITH NOTHING LEFT BUT TO FILE A LAWSUIT AGAINST THIS BLANTANT ASSHO—–
June 6, 2009 at 3:39 am Curves Owner 2 says:
Will the lawsuit get rid of Gary, but Curves will go on. If so, should we hold on, in hopes that in due time, we may be able to make the money we need to pay off our debt?
April 7, 2009 at 4:40 pm Curves Owner2 says:
Jd, the seller made $400k profit in the first 2 years of owning the clubs, which means the seller made $200k profit each year, for 2 years. The buyer believed they had purchased 2 clubs with 500 members each, who knew they were paying for their membership. As the buyer in the article states, “When we bought the clubs, we switched from paper drafts to an electronic drafting system. A month later we started getting calls from women who were threatening to sue us for taking money from them without permission. I explained that I was the new owner, that they were still under contract, and based on my knowledge, the previous owner was drafting them when I bought the clubs. They argued with me and said they had cancelled their contracts, and they had not been getting drafted from Curves until we started drafting them. I asked them to bring in a bank statement from any month prior, and the current months statement. When they brought in their statements, we discovered that the previous owners draft was coming out as “Merchant”. They didn’t realize they were being drafted until they saw our “Curves” draft. Over the next 3 months, we had over 300 women cancel in each club.”
I don’t believe any amount of research would have given the buyer access to the fact that the previous owner was drafting these women deceptively. The seller would have had to mention this. Obviously, she didn’t.
June 16, 2009 at 9:33 pm unhappy says:
I wish I had a crystal ball and could answer that question. It has been on many owners mind and we are all hopefull that things will change as most owners love helping women reach their fitness goals. Only time will so if you decided to go on you should at least go to the yahoogroupcurvesowners site as they are a good resorce to help you stay open. Good Luck and God Bless you and your family.
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Photo: Bobu. Licensed by Creative Commons.
