March 9, 2011
Attorney General Eric T. Schneiderman has announced that Curves International must establish a restitution fund to repay members of 60 Curves franchise fitness clubs that closed in New York in 2009. Additionally, Curves must pay an additional $60,000 to New York State for the costs of the investigation.
In New York, franchisors are liable for refunds on closed franchised health clubs
The Attorney General launched an investigation after receiving complaints that a Suffolk County Curves franchise had closed without notice. Since that club failed to secure a bond as was required by law and refused to provide refunds to its members, consumers sought refunds from Curves International – its franchisor. However, Curves International failed to immediately provide refunds, denying any responsibility for the independently-owned club.
New York State General Business Law states that any contract between a consumer and a franchised health club is also enforceable against the franchisor. According to the Attorney General’s office, Curves International refused to honor that legal obligation and failed to provide refunds to the consumers.
“If you do business in New York, then you have to play by the rules. Curves International – like any franchisor operating in the state – must refund the customers who prepaid for memberships they ultimately could not use,” Attorney General Schneiderman said. “My office will continue to ensure that consumers are treated fairly, and I encourage New Yorkers to learn their rights and report offenses to our office so that we can take action.”
More Than 60 ‘Curves’ Health Clubs Across the State Accepted Fees, Then Suddenly Shut Their Doors…
In 2009, 60 Curves health clubs across New York state went out of business without providing refunds to their members.
According to the Attorney General’s press release, the closed Curves franchise club locations, by county, include:
|County||Curves Closed ‘09||County||Curves Closed ‘09||County||Curves Closed ‘09|
|Cortland||1||New York (Manhattan)||1||Saratoga||2|
More than 1000 Curves franchises closed in 2009
From 2007 to 2009, the Curves franchise chain shrunk by about a third in the U.S., from 7,748 at the beginning of 2007 to 5,208 U.S. sites at the end of of 2009.
In 2009, more than 1,000 Curves franchises closed their doors, while just 35 new locations opened.
When asked for the reason for the widespread closings, Curves president Mike Raymond said it was part of a plan to “prune the system,” sparking outrage from the Curves owners whose investments and livelihoods suffered from the pruning of franchisee-owned clubs.
According to this month’s Franchise Times, Curves International has been sued by more than 266 franchisees and franchise groups. Curves franchise owners have documented their struggles and frustrations by posting thousands of comments on posts on UnhappyFranchisee.com.
How New York members of Curves clubs that closed in 2009 can apply for a refund.
The NY Curves restitution fund is being adminstered by the Better Business Bureau. Consumers who believe they are entitled to a refund from Curves International should contact the Better Business Bureau at 212-358-2857 at 30 East 33rd Street, 12th Floor, New York, New York 10016.
New Yorkers who have had a similar experience with a different business and would like to file a complaint are encouraged to contact the Attorney General’s Consumer Helpline at 1-800-771-7755.
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March 1, 2011
Unhappy Franchisee – Curves founder Gary Heavin and his wife Diane will be featured in an episode of the new “inspirational” ABC series “Secret Millionaire.”
We ask: Do Curves franchisees perceive Heavin’s Secret Millionaire participation as positive brand exposure that will benefit existing clubs?
Or do they perceive it as a slap in the face, an ego-fueled insult to the thousands of failed or failing Curves franchise owners who are now, themselves, suffering financial hardship by investing in Heavin’s franchise?
Feel free to share your view below.
There’s more to this story than it seems… – Gary Heavin
The promo clip for the episode begins with ominous music and a dramatic voiceover:
[Narrator:] “Tonight… A couple who has created a health club empire…
[Gary Heavin:] “We’re kind of the McDonald’s of fitness…”
[Narrator:] “…Will experience life in one of the nation’s poorest cities…”
[Diane Heavin:] “I’m not sure I understand poverty in America like this…”
[Narrator:] “…For six days days they will be stripped of all luxuries…”
[Gary Heavin:] “Six dollars and fifty cents a day… Wow…”
[Narrator:] ““…And assume new lives as secret millionaires… Looking for deserving people who need their help… In the end they’ll surprise community heroes with tens of thousands of dollars of their own money…”
[Diane Heavin:] “We really want to do something special…”
[Narrator:] “After revealing their secret identities as…”
[Gary Heavin:] “There’s more to this story than it seems…”
[Narrator:] “The Secret Millionaire.”
For six days they will be… looking for deserving people who need their help… – Narrator
A television show about the founders of Curves having to search for deserving people in financial crisis may strike some as a tad ironic.
The Wall Street Journal reported 1000 franchises Curves clubs failed in 2009 (Read CURVES: 1000 Franchise Clubs Failed Last Year). Since 2007, 2/3 of Curves domestic franchises – more than 2500 clubs – closed their doors. The financial toll on many franchise owners has been devastating.
On UnhappyFranchisee.com, failed and failing Curves franchise owners have reported that instead of receiving assistance and support from their philanthropic franchisor, they have received threatening letters, demands for closing fees and payments, and been mercilessly harrassed by an IL law firm/collection agency claiming to represent the Heavin’s company.
Curves franchisees, many of whom were “stripped of all luxuries” long ago, have voiced their discontent in more than a thousand comments on UnhappyFranchisee.com (Read CURVES: Robert Lay’s Story and CURVES: Curves Posts on Unhappy Franchisee).
None have, so far, reported receiving a call from Gary or Diane Heavin offering to do something special for them.
We really want to do something special… – Diane Heavin
The Secret Millionaire series will debut on Sunday, March 6 at 9/8c.
The short clip above is a teaser from one of the first episodes of Secret Millionaire, which features Diane and Gary Heavin, scheduled to air on April 3.
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November 30, 2010
Ex-Curves franchise owner Deborah blames “corporate greed, lack of quality control and a very poorly run infrastructure” for the once-proud Curves for Women fitness concept becoming (what some have called) the “trailer park of gyms.”
In a recent Curves franchise discussion (CURVES: Robert Lay’s Story), Deborah recounted what she describes as the unscrupulous overselling of the Curves franchise opportunity, and the resulting damage to the Curves for Women brand image:
When we bought a franchise in 2003, there were a few thousand clubs and the closest club was over 5 miles away. You had to have 30,000 or more in population to constitute a “territory”. It does not take many brain cells to realize that when Curves started selling “territories” with as few as 5,000 total population, that a) such territories were not large enough to support a club or b) that existing clubs would suffer member and revenue losses.
We went from a purist apporach to selling everything Curves could throw at us (even an overpriced travel service) in order to shore up corporate and club revenues. What was “contemplated by the parties” in contract terms at the time we signed our franchise agreement and what transpired thereafter, were at odds. Also, there was absolutely no quality control and some clubs were little more than slums. This caused a tarnishing of the Curves brand and I had some people tell me that Curves was the “trailer park of gyms”.
According to Deborah, Curves clubs cannibalized each other’s sales, spreading too-few members across too-many clubs. Add in lack of support and infrequent-to-nonexistent field visits and you have a recipe for widespread failure:
As the person who sold me the franchise said, they don’t care anything about you or what your are like or what your skills are if you have the money to buy. I was four years into my franchise before I even saw an area director. By that time, we had gone from having one or two other clubs in the area to having six. My membership numbers had peaked at around 600 and, by 2006, were at 300 and falling.
According to Deborah, Curves International would sell a franchise to anyone whose check would clear, including many who were neither qualified nor prepared for business ownership:
My experience with other owners was that some were reasonable business people, but many were naive and had no experience in business. I will never forget my training in Waco. The guy sitting next to me was a chicken farmer whose mother in law had bought him a franchise. As my salesman had said, Curves did not care if you had the money. This guy was a train wreck waiting to happen. By the time I got out of the franchise, three of the six clubs in the area had closed.
The Curves closures in Deborah’s area are consistent with national averages (Read: CURVES Franchise Owners React to Comments That They’re Being “Pruned”) . It’s been reported that 1000 domestic Curves locations closed in 2009 alone, and that in the past three years 1/3 of all domestic Curves clubs went dark. Yet despite the devastating losses suffered by Curves franchise owners, franchisor Curves International is enjoying healthy profits. Curves International actually increased earnings as a percentage of sales, with 2009 earnings of $16.4 million on revenue of $84.1 million.
According to Deborah, the demise of the Curves brand is the result of corporate greed and substandard franchisees:
The Curves disaster is down to corporate greed, lack of quality control and a very poorly run infrastructure…. Lack of care in chosing franchisees impacted the brand. I have no moved back to the Southeast. My local Curves has tacky and cheap paneling that is peeling off the walls, ancient and poorly maintained equipment and (horror of horrors) plastic flowers in plastic vases. The owner is fat, complaining and has the energy of a slug. Am I a member? You answer that one.
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September 30, 2010
In the Curves International 2010 Franchise Disclosure Document (FDD) issued March 25, 2010, 28 civil actions were disclosed in the Item 3 Litigation section.
5 are individual or group actions by Curves franchisee owners alleging such things as breach of contract, fraudulent inducement, negligent misrepresentation, etc. on the part of Curves International.
7 are lawsuits by Curves members allegedly injured on pieces of equipment or on premises.
5 are by vendors, employees and a competitor (Weight Watchers) against Curves International.
11 are lawsuits by Curves International against its franchisees, most seeking recovery of damages (non-payment of fees) resulting from their alleged “abandonment of the franchise.”
Curves International, Inc. Settlements With Franchisees Who Sued
The mandatory disclosures of litigation in the Curves FDD make public the following “confidential settlements” between Curves International, Inc. and the Curves franchisees who sued them. For more information on the allegations and court venues, consult the CURVES International 2010 Franchise Disclosure Document (FDD).
Healthy Directions Northwest, Inc. v. Curves International, Inc., George Blaine and Sandy Blaine d/b/a Curves.
“…A confidential settlement between the parties and this case was dismissed by the court on 4/9/09 in which We [Curves International] paid $5,000 in full and complete settlement of all claims.”
Linda G. Woodward, Susan Taylor Harper, Lydia S. Romero, Jeffrey P. Kalbfleisch and Stephanie Kalbfleisch v. Curves International, Inc.
“…We paid $3,500 in settlement of all claims filed by said plaintiff [Woodward], and her claims were dismissed from this lawsuit by the Court on 2/13/08. Confidential settlements have been reached between the 4 remaining plaintiffs and Us… execution of the settlement documents and dismissal motions are pending.”
Kareen Lay v. Curves International, Inc.
“On 3/20/09, an action was filed against Us by a franchisee seeking recovery of damages in an undisclosed amount for alleged breach of the franchise agreement by an alleged failure to mediate. As of the date of this Disclosure Document, this case is still pending.”
Kinnie Gibson v. Curves international, Inc.
“On March 9, 2010, an action was filed against Us by a former master franchisee in Germany… regarding the franchise relationship. As of the date of this Disclosure Document, the case is still pending.
Momentum Sales & Services, Inc., et al. v. Curves International, Inc. and Howard Gary Heavin.
This is the largest group action lawsuit by franchisees against Curves International, Inc.
17 plaintiffs’ claims were dismissed with NO payments being made by Curves International, Inc.
29 confidential cash settlements totalling $204,400 were made by Curves International, Inc. resulting in their claims being dismissed. The average settlement amount was $8,290.
As of the date of the FDD, the case is still pending with 81 plaintiff groups remaining.
|Date Settled||Plaintiffs||Amount CII Paid|
|2/7/08||Lori Brickel & Jill Kalatucka||3,000|
|5/14/08||Diana L. Dahlin, Peggy Matson||20,000|
|5/14/08||Carol L. Rooney, Jaclyn A. Rooney||7,500|
|6/11/08||Sheree Corde Carter||5,500|
|5/8/08||Denise Alabach, Diane Schneck||5,000|
|6/27/08||Judith Haddad, Tringo, Inc.||10,000|
|5/13/08||Sandra L. David||3,500|
|5/19/09||Gloriously Fit Inc., Janet & Russell McTier||1,000|
|6/24/09||Akute LLC, Royce Makil, Gracy James||6,000|
|6/24/09||Doobly Ventures LLC, Doobly Ventures III LLC, Deborah B. Myers||7,000|
|11/20/09||Carol Riedel, Marie Fitness Inc.||12,000|
|1/8/10||Betty J. Boyd||2,500|
|2/2/10||Geralin Inc., Linda Coughlin, Geraldine McClary||4,500|
|2/24/10||S&P Wolf Inc., Peter & Sarah Wolf||3,000|
|3/5/10*||Karen Costner Leighton||24,000|
|3/5/10*||Fitness etc. LLC, Yvonne Samuels||2,500|
|3/5/10*||RM&R Fitness Inc., Mary Stark||2,000|
|3/5/10*||Elaine & Robert Taylor||2,000|
|3/12/10*||Treetoad LLC, Teresa Soderberg||2,000|
|* Agreement date.
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September 29, 2010
Curves International 2010 Franchise Disclosure has been released. Here is the PDF version of the Curves FDD issued March 25, 2010, registered with the State of California. It is separated into 2 parts.
Item 1. The Franchisor and any Parents, Predecessors, and Affiliates
Item 2. Business Experience
Item 3. Litigation
Item 4. Bankruptcy
Item 5. Initial Fees
Item 6. Other Fees
Item 7. Estimated Initial Investment
Item 8. Restrictions on Sources of Products and Services
Item 9. Franchisee’s Obligations
Item 10. Financing
Item 11. Franchisor’s Assistance, Advertising, Computer Systems, and Training
Item 12. Territory
Item 13. Trademarks
Item 14. Patents, Copyrights, and Proprietary Information
Item 15. Obligation to Participate in the Actual Operation of the Franchise Business
Item 16. Restrictions on What the Franchisee May Sell
Item 17. Renewal, Termination, Transfer, and Dispute Resolution
Item 18. Public Figures
Item 19. Financial Performance Representations
Item 20. Outlets and Franchisee Information
Item 21. Financial Statements
Item 22. Contracts
Item 23. Receipts
Here are most of the required exhibits and attachments that accompany the 2010 Curves FDD. Missing is the list of locations, which may be added later:
Curves Franchisees Who Left The System in 2009
The file “Curves Franchisees Who Left The System 1″ also contains a partial list of international locations and the list of Agents for Service of Process. The list of franchisees begins after that.
Also read: CURVES Franchise Lawsuit Settlements to see the lawsuit settlement amounts Curves paid to franchisees in table form.
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July 10, 2010
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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April 26, 2010
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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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, Martins Ferry,
Cuves, St. Clairsville,
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.
Tip of the hat to Fitdude for the link to this story
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