CURVES: Negotiating the $10,000 Closing Fee
October 12, 2009
Struggling, failing and soon-to-close Curves franchise owners share information and advice on both Unhappy Franchisee and Franchise Pick posts. One of the frequent topics is the club closing procedures, and how to negotiate with Curves International in regard to their demands for a $10,000 “failure fee” and often tens of thousands of dollars for “future royalties.”
From the post CURVES: Robert Lay’s Story, here’s a recent exchange regarding the $10,000 closing fee:
Donna Submitted on 2009/10/08 at 2:41pm
HELP!!! I have read some of the horror stories listed. I to have to close my club. I can not get anyone to return my calls from CI. I do not know what to do. I have had my club almost 7 years and have paid my dues. I do not have 10,000 dollars. Because of the recession I have to close. I love my members and hate to dissapoint them but I have no choice. The closing packet was sent to me but I’m scared to send it in. Is there any help out there? I have to do what I need to do today. Will they let me out without the 10,000 fee. Has anyone out there been in my shoes. Please someone respond as I need advice and help NOW.
CA ex-owner Submitted on 2009/10/08 at 8:21pm
We’ve all been there! Our club has been closed for over a year. We refused to pay the $10,000. They emailed us two more times, first lowering it to $8,000, then to $6,000 – we still refused. Next came a letter from Curves Legal stating we now owed fees for the remainder of our franchise agreement, somewhere in the amount of over $42,000, with a fair amount of scare tactics! (Read our story above: CA Ex-owner on October 16th, 2008) We then sent a letter back to legal, refusing to pay anything and the reasons why. Now I will knock on wood before I say this, but it has been over a year that we sent them that letter and we have not heard a thing yet.
We are not part of the legal action that many of the people above are pursuing, and I’m sure someone will respond on how to proceed in that direction, or direct you to on what other options you may have. Remember, you are not alone, we’ve all been through this horrible experience. It hardly makes it better, but at least maybe knowing there are so many of us out there, you might feel a little better…
Another Curver Submitted on 2009/10/09 at 12:15pm
Hi Donna.
Like You, I had to close my club. I closed it Feb 28th this year…
Of course I did everything I could to keep Curves International properly informed and I asked them for advice on the best way to proceed…The one thing they did spell out, there is no “standard” $10,000 fee. At least Not Anymore. They said, if I write a letter asking for a settlement instead of paying all the outstanding royalties and ad fees, then they will put it to a review board and the review board will make a suggestion for a settlement. Then they told me not to write a letter but to hold onto the closing packet.
Well, then they forgot about me for 6 or 8 or 10 weeks. I think it was sometime in May that I got a notice that I owed some $40,000 for the balance of royalties and such…
however, i did inform them that i was filing for bankruptcy. they never asked for the bankruptcy attorneys name or the case number. i am just now filing, so they havent gotten any legal notices yet either.
since then I have not heard one word. it’s been what, 7 months since I closed. ridiculous…
i do have another franchise, that i’m struggling to hold onto, and you would think maybe that’s why they’re giving me some slack…
they are very frustrating but i think they have a backlog of closed cases. i have been told by others (gossip?) that they are understaffed and overworked. of course they’re busy with the big lawsuit that “unhappy” is part of it. and all the little lawsuits. i would like to know more about gofigure’s lawsuit against them too.
my attorney told me not to worry about any of it, because our state law supercedes whatever was written in the franchise agreement….
Donna Submitted on 2009/10/12 at 12:21pm
Robert was right on. Settlement from 10,000 now wanting 2,500. And its only been 12 days. I don’t close until Oct. 30th. They were also nice and I wouldn’t have to pay it until the end of Nov. I wonder If I ask nice they’ll say i don’t have to give away my equipment to another Curves or destroy it -I can do what I want with it. What do you think?
WHAT DO YOU THINK? SHARE A COMMENT BELOW.
[...] CURVES: Negotiating the $10,000 Closing Fee [...]
As for these “failure fees” that are hidden in the unilateral, unbargained contracts, you can see from the above that they are negotiable.
Do you think Curves will actually sue you for $10,000 if you can show the court that you are unable to operate your business without sustaining a loss? Do the Courts uphold these abstruse contract terms that obscurely define the failure of the franchisee as an opportunity for the franchisor to get a fee from the loser?
I don’t think the Courts would go this far but I am not an attorney. The Courts do always appear to support the franchisors and their contract terms, but would they support such unfair terms now that “franchise fraud” and the economy are worsening the situation for franchisees —and now that the abstruse franchise failure fee is getting coverage on the Internet —and Curves are closing down all over the place.
In hindsight, I can see that we could have saved ourselves a lot of money if we had just closed down our The UPS Store and taken our chances with the court, when UPS threatened to demand liquidated damages from us because we failed to thrive and were trying to terminate the relationship. We stupidly lost even more money when they insisted that we get an attorney to bargain the “failure fee” and the termination with their outside attorney.
Please know that the franchisor is free to negotiate the terms of the contract with you and maybe you, yourself, can negotiate your “failure fee” down to one penny! Think about this! If you just close down and do nothing and see what happens, maybe nothing will happen and you will save yourself the price of an attorney at $200 per hour. But, do comply with all the paperwork involved in termination as described in the actual contract to the best of your ability to demonstrate your good faith in the termination of the business.
Good luck!
Tammy on October 14th, 2009 7:37 am
I have a club in Missouri and I know how you feel. I also hate to dissapoint my members. I work a 2nd job and my husband too. I need help with Curves. What can we do? HELP
Curves will sue in hopes that you are already broke enough that you can not afford to hire an Attorney in Texas and fly there for the case…they win by default. They know that the Courts will not be sided with CI in the majority of those suits.
I too am planning on closing oct. 30, 2009. Has anyone sold their equipment to help pay off debts and how much did you ask for each piece.
Thanks Penny .
To Tammy and Penny send an email to unhappyfranchisee@gmail.com [email corrected] requesting it to be forwarded to Robert Lay and he will be able to help give you some advice. Be sure to include your phone number.
I feel real sympathy for those Curves Owners who have to close down because I remember the terrible days when we realized that we had to close down our The UPS Store to avoid losing even more money each month —-and the terrible realization that we had lost our entire investment.
I know that those who are faced with this terrible stress and strain and the realities of losing your entire investment in the business are in pain and don’t know what to do and who to turn to.
Some of you will be able to avoid personal bankruptcy but perhaps will have to continue to pay on any startup debt you assumed and personally guaranteed with personal assets. Some of you will have lease obligations that mean even more debt if the Landlord gets a judgment against you for a lease that has b een personally guaranteed. Some of you will perhaps not be able to avoid personal bankruptcy and if this is the case, don’t keep digging the hole deeper. As Richard Solomon, Attorney and Author advises on Blue Mau Mau —–Do it! and quickly! and get on with your life, and out from under the stress of the indecision.
Those who have to quit to cut their losses when they have exhausted their startup capital and exceeded the startup estimates of the franchisor, etc.. do believe they have been defrauded in the sales process by misrepresentations and omissions. When these tired and angry franchisees survive with any personal financial assets still available, they often think of joining class action and mass action lawsuits to seek justice and restitution.
I am not opposed to these lawsuits because they do push the courts to look at the fraud that is going on in franchising, but I believe that failed franchisees need to be objective and not subjective and look at the status quo of the law and regulation surrounding franchising that has contributed to their current situation.
This is why I post —to warn —and to try to provide the benefit of my research to current and past franchisees.
Please see http://thegreatfranchisingrobbery.blogspot.com/ and read in a Google Search, the articles “Franchise Regulation Realities — Deception or Patriotism” – “Disadvantage of Buying a New Franchise for Prospective Franchisee” and “The Franchise Disclosure Document –Beware of Red Herring”
Unhappy:
You gave the wrong email address, but I corrected it.
Please use the email address unhappyfranchisee@gmail.com if you’d like a message forwarded to Mr. Lay.
Thanks
Sorry about that I must have been in a hurry or maybe it’s that I’m loosing my mind . take your pick.. Any way thanks again Unhappy who is getting happier every day
Penny…yes we sold evrything to include the Smart equipment to pay off as much debt as we could. Look to your local Clubs first to see if they are in need of any equipment then ask your members. Many of them will also buy their favorite stations and work out at home.
Sorry to hear you need to close but understand…life will go on and we will be back on our feet with time.
We owned 4 Curves. Lucky for us we sold 2 for good bucks a couple of years ago, closed 1, and kept the 4th, our flagship cash cow.
If you have to close, ignore the agressive posturing by CI. We negotiated the
10,000. down to a $100. monthly payment, which they agreed to and then came back and said they could not accept a monthly payment. We offerred $1200. which they took.
Listen, the people you are dealing with at CI are low level clerks, that sit at computer screens and answer the phone. Stand strong, tell them what you can or will pay, and never show weakness.
If you need to, buy a good book on business negotiation.
At club camp in 2002, I understood Howie’s true intent when he said,
“money is God’s way of telling me that I am doing the right thing”
Its a shame, because Curves is a brilliant concept..
.
You are right that Curves is a brilliant concept but it will go bankrupt as long as Howie is running it. He is nothing but a greedy crook who will get what is coming to him once everyone who has filed suit against him gets to court. The only thing they want you to sign when you close is a so called mutual release form which only protects them. They will drop the fee down to around 2500 dollars now but you must sign the release form, by doing so you are signing away your option of filing a lawsuit against them but they can still sue you. For all means don’t sign anything if you happen to close. Send an email to Sean at this site requesting him to forward it to me and include your phone number and I will let you know what to do and what to expect.
Just received a notice from the post ofice for our facility. I haven’t picked it up yet. Will this week as it came on Saturday. Probably a packet from the “born again christian”. We have been closed for 3 months now. In the past 9 months, I have asked for help with someone coming in to the facility to make it better, no response. then mentioned that we may have to close as we are not “making it”. No response. Again, after two weeks asked for some help with someone coming in to our facilty. Oh…. we have had 4 area directors in the past 2 years. What is up with that. And I have only seen 1 area director in 9 years. Got some poor southern bell on the phone that would not talk to me as I was a bit upset and she said they don’t deal with unhappy franchise owners. I even asked to speak with “Mr. Born Again”. Was put on hold, thought I would even be able to talk to him. Nope. Told that he was gone for the day. This is so typical. I hope he gets what he deserves and maybe he should “be born again”. I hope his upbringing is a bit more admirable.
Lola, don’t sign anything until you talk to me. Send an email to Sean at this site and include your phone number and ask it to be forwarded to me and I will call you immediately.
Hi, all.
I commented back in January or February about closing my club. I did close and I will say that I did my best to comply with any of the closing obligations that I could. The $10,000 was not an option for us. CI did work with us and I closed without any threats or ugliness. We are in debt and will be for about 3.5 more years, but I have peace of mind for the first time in 3 years and for that I am very grateful.
Penny, Tammy, Donna, my heart just goes out to you when I read your comments. Don’t continue trying to keep a failing club open. Get out and move on with your life. It is not worth it and you will be so relieved when it’s all over.
I, too, loved my members and still keep in contact with many of them. There were no hard feelings or anger at my closing. They knew I tried my best. That is all any of us can do. I do not have time for anger or bitterness. I’m just thankful that I have a good job and that we are doing okay.
I wish those of you involved in the lawsuit the very best of luck.
Denise
Good luck to you Denise and God Bless. Thanks for posting
We closed on October 16, 2009 and followed all the instructions in the closing packet. We sent several emails pleading our case as to why we couldn’t pay the $10k and continued to request that they accept $2500. I don’t know why but they held firm at $5000 which we just don’t have so after their deadline passed, they told us it was being turned over to legal. I was surprised at how quickly they acted with us because we got their demand letter last week. I have done nothing and need to hear from anyone else who is sitting on pins and needles just in a holding pattern.
We just closed our club on Dec. 31st and received the closing procedures today via email. Should we not complete the forms if we can’t be in compliance with anything – we don’t have money to have our sign removed, pay back members or pay Curves. We donated our equipment but not to a prison.
What happens if you don’t complete the forms? What happens if you don’t pick up the demand letter that Sherry mentions above?
What happens if they get a judgment against you in the Waco Court?
Thanks – I’d appreciate hearing from someone who can give us some advice now.
Pat! I am not an attorney but I understand that consulting with an attorney costs money and those who close down their businesses don’t have the money, generally, to consult with an attorney. It is my opinion that the attorneys can’t do much for you in view of the contract terms you agreed to when you put your signature to the contract agreement but honest attorneys will tell you the pros and cons of cooperating or not cooperating with the demand of “liquidated damages” from the franchisor when you fail to thrive and close your business.
If you try to cooperate in the closing of your business to do the least damage to your franchisor and his image, this should help you in the event they do try to get a judgement against you from a court. If you try to be as fair as you can be and follow the Golden Rule with your clients, as well, this will demonstrate your good faith in closing down your business because of insolvency or to avoid insolvency in the future.
I’m not clear on whether or not Curves have tried to get judgements from the courts for the “failure fee” when businesses close down because of failure to thrive. Since they are offering to settle, it would appear that they haven’t been spending the money to go to court to enforce these terms of their contract. Would the $10,000 or a $5,000 be a small claim in your state?
You can look at the Statutes of your State and see how long judgments are good for. I wouldn’t think that the courts would uphold these ugly terms, the failure fee, in these hard times if you can prove to the Court that you were losing money and were closing to avoid insolvency, and I think Curves knows this to be true.
On the other hand, if you just closed because you weren’t making profits and weren’t in danger of failing, the courts would probably uphold the terms of the damages for closing your business before the expiration of the time term of the contract. Obviously, the purpose of the “failure fee” to begin with is to keep franchisees standing as long as possible to feed the franchisor with gross sales and to gain an advantage when the franchisee fails.
Profits for the franchisees are not promised in the routine franchise agreement. In other words you just can’t quit because you aren’t making profits but if you have to quit to avoid insolvency in the future and have exhausted the estimated startup costs, etc.. and are still losing money, how could the courts uphold these “failure fees?”
These failure fees are especially unfair and unjust when the franchise is sold under cover of regulation as if there is very little risk to the buyers, and I’m sure the courts know what is going on.
Remember that “doing nothing” and “waiting” while trying to follow the Golden Rule is a decision in itself and sometimes the best decision.
Good luck to you!
Carol
http://thegreatfranchisingrobbery.com
Pat,
I have helped many owners go through this and you need to send Sean an email requesting it be forwarded to me with your phone number on it and I will get a hold of you asap. Carol as she stated is not a lawyer and has no idea of what is going on with all the Curves lawsuits or how to handle the closing packet you received. Do not sign anything that you receive from curves until you talk to me.
I have heard that CI has quite trying to charge the closing fee as they now are aware that it is illegal in TX to charge it. can any one confirm this? i also heard that it is illegal for CI to collect franchise fees and add fees once you are closed in TX. Is this true? man what a bunch of low life crooks they are nothing but scumbags
After all the threats and suits CI agreed to take $3,000, which i am now sorry i paid. We have not received the release which was promised, and will head to personal bankruptcy to avoid future claims. DO NOT send them money. As everyone else here has stated I had a thriving club that had to close due to the economy and rent over 40% of income.
After reading all of the terrible things CI has done to other closing clubs I closed on 10-30-o9. I did not tell them anything I just closed my back account. Gave my members a 3 week notice I did not draft any more money, sold my equipment for almost nothing just to pay my employees back pay. I was mentally and physically zapped and broke. We will be filing personal backruptcy this week. Can anyone tell me if that will end the Curves NIGHT MARE!!!! Curves has not come after me yet, but my leasing company is sueing me for breaking my lease and my credit care deibt has gotten out of control.
Penny: Your Bankruptcy Attorney will answer all of your questions for you. In the bankruptcy, if you have any assets that will be liquidated, the Landlord will be first in line with his judgment as a creditor, if he does get a judgement against you. I believe I read where Landlords are high up on the list of creditors in bankruptcy since franchising has exploded in our economy. Just inform your Landlord that you are declaring bankruptcy and refer him to your bankruptcy attorney.
I’m sorry for your pain! You are a good person! You did your best to take care of your obligations and now you will start on your path to put this behind you. Some day, you will look back and it won’t hurt as much.
When you feel better, please call your State Attorney General and your elected representatives and write a complaint to the Federal Trade Commission on their Website if you feel that you were sold an “unviable” business concept and that the “risk” of the investment was withheld from you in the sales process. Maybe, if enough Curves owners and other franchisees complain, the government will try to make franchising safer for new buyers of franchises.
Good Luck and God Bless!
Carol
http://thegreatfranchisingrobbery.blogspot.com
Hi I just closed one of my three locations and Curves did try and sue me for royalties and closing fees….we settled at 10 thou case closed now they want me to donate the equiptement…….I have two other locations and I need to close them also can anybody help…I am drowning…..
tammy,
You do not own them anything and for heaven sakes don’t pay them a dime. send an email to unhappyfranchisee[at]gmail.com at this web site and I will call you an explain what you have to do>