Dating agency flyers slipped into new members' packs and an advertisement depicting aliens shooting fat people were given as reasons why a businessman broke three franchise agreements with an Auckland gym chain, a court heard today.
Stuart Holder, who owned three Club Physical gym franchises in Auckland, suddenly rebranded the clubs as "Jolt Fitness" without warning earlier this month.
Staff at those gyms - in Three Kings, Botany and Westgate - were fitted with new uniforms, new classes put in place, and instructors arriving up to take their regular classes were turned away.
Club Physical owner Paul Richards alleged Holder's actions were a breach of franchise agreements that had "years to run on them" and that the move came completely out of the blue.
Seeking an injunction to stop Jolt Fitness from trading, Richards brought the matter before the High Court at Auckland today.
Holder's lawyer, Jason Goodall, told the court his client had no previous experience running gyms and, under the franchise agreements, Richards was supposed to provide business support.
Richards had not been meeting his obligations and this was putting the clubs' futures in jeopardy prior to the sudden rebrand, Goodall alleged.
Holder began facing "significant competition" last year from another gym called 'Jetts' and needed Richards' help to refresh his pricing and marketing strategies, and the class schedule.
"There were profitability concerns around my client's gyms. He was thereafter repeatedly trying to get in touch with Mr Richards about how this could be managed.
"He (Holder) was going for months trying to get this resolved when the financial circumstances became too serious."
Without support from Richards, Holder was left with no choice but to cancel the agreements and start a new gym brand to keep the business afloat, Goodall said.
The court heard that a major point of contention was over the type of marketing materials being promoted by Club Physical.
Flyers for a dating agency called 'Two's Company' were being put into new members' packs last August and these were upsetting some members, Goodall said.
Holder was also unhappy about an advertisement Richards apparently ran which showed aliens shooting fat people, with the slogan 'Get the fat people first'.
Phillip Rice, lawyer for Richards, said Holder had cancelled the agreements at the same time as franchise fees - which had been waived for the first two years - suddenly became payable.
"The evidence shows there was clearly a predetermined plan here to acquire several franchises and at the opportune moment, terminate on some pretext.
"It's not mere coincidence that this times perfectly with the end of the two-year waiver of fees."
Any reasons Holder had for wanting to cancel the franchise agreements should have been discussed before he took such sudden action, Rice said.
"If Mr Holder was so disappointed with the management, the appropriate course was to raise this issue and there is no evidence of that happening.
"There was absolutely no lawful right to terminate the agreements. The grounds that have been put forward are trivial and historical."
Rice told the court that if Holder had issues with Richards' management style, it was hard to understand why he ended up purchasing three franchises over several years.
He argued Richards had provided adequate support to Holder, albeit often through his sales manager.
Jolt Fitness today sought a counter injunction against Club Physical to stop it accessing its member database.
Justice Helen Winkelmann adjourned the case and will release her decision on the matter early next week.