Breakaway gyms shut down by court order

By Ben Chapman-Smith

A group of loyal Club Physical gym members protest outside Jolt Fitness in Westgate. Photo / Supplied
A group of loyal Club Physical gym members protest outside Jolt Fitness in Westgate. Photo / Supplied

A gym owner who broke franchise agreements and rebranded three branches without any warning has been told to stop operating with immediate effect.

Stuart Holder, who owned three Club Physical gym franchises in Auckland, suddenly rebranded the clubs as "Jolt Fitness" without warning on February 8.

Staff at those gyms - in Three Kings, Botany and Westgate - were fitted with new uniforms, new classes were 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 said the move came completely out of the blue.

Health Club Brands, which trades as Club Physical, applied for an injunction to stop Jolt Fitness from trading and both parties fronted at the High Court at Auckland last week to argue their cases.

Justice Helen Winkelmann today ruled in favour of Health Club Brands.

Her decision to grant an interim injunction means Jolt Fitness is not allowed to operate a health and fitness business at or within five kilometres of the Three Kings branch until further order of the High Court.

With regard to the other two branches, Jolt has been told it cannot trade at the Botany and Westgate premises until further order of the Court. No other restraints were issued which means Jolt could effectively open up another gym next door if it wanted and was able to.

Jolt Fitness' cross-application to stop Club Physical from accessing the contact details of the franchisee's gym members, and from contacting those members was declined by Justice Winkelmann.

Richards this afternoon said he was thrilled with the decision.

"Very happy, now the work starts.....meet with landlords, and see how we can re-instate Club Physical for its members as quickly as possible. We do not know how long this will take."

Richards said if and when the affected branches closed temporarily, all Club Physical members would be allowed to attend the locations at Albany, Te Atatu, Downtown, Birkenhead, and New Lynn, at least temporarily.

A spokesperson for Jolt Fitness said the owners were this afternoon processing the decision and not ready to make a comment.

Holder's lawyer, Jason Goodall, told the court last week that 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.

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 Holder was also unhappy about an advertisement which showed aliens shooting fat people, with the slogan 'Get the fat ones first'.

Phillip Rice, lawyer for Richards, said Holder had cancelled the agreements at the same time as franchise fees for the Three Kings club - 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."

A future date for both parties to bring their full cases before the court and for a permanent decision to be made has not been set.

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