How did California Fitness get into such bad shape?

How did California Fitness get into such bad shape?

In its heyday, California Fitness revolutionised the fitness scene in Singapore. Almost 20 years later, the chain has gone bust. Jalelah Abu Baker traces the rise and fall of the once-popular mega-gym.

California Fitness was once the talk of the town with three floors of top-notch equipment in the heart of Orchard Road, and those cool glass walls which gave gawkers a chance to admire the lean bodies exercising within.

Introduced here as a tie-up between American fitness guru Ray Wilson and a Hong Kong-based property company, it was considered revolutionary when it entered the Singapore market in January 1998. The mega-gym made fitness fashionable.

Close to 20 years later, the chain, which had four branches in Singapore, has completely shut down as its owner, JV Fitness, lacked the finances to keep it running, according to officially appointed provisional liquidators.

JV Fitness had chalked up losses of more than $25.6 million as at June 30 this year, said a report by its provisional liquidators Ferrier Hodgson. JV Fitness was already $21.7 million in the red in January last year, and had been losing money since 2013, financial statements show. But it kept the chain going by signing new members and getting them to pay their fees up front.

Two of its branches - in Orchard Road and Raffles Place - closed abruptly earlier this year. Its two remaining branches, in Novena Square and Bugis Junction, which were opened officially by action star Jackie Chan in the mid-2000s in a tie-up with the famous Hong Kong actor, shuttered on July 20.

A report in Hong Kong newspaper South China Morning Post(SCMP) on the same day said that a branch in Beijing was the only one still in operation, but on a temporary basis.

Up until its closure, California Fitness here had kept mum about any financial difficulties. In fact, a spokesman, responding to queries, said in March: "We have been in Singapore for more than 18 years and we have strong financial backing. We are proud of our stability and will continue to offer reliable and quality services for our members."

Financial troubles plaguing the company became public knowledge, however, when all 12 branches in Hong Kong were shut amid a winding-up petition and other court action. It is estimated that the firm owes HK$130 million (S$22.5 million) in rent and other operating costs, said SCMP.

California Fitness' history in Asia started when Canada-born Eric Levine founded the first branch in the region in Hong Kong in 1996. At the time, he had just sold off a chain of fitness centres he had built, which had gained mainstream appeal particularly in California, according to a report by Forbes in 2008.

He focused his attention on Asia, opening branches in Singapore, Hong Kong and China. At one point, the chain had expanded to two dozen health clubs across Asia.

The chain reportedly broke even in just two months of its opening in Singapore, with 4,000 members, according to Mr Levine then. While it is not clear when he exited the chain in Asia, it appears to have changed hands along the way.

Most recently, it has been run by JV Fitness, whose Singapore business registration lists a JV Fitness (BVI) Limited under a British Virgin Islands post office box .

Hong Kong media reported that problems had plagued the finances and sales tactics of the chain months before its closure.

In Singapore, as early as May 1998, The Straits Times reported on two customers' claims that the gym pressured them to sign up. Their claims were followed by several similar ones over the years.

There were also other criticisms levelled against the chain - cancellation of lifetime memberships, random membership terminations, overcrowding and misrepresentation. Business experts have pointed to poor cash flow management and failure to keep up with fitness trends as possible reasons for the eventual demise of the chain.

California Fitness' practices - which have now left consumers high and dry following the chain's closure - prompted the Consumers Association of Singapore (Case) to call them "questionable".

Said the consumer watchdog's executive director, Mr Seah Seng Choon: "Case will discuss with the (Government) and the relevant stakeholders to look into protection for consumers' pre-payment."

GYM CHAIN'S FORTUNES OVER THE YEARS

  • January 1998: The first California Fitness gym opens here in Somerset, in a tie-up between a Hong Kong property company and American fitness guru Ray Wilson.
  • April 1999: The second outlet at Republic Plaza opens.
  • October 2005: Well-known Hong Kong movie star Jackie Chan opens Bugis outlet, known as a California Fitness Jackie Chan Sport Centre, to fanfare after investing in the chain.
  • November 2006: The second California Fitness Jackie Chan Sport Centre opens.
  • February 2011: California Fitness' Orchard branch moves from Somerset to Ngee Ann City.
  • February 2016: Its Orchard branch on the eighth level of Ngee Ann City ceases operation due to "variable business strategies and decisions".
  • July 16, 2016: California Fitness closes its Raffles Place outlet "until further notice". The Sunday Times learnt that the unit was repossessed due to failure to pay rent.
  • July 20, 2016: Provisional liquidators from insolvency management firm Ferrier Hodgson send a media statement that California Fitness' owner, JV Fitness, "does not have adequate liquid resources to continue its operations and therefore all outlets in Singapore will be closed from today until further notice".
  • Aug 12, 2016: JV Fitness was already $21.7 million in the red in January last year, according to a liquidation report presented to court. It is also revealed that around 27,000 members are owed $20.8 million in unused gym access and unredeemed personal training sessions.

jalmsab@sph.com.sg


This article was first published on Aug 21, 2016.
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