Health Club Closures Spotlight Industry’s Need for Surety Bonds

health club

Private health clubs have been in the news lately, and not for their success in helping members shed pounds. With the economy down, many private gyms, spas and martial-arts studios have closed their doors.

While some have offered members refunds, others have left a trail of angry customers. For instance, in Seekonk, Mass., WPRI-TV reported this week on the sudden closure of Women’s Fitness after receiving calls from angry members. The owner offered to give members refunds only after being contacted by the station.

When health clubs close down, members are entitled to receive refunds for the unused portion of their membership. But broke private club owners can disappear, leaving members flat. That shouldn’t happen, because in most jurisdictions, private health clubs and other facilities that collect membership fees upfront are required by law to have a surety bond. In the event of closure, the bond ensures that members can recoup the unused portion of their membership.

Without a bond, members may end up short-changed. When one Georgia gym closed in December, members were left hanging as the gym owner tried to sell off equipment to raise refund money.

Sometimes another gym may offer to accept defunct club memberships in hopes of getting consumers’ renewal business down the line. Other gym members sue for refunds.

In some areas, health-club closures have been frequent. The South Carolina Department of Consumer Affairs received hundreds of complaints about sudden health-club closures in the past year — so many that they issued a consumer warning about gyms and the story was reported last week by a local TV station.

Headlines across the country have consumers asking more questions about whether they’re protected if their gym closes. It’s a good time for health-club owners to take a look at whether they need a surety bond, and if so the bond amount local regulations require. Another good move is to make sure staff know whether you have a bond, so they can reassure customers if asked about your surety bond coverage.

The process of obtaining a surety bond for a health club, spa or other membership facility can be confusing. States and local jurisdictions set their own requirements for the amount of surety bond clubs are required to carry.

The types of clubs required to have a surety bond vary from state to state, as does the dollar value of the bond needed. In Maryland, for instance, owners of health clubs, weight-loss centers and martial-arts schools are required to register with the state and secure a bond that covers “all outstanding liabilities” to members. New businesses conducting pre-opening sales have different bonding requirements than established gyms. In Florida, health clubs operated by nonprofits and certain other club types are exempt from the bonding requirement.

For help in securing a bond, contact the experts at SuretyBonds.com. Consumers can check with their state attorney general’s office for details on local bonding regulations.

Image: Mimar Sinan

About the Author

Carol Tice
Business journalist Carol Tice has written for Entrepreneur Magazine, the Seattle Times, Dun & Bradstreet and many others. She is a frequent contributor to SuretyBonds.com.

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