When you’re considering a particular franchise opportunity, most franchisors will provide you with a wealth of sales literature, marketing brochures, videos, and legal documents (FDD), as well as an ample supply of timeworn cliches (”You’ll be in business FOR yourself, but not BY yourself”).

Franchisors should provide you with one more thing: The email or certified letter they’ll send you if you fail.

Ask for it. Get it. Read it. Think about it.

Don’t listen to the franchise salesperson when he tells you If you think negative thoughts you will kill the success fairy!

Realistic ain’t negative.  And this letter contains an important message:  As a franchisee, you are under a legal, contractual obligation to succeed.

Curves Email to Closed Club Owners

A reader at Unhappy Franchisee posted the email that Curves International (The AAFD “Franchisor of the Year“) allegedly now sends to Curves franchise owners who are in distress, have run out of money and closed their struggling clubs:

From: Wendy Law

I have received notification that you have closed your club. I have attached the closing requirements if indeed you have in fact closed. Please contact me and let me know the reason of the closure.

The resale department has received information to indicate that you abandoned (closed) your facility. You realize, of course, that closing your facility is a breach of the terms of your franchise agreement with Curves International, Inc. (“Curves). You place yourself in default of the terms of your franchise agreement and you not only remain responsible for all delinquent fees (including monthly royalties/advertising fees), but also all future fees due and owing to Curves (including maximum monthly royalties/advertising fees) for the remaining Term of your franchise agreement. If you fully comply with all Curves’ requirements, including the procedures listed in the attached Closing Procedures document, Curves will allow you the opportunity to pay a settlement fee and execute a Mutual Release with regard to said franchise.

The completed Club Worksheet, Intent to Close Facility form, and an active, inactive, and archived member list must be returned to the resale department within two (2) business days of your receipt of this email by facsimile to (254) 751-3035 or by return email.

Carefully review attachments. If you have any questions please feel free to contact me. I hope to assist you through this transition and to make it as smooth as possible.

Sincerely,

Wendy Law

Resale Specialist

Curves International, Inc.

If and when a Curves franchisee closes their club during the term of their franchise agreement, Curves International dispenses with the touchy feely stuff one encounters in Curves franchise marketing.  No, you won’t even get a “We’re sorry to hear…” or “Our condolences…”

In fact, in the closing email CI doesn’t even pretend that they know - or care - whether your club is dying or dead except in regard to what you owe them.

February 1st, 2008 CI began requiring franchise owners who closed clubs prematurely to pay a $10,000 closing fee (”Failure Fee” Our term).  Readers report that Curves often accepts what they can get from the distressed franchisees, and negotiated as low as $2000.

Then there are the “delinquent fees (including monthly royalties/advertising fees), but also all future fees due and owing to Curves (including maximum monthly royalties/advertising fees) for the remaining Term of your franchise agreement.”  Unhappy Franchisee readers have reported Curves demanding amounts averaging from $29,000 to $49,900 in future royalties and fees.

This does not include the outstanding credit card debt, past and future lease payments, and all that is owed to equipment cos. and vendors.

A Contractual Obligation to Succeed

Curves International CEO Gary Heavin recently attributed the high rate of SBA loan defaults to the reselling of Curves franchises at inflated prices by greedy 3rd parties.  Perhaps Curves International, Inc. should require every new franchisee who enters the system to read and digest this farewell email.  There will be less of a backlash for the Franchisor of the Year if it’s clear that franchisees are contractually obligated to succeed.

Franchisees should know coming in that failure is not an option.  At least for Curves International.

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Photo:  Unhappy Franchisee

That wacky AAFD is at it again!  The American Association of Franchisees & Dealers (AAFD) has named Curves International its 2009 Franchisor of the Year!

(In other news, Bernard Madoff has been named Investment Advisor of the Year and Kim Jong Il has won the Nobel Peace Prize…)

You may remember the AAFD as the supposedly pro-franchisee organization that gave Cuppy’s Coffee the “fair franchising” award and public praise it needed to help scam many more out of $30K - $40K deposits before completely abandoning the lucky franchisees who managed to get open (and lose hundreds of thousands).

According to the breaking story on Unhappy Franchisee, (CURVES: AAFD Names Curves Franchisor of the Year), the AAFD awards will be presented at the Total Quality Franchising Awards Banquet on Thursday, April 30, 2009, during AAFD’s 17th Annual Conference in San Antonio, Texas.

Why is Curves the AAFD Total Quality Franchising Franchisor of the Year?

I could not find the release explaining why the AAFD chose Curves, out of all the franchisors in the country, as the Total Qualitiest Franchis-i-rific franchisor of them all, so I’ll have to guess.

Because Curves is being sued by so many franchisees?

Because Curves has one of the highest SBA loan failure rates in the nation? (See QUIZNOS, COLD STONE, SUBWAY & CURVES TOP FRANCHISE LOAN DEFAULTS)

Because Curves International forbids even failed franchisees from selling the equipment they paid for?

Because the mention of Curves has prompted more than 1000 comments, mostly unhappy? (Read: Is Curves for Women a Good Franchise Investment? )

Or because Curves charges their failed franchisees a $10,000 “failure fee,” then allegedly hounds them for tens of thousands of dollars even after they’re bankrupt?

Has the AAFD read the comments left here and on UnhappyFranchisee about Curves charging failed and failing franchisees? Here are a few.

CA ex-owner wrote:

We closed our club in August. Curves demanded $10,000. We refused and they lowered it several times (down to $6,000) and we still refused.

Next legal sent us a letter demanding over $42,000 for future franchise fees and future advertising.

Betty Priest wrote:

I closed my Curves Dec. 30, 2009. Curves reduced the closing fee to $3000 and then in Jan. they reduced it to $2000. I told them I did not have the money to pay them. I not working and I had surgery on Jan. 19. I now have received a legal paper from them that I have to pay them over $28000 in franchise fee and advertising fees.

Melissa wrote:

I am evidently getting ready to face my real nightmares, concerning my closing of my Curves. I am at the threat stage with them and have not agreed to any amount yet. Mostly because I have nothing left. I am closing in two weeks. I gave it all of my money and my best shot the past six years.

…I am hearing they will still sue me even if we agree to an amount. I wish I had some answers, even though I have no money left to give anyone. I really don’t know what to do next….

How can they hurt so many people financially and get away with it? All we wanted was to work hard and make a decent living, totally impossible with two clubs in our area!! We haven’t even broken even in three years.

Carrie wrote:

…I am now down to $2,500 to settle the closing of my Curves. I do not have the money to send them and if I did I do not want to give them one more penny. I am $85,000 in debt which I will be paying on until I’m very old (hopefully I live!)

Sheila wrote:

I am in the same boat as the rest of you! They are doing the same thing with us.. we closed this past Wednesday… we have been open 4 1/2 years and just can’t do it anymore.. all of our credit cards are maxed to the limits and we did our best..

…I’m so sick of their fees and you owe us this and that.. like everyone here has said Howard is supposed to be a Christian? Why doesn’t he understand that peoples lives are getting ruined by his fees? Haven’t we had enough punishment when we have sacrificed so much? The economy should be telling him something when the franchisees and members are dropping like flies! We just got the paper saying we owe them the 10K.. we are right along with the rest of you.. if I had 10K don’t you think I’d be in business right now?

…what really makes me mad is they get their money.. now popcorn sales, cereal sales, curves bars etc and we are all suffering.. I haven’t had a paycheck in 2 years.. I did my best.. I gave my all.. and now to find out you want 10K? Are these people for real? I will never ever in my life own nor participate in any franchise ever again.. thanks Howard for teaching us that the hard way…

These and other comments can be found on the post: CURVES: Robert Lay’s Story

A complete list of Curves-related posts are here: CURVES: Franchise Overview & Links

Perhaps Curves has made some progress in the past year, and the AAFD wants to reward them.  Or perhaps Curves wrote them a big check to help offset the negative comments being left here and elsewhere.  If you have any idea how they’re justifying this award, please share it below.

Some AAFD-related posts:

AAFD Award Caffeinates Growth of Cuppy’s Coffee Franchise

AAFD: Franchising Watchdog… or Lapdog? Part 1

AAFD: Franchising Watchog… or Lapdog? Part 2

Franchise Buyers: Don’t Get Fooled by Fair Franchising Awards

Answer This Franchise Due Diligence Quiz Question

Cuppy’s Coffee: Some Words from AAFD Raises More Questions

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PHOTO:  unhappyfranchisee.com

Curves International Inc. chief executive Gary Heavin, recently said that high SBA loan defaults were a result of “the overpriced resales of franchises between third parties.” (See QUIZNOS, COLD STONE, SUBWAY & CURVES TOP FRANCHISE LOAN DEFAULTS)

On the Unhappy Franchisee website (See CURVES: Disturbing Resale Story), a Curves franchise buyer of two existing clubs provides an example of how a resale business can be artificially, even fraudulently, inflated.  The results can be disastrous for the unsuspecting buyer.

The Curves franchise owner writes:

I am a Curves resale. I bought 2 clubs from a friend of the family, who I thought was a good person. She claimed Curves International told her to base the purchase price of her clubs, on the number of “active” members. When I bought my clubs, an active member was any member who had not canceled their membership. Therefore, the previous owner came up with the purchase price this way, (500 members x 12 months x $29 (plus tax) ~ $175,000 x 2 clubs ~ $350,000).

However, the new franchisee claims that a large percentage of the 1000 supposed members had actually cancelled their memberships and didn’t know their bank accounts were still being charged for their monthly fees.

When we bought the clubs, we switched from paper drafts to an electronic drafting system. A month later we started getting calls from women who were threatening to sue us for taking money from them without permission. I explained that I was the new owner, that they were still under contract, and based on my knowledge, the previous owner was drafting them when I bought the clubs. They argued with me and said they had cancelled their contracts, and they had not been getting drafted from Curves until we started drafting them.

How were 600 women billed for a service they had cancelled without them noticing?  Turns out that the previous owners’ charges appeared on their bank statements simply as “merchant.”  When the new owner switched to an electronic system that identified the charges as “Curves,” all hell broke loose.

I asked them to bring in a bank statement from any month prior, and the current months statement. When they brought in their statements, we discovered that the previous owners draft was coming out as “Merchant”. They didn’t realize they were being drafted until they saw our “Curves” draft. Over the next 3 months, we had over 300 women cancel in each club.

The lesson to be learned?  When doing your due diligence, do thorough and rigorous due diligence… hopefully with the help of a professional who knows these kinds of tricks and nuances, and knows the warning signs.

And keep in mind the wise words of my favorite doctor:

I have heard there are troubles of more than one kind.
Some come from ahead and some come from behind.
Dr. Seuss

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

Photo: Bobu.  Licensed by Creative Commons.

As the recent closing of the Kailu, HI Curves for Women fitness center shows, a failed franchise location is a loss for many involved.

In this case, franchise owner Robbi Ugini must deal with the personal and financial agony of defeat.  Her 5 employees are suddenly jobless.  Her 270 members are without a fitness club.  Her landlord has a vacant space, and her lender will, most likely, have a defaulted loan.  And the franchisor will not be receiving future royalties, revenue from purchases or advertising contributions.

What started as a dream ended in disappointment

According to the story by Nina Woo in the Honolulu Star Bulletin, Ugini opened her Curves franchise in 2005.  The initial location in the Enchanted Lake shopping center was doing well with 435 members.  Her lease was up just two years later, and Ugini relocated to another location last year, above Agnes’ Portuguese Bake Shop. The business struggled in the new location, with just 270 members.

Ugini tried selling her Curves for Women franchise for the fire sale price of $15,000, but could get no takers.  Part of what hampered the sale was the additional equipment investment the new owner would have to incur, per the franchisor’s requrements.  When a prospective buyer recently pulled out at the last minute, Ugini decided to close the doors and liquidate.  According to the article:

The closure was abrupt, leaving some 270 members in the lurch. Five staff members also lost their jobs.

“I made sure my staff was paid,” said Ugini. “I had the very best staff in the world.”

Ugini said she is working on notifying everyone of their options. She said members’ payments made on Oct. 5 have all been canceled.

Qualified members can request a travel card, she said, which allows them to use another Curves on Oahu for up to 20 days after they have been issued.

Some have gone to the Curves in Kaneohe, which is owned by a different franchise owner, but it won’t be able to take everyone.

“I am going to contact everyone,” she said. “It’s just going to take me a little more time to get to everybody.”

Some members paid on a monthly basis, some prepaid for three months and others for the entire year.

VR Business Broker calls Curves a fad and the franchisor uncaring

A business broker named Mark Heilbron, a business broker at VR Mergers & Acquisitions, had some harsh words both for the Curves franchisor and the Curves franchise fitness concept, which he categorized Curves as “a trendy kind of business.”   Heilbron said he sold a couple of Curves franchises in recent years, but has listed many that never sold (the glut of Curves resales on the market, some priced at $1.00, has been reported here.  See How to Open a Health Club for Half the Cost, and How to Buy a Curves Franchise for $1.00… or Less!).  According to the article:

“It’s a faddish type of business,” he said. “They made a lot of money and then when the trend went out, people who were still in them lost a lot of money.”

While buyers are more cautious in these economic times, Heilbron said they are still out there, with money they’d rather invest in a business than in the volatile stock market.

“Most people get talked into buying a franchise, and you’ve got to realize, depending on who the franchisor is, that most don’t care whether the franchisee makes it or not,” he said.

With the closure, Curves now has 17 locations on Oahu.  According to Curves International, the Texas-based chain has more than 7,000 locations in the U.S.

Related story (Unhappy Franchisee):  CURVES FOR WOMEN: Business Broker Slams Curves Franchise and Franchisor

CURVES FRANCHISE OWNERS: Share Your Story Here

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

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Read and comment on real life stories, news, controversies, warnings, opinions, rumors, and insider insights into the hidden side of franchising at Unhappy Franchisee.

Visit FRANBEST’s: Unbiased franchise information, franchise interviews and detailed, searchable information on 400 franchise and business opportunities.

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Franchisees, customers & experts vote for their favorite new franchises at Top New Franchise: Who’s hot. Who’s not.

Photo:  Bobu.  Licensed by Creative Commons.

(Franchise Pick)  Also read:  Is Curves for Women a Good Franchise Investment?

Franchise Dreams Becoming Nightmares for Many Fitness Club Owners

When Curves for Women franchise owner Logan Chung abruptly closed his two Chicago area fitness clubs, he left his employees without paychecks and members without a fitness program.  However, a group of members have banded together to possibly buy and reopen the Elmwood Park location, and Curves International is hoping to find a buyer for the Oak Park club.

According to the Wednesday Journal:

Two local Curves women’s fitness centers closed their doors, Aug. 31. But a spokesman for the company says they’re hoping to reopen them.

“There are several people interested in taking over the ownership of the clubs, and we’re just waiting for them to submit their paperwork,” said Becky Frusher, a spokesperson for Curves at their headquarters in Texas. “Our main concern is for the members, and we’ll get new owners in the clubs as soon as possible to minimize the disruption to them.”

Logan Chung owned the two locations-one on South Boulevard in Oak Park, the other on North Avenue in Elmwood Park. Employees and members say the closure was unexpected, and Frusher says Chung also has not contacted Curves’ corporate office or returned phone calls.

Chung was reached by the Journal recently at a cleaners he owns in Gary, Ind., but he declined to comment.

Carmeline Biscan, a three-year manager at the Elmwood Park Curves, says several employees have yet to receive paychecks for the entire month of August, and a handful of customers also have not received refunds for prepaid memberships.

Renata Mayfield and a group of seven or eight other members are interested in keeping the Elmwood Park location open, which Curves calls its “North” Oak Park location.

Mayfield says they received a starter kit and are waiting on a price to run the location.

“It could be a couple weeks,” Mayfield says. “We were hoping before the end of September that we would have this all straightened out.”

Photo:  Bobu.  Licensed by Creative Commons.

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FEATURED STORY:

TanWorld: Creating the Next-Generation Tanning Salon Franchise

OVERVIEW Interview with Tanworld V.P. Bob McQuillan

Visit FRANBEST’s: Unbiased franchise information, franchise interviews and detailed, searchable information on 400 franchise and business opportunities.

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Franchisees, customers & experts vote for their favorite new franchises at Top New Franchise: Who’s hot. Who’s not.

Curves franchise owners and ex-franchise owners:

What’s it like to own a Curves for Women franchise?

Was it a good investment decision?   Was the Curves franchise ownership what you expected?

Has it enriched you financially?  Emotionally?

Would you recommend the Curves franchise to would-be franchise owners?

 SHARE YOUR STORY, EXPERIENCES, INSIGHTS WITH A COMMENT.

(FranchisePick.Com)  Also read:

Curves For Women Franchise: 20% of Curves Franchises Closed in MA,

HAS CURVES FOR WOMEN ABANDONED ITS FRANCHISE OWNERS?,

Insider Advice for Curves Resale Franchise Buyers,

200+ comments: Is Curves for Women a Good Franchise Investment?

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In a recent Concord Monitor article, AG bureau looks into gym closings, Kate Davidson reports that 2 more Curves for Women franchises have closed their doors abruptly, leaving their members stranded and their owners’ dreams dashed.  Davidson writes that unhappy members who paid for services they didn’t receive have taken their complaints to the MA Attorney General :

The attorney general’s consumer protection bureau is reviewing complaints against Curves For Women gyms in Concord and Penacook, which closed last month without notice and without refunds for members who already paid membership fees.

The Curves franchises closed during the first week in March, displacing about 400 women who worked out at the two locations, according to owners of other Curves gyms who have taken on some of the members. The memberships are transferable to any other Curves location, but compensation was not offered to women who decided not to move to a new gym.

The attorney general’s office received four complaints in March and April against Atasal Enterprises LLC - owned by Janet Lasata of Gilmanton - which was doing business as Curves For Women in Concord and Penacook.

According to Senior Assistant Attorney General Lauren Noether said the complaints were from members who had paid for services they never received.  The AG lists the complaints on its website as “open - in progress.” According to the story, Atasal Enterprises was “not in good standing” by the secretary of state’s corporation division, as the company failed to file its annual report by the April 1 deadline.

Hat tip to sadderbutwiser for the article link.  Photo:  Bobu.  Licensed by Creative Commons.

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

(FranchisePick Franchise Blog)  Thanks to the readers and contributors of FranchisePick.com, our pages contain a wealth of great franchise buying advice from insiders and franchise owners you’ll find nowhere else.  If you’ve got a question, post it and you might get a thorough and insightful answer, such as this one regarding the purchase of an existing Curve fitness franchise.  Thanks to Kunst for his/her response. 

RMZ asked:
“I am considering purchasing an existing 2.5 year old franchise in a community of 4200 (2500 women with the median age being 45.5) that has one other full-service gym.
The current owner is absentee and has actually moved to another state. Current membership is 223 with 07 gross sales of around $80K, expenses of $55 and cash flow of $22K. The owner has not advertised at all in 07, but spent about $2,000 in advertising in 06. 07 gross sales are about 25% less than 06.
“The asking price is $30K. What do you think?”

Curves for Women franchise owner Kunst replied:

“One of our clubs is similar to this. About 10,000 population and 231 members. One full-service independent gym. Our revenue and expenses are higher (your club must be at $29/month; ours is at $39). P&L profit about $16,000 last year. The problem with this situation is the population. As with all gyms, 1/3 to 1/2 of your members are going to leave each year. That means you’re keeping them on average 2-3 years, which is good, reasonable, and normal. The problem is replacing them. It is true in general that Curves membership levels are down significantly over the last several years, and the main reason is that it’s hard to replace the members you lose. In a larger community, there are fresh faces all the time, but in a smaller community like the one you’re talking about, this is probably not the case. One reason the owner hasn’t advertised is probably because everyone knows Curves is there and either is a member, was a member, or knows people who are members. The best marketing for that kind of community tends to be people-gathering events, which is more demanding of time than money.

“Here’s what I recommend to anyone considering buying a resale club:
1. Get a 2007 P&L from the owner, preferably with each month in a separate column. Analyze that puppy until you fully understand it.
2. Make sure you understand the membership numbers and how they relate to revenue. Look at product sales. If this area has been neglected, it may be an improvement opportunity for you.
3. Ask for the membership numbers by month since the club opened. You will probably see an initial spike that reached a peak and has been dropping for some time. It may or may not have leveled out.
4. Marginal (i.e., new and cancels) membership changes pretty much go straight to the bottom line. If membership drops, revenue drops with it.
5. Sometimes a new owner can energize a club and raise it to a higher level. Sometimes not. Do some due diligence and make the case both for and against this.
6. Talk to everyone you can about the club. If possible, talk to the employees. Talk to members. Have your wife join if that is feasible, or work out there on a travel pass if she is a member at another club. Most important of all, talk to every Curves owner in the area. Most will be very willing to take the time to answer your questions and give honest advice.

“Is $22,000 an adequate return for you? Make sure that number is real. If you don’t have to spend a lot of time, that’s a pretty good return on $30,000 but it’s not enough to live on. Because we have four clubs, we do just fine on per-club profits that would not be sufficient for most people if they have only one club. Are you going to maintain the same staffing structure? How do you intend to run the club? It usually doesn’t work well when the female owner isn’t engaged enough. Our comparable club has 3 employees and my wife manages it by phone and by being in there 1-2 times a week. Our other clubs have managers and she spends about the same time on each of them. She does not work in any of the clubs on a regular basis. She is an absolute expert on every aspect of Curves operations, which gives a solid foundation you won’t have at first.

“We have really good employees who have been with us (4 clubs) on average nearly 3 years. Employee turnover is no fun, so make sure you have a handle on this and a plan for how you would handle someone leaving.”

WHAT DO YOU THINK?  COMMENTS WELCOME.

 Photo:  Bobu.  Licensed by Creative Commons.

(FranchisePick.Com)  In it’s article Curves sheds a fifth of its fitness centers, BostonNow Business reports that both membership and number of Curves for women franchise clubs in Massachusetts has declined significantly in the past three years.  According to the article citing information from the Boston Business Journal:

“…Owned by local franchisees, last year the number of Curves gyms in Massachusetts dropped 20 percent to 156 from 194 in 2006, and was down nearly 30 percent from the 218 sites that were operating in 2005, according to research by the Boston Business Journal. Membership levels in the state also dropped 20 percent to 62,400, from 77,600 in 2006.

“A spokeswoman for Curves International Inc., headquartered in Woodway, Texas, attributed the falloff to a shift in company strategy.

“‘We have always tried to keep every club open and that’s not always the best decision,’ said Becky Frusher, Curves’ corporate communications manager. ‘There are some owners who shouldn’t have bought a Curves … that’s normal with any retail business. We’ve taken a different approach of, maybe we shouldn’t struggle to keep every club open.’ …

“Donna Henderson, who manages the 500-member Curves in Watertown, notes that Curves gyms in Waltham, Brookline and Belmont have closed recently…”

“Nationally, the fitness chain’s stature has also flagged. According to Entrepreneur.com’s annual Franchise 500 rankings, the company dropped from No. 2 in 2005 to No. 185 this year.”No experience necessary.  Unless you fail.  Then you should have been experienced.

According to Curves, the reason for the failures was presumably that the franchisees weren’t “business owner” material.  Does that mean Curves tightening up their franchise requirements, and seeking franchise owners with prior fitness club experience?  Not according to their website, which says they assume franchise owners have no experience.  They’re shift in business strategy seems to be to stop feeling bad about it and accept a 20% failure rate as “normal with any retail business.”

So in your search for a solid franchise opportunity, be wary of those who say you can be “In business FOR yourself, but not BY yourself.”  Once you’re OUT of business, you’re definitely BY yourself… So go into it understanding that there’s NO system that, if followed, assures success.

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