It’s a fairly common scenario: A nearby health club loses its lease, and rather than opening in a new location, the club operator decides to retire by the beach.
This presents you with the opportunity to purchase or take over the closing club’s membership agreements. Here are some guidelines on how to make the process go as smoothly as possible.
Check Your State’s Laws
First things first—check your state’s laws to see if there’s anything on the books that might prevent you from proceeding as planned.
And make sure the club you’re thinking of taking over has the appropriate safeguards in place, so you don’t open yourself up to needless trouble. It’s important to exercise due diligence before jumping the gun.
Since at least 27 states require health clubs to secure a bond to either sell memberships prior to opening or to run a club once opened, odds are good that your state requires clubs to post a bond to protect the members’ investment. For example, in Massachusetts, if a closing club sold contracts of less than 24 months, the club should have a bond in place for $25,000. If contracts were greater than 24 months, then the club should have a $100,000 bond. Then, if any of the members are unhappy with the terms you provide, their first recourse is to apply to the attorney general for a refund of their prepaid dues.
A club in Massachusetts that planned on taking over a closing club’s membership decided not to after learning that the owner of the other facility did not have the appropriate safeguards and bonds in place to enable them to acquire their members without concern. Instead his legal team encouraged the club operator to maintain the business for another year or so, get the safeguards in place in the meantime, and revisit the option next year.