Gym operator has chalked up millions of dollars in debts; two senior execs arrested
Some 64,000 members and 700 employees have been left in the lurch by the sudden closure of a gym chain once famously fronted by action movie star Jackie Chan.
California Fitness shut all its outlets in Hong Kong on Tuesday after chalking up millions of dollars in debts.
JV Fitness, which operates the giant chain, closed all 12 of its gyms, including two called mYoga and one facility known as Leap, pending a winding-up petition against the company.
It is estimated that the firm – Hong Kong’s second-largest gym operator – owes HK$130 million (S$22.6 million) in rent and other operating costs, said South China Morning Post.
Its sole director Wong Lun, who is not in Hong Kong, is wanted by the Customs and Excise Department following the arrest of two senior executives on Monday.
A spokesman for the Labour Department told The Straits Times that its officers raided some of the fitness centres after receiving complaints from the firm’s employees about wages owing to them.
News of JV Fitness’ financial woes first surfaced after the sudden closure of one of its California Fitness outlets on July 4.
A High Court hearing on Wednesday revealed that JV Fitness had lost HK$117 million over the past 2½ years and is now left with HK$16 million in cash.
A check on California Fitness’ website found no indication of the chain’s closure across the city. Members found out only when they turned up at the gyms on Tuesday.
Mr Morten Soerensen, 42, had tried to book a slot with a personal trainer on Monday and was told that none was available. However, the counter staff had assured him that the gym would continue operating despite reports of the firm’s mounting debts.
When Mr Soerensen returned to the same branch in Wan Chai district the following day, he was shocked to find it closed. “If they knew that they were in such a bad situation, it’s unethical of them to get people to sign up for a three-year package with the club,” Mr Soerensen, a sales manager from Denmark, told The Straits Times.
He said he had recently paid HK$11,000 up front in membership fees as he was convinced that the gym, which has branches in Singapore and China, is reputable.
Mr Soerensen said that he will lodge a complaint with the Consumer Council, which has received more than 100 complaints from gym members regarding termination of contracts in just the last week.
The consumer watchdog urged members to contact their banks for possible refunds and termination of further auto-payments.
The Federation of Trade Unions estimated that consumers could lose up to HK$1 billion, while overdue wages have already exceeded HK$10 million.
After his court appearance on Wednesday, the gym’s former owner Wong Ping Kuen told the media he was unaware of the firm’s mounting debts until he saw that the firm’s audit showed HK$335 million in net liabilities for 2014.
Mr Wong, who bought the business for HK$50 million last December, later sold it to his brother, Wong Lun.
Mr Wong also revealed that the firm, which has been slammed for its aggressive sales tactics, had seen some of its gym trainers earning as much as HK$100,000 per month, mainly from inflated commissions.
Customs officers arrested two of its staff members in May over an allegation that a customer was offered a free trial before being charged a HK$140,000 credit card payment for private training classes without her consent.
Hong Kong Democratic Party vice-chairman Andrew Wan Siu Kin, who has been assisting hundreds of gym members with their complaints, urged the government to provide “some kind of protection” to consumers who may fall victim to pressure-selling tactics by companies desperate for business.
“Singapore has an insurance system in place for people who sign up for prepaid spa packages,” he said. “We can have a similar system here to ensure that consumers are able to get their refunds when firms suddenly shut down their businesses.”
The first California Fitness gym opened in Hong Kong in 1996 before expanding to other parts of Assia. At its peak, it had 16 clubs in Hong Kong, China and Singapore.
HK and S’pore gyms operate separately
A California Fitness spokesman contacted by The Straits Times said that “California Fitness Hong Kong and California Fitness Singapore operate separately and independently”, and declined further comment.
California Fitness Singapore came under the spotlight earlier this year when it closed its Ngee Ann City outlet in February. Members could visit its other outlets in Novena, Bugis and Raffles Place.
The Consumers Association of Singapore said it has assisted in 11 complaints against California Fitness Singapore this year. Five of the complaints involved consumers asking for a refund of membership fees after its Ngee Ann City outlet closed.
This article was first published on July 15, 2016.
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