24 Hour Fitness Inc. appears to have been the latest casualty of the coronavirus pandemic, as the company is now getting ready to shut operations down.
The company announced that it would be filing for Chapter 11 bankruptcy reorganization earlier this week. An official blog post from the company revealed that it had also secured a $250 million funding lifeline that will help it reopen some of its locations.
Significant Problems Trailed the Company
The funding will allow the firm to keep the lights on in some of its locations across the country. However, this will come at a price as the firm will also be shutting down about 130 sites across 14 states in the country.
“If it were not for Covid-19 and its devastating effects, we would not be filing for Chapter 11. We expect to have substantial financing with a path to restructuring our balance sheet and operations to ensure a resilient future,” company chief executive Tony Ueber said in the statement.
Ueber added that they would be using the additional funding to reinvest in their existing clubs. The firm is also looking into opening some other locations and introducing “new innovative products and services.”
24 Hour Fitness is a private company that has been around since 1985. However, like several other firms, it has felt the sting of the pandemic significantly. The company had to close its locations due to the state-wide curfew laws, and while it has started to reopen, business has evidently been slow.
The company also appears to be dragging quite a lot of baggage behind it. Earlier this month, Bloomberg reported that the fitness chain owes $1.3 billion from a leveraged buyout by AEA Investors and the Ontario Teachers’ Pension Plan in 2014.
Last week, the signs of a bankruptcy filing had started to show. The company sent an undisclosed percentage of staffers packing, the Wall Street Journal reports.
Like many other subscription-based gyms, 24 Hour Fitness faced significant backlash when it kept charging members even while at home. Per a Forbes report, several top names in the gym and fitness industry – including Town Sports International’s Boston Sports Club, LA Fitness, and New York Sports Club – have faced lawsuits over this issue.
Most of them make a significant chunk of their revenues through subscriptions. With the pandemic in full swing, they have experienced a spate of cancellations from workers who haven’t been able to leave home.
Fitness Clubs are Collapsing
Some top industry names have already begun to tap out. Gold’s Gym, a chain similar to 24 Hour Fitness, announced that it would file for bankruptcy last month. The company explained that it would have to close all of its 700 locations worldwide temporarily. The company hopes to emerge from bankruptcy in August.
Things could get even worse for many sports gyms, as the United States appears to be recording a second wave of the pandemic. While several states have reopened over the past few weeks, there are growing fears that we could be returning to the status quo of April and early May soon.
States like Florida are seeing increasing numbers, which could threaten the viability of large-scale gyms that haven’t been allowed to open in the first place. For now, most gym-goers have been patronizing smaller-scale, less-expensive fitness companies.
Peloton, the famous in-home gym equipment manufacturer, announced in May that its revenues had grown by 66 percent. The company’s app, which provides various workout regimens, also saw a 30 percent growth in its subscriber base.
Like many other industries, the fitness space appears to be undergoing a seismic change. It’s only a matter of whether companies like 24 Hour Fitness will be able to survive.