Gold’s Gym International, Irving, Texas, isn’t standing still after its Chapter 11 filing. The company is fielding offers from potential buyers while also going after new franchisees with a model option that has a smaller footprint and a lower investment requirement.
Gold’s Gym International filed for restructuring on May 4 after the COVID-19 pandemic led it to temporarily close its company-owned clubs on March 16, as did most other health club companies. The temporary closures stopped revenue flow, leading to the decision by management to file for Chapter 11.
Initial plans set forth in the Chapter 11 filing had TRT Holdings Inc., which owns a majority stake in the company, acquiring the full assets of Gold’s Gym International for $80 million, which is the cost of the company’s senior debt, its bankruptcy loan and transaction costs. But during the process, potential other buyers came to light wanting to make “higher and better offers” for the business and assets than what was proposed under the restructuring plan, according to a June 1 filing with the U.S. Bankruptcy Court for the Northern District of Texas Dallas Division.
For this reason, Gold’s Gym has asked for a “market check” to determine whether the existing sale plan would offer fair value for the company’s assets. That check allows for interested parties to bid on Gold’s Gym International through July 9. If necessary, a virtual auction will occur on July 13. A deadline to close the sale is set for July 31.
In 2019, Gold’s Gym International had one of its strongest years of worldwide growth in company history, finalizing 22 American franchise agreements and opening 35 locations, the latter of which was a company record, the company shared in January. In early March prior to the COVID-19 shutdowns, Gold’s Gym refranchised 24 locations in the Washington, D.C., area and refranchised two locations in Los Angeles and eight in Tennessee.
Introducing A New Model
In the meantime, Gold’s Gym now offers a scalable footprint model that allows potential franchisees a lower entry point and a smaller footprint. Instead of investing $2.5 million to $5 million previously required to open the typical 25,000-square-foot to 45,000-square-foot clubs the brand is known for, entrepreneurs can invest $1.5 million to $2.5 million in clubs ranging from 10,000 square feet to 15,000 square feet, the company announced.
"As we continue evolving our 55-year-old brand to offer the best and safest fitness experience possible, we are simultaneously looking to enhance our approach to global franchise development to offer more opportunities for people to take control of their destinies through Gold's Gym ownership," Gold's Gym President and CEO Adam Zeitsiff said in a media release. "The new scalable footprint model is designed to not only maximize flexibility by giving franchisees more affordable investment options but also to deliver high-quality fitness centers to geographic regions with limited space to build."
Despite the smaller footprint, the new model options are designed as full-service clubs with amenities that include cardio and strength equipment, locker rooms, personal training, group exercise classes and Kids Clubs.
In addition to these standard amenities, scalable franchise spaces that are 15,000-square-feet or larger can accommodate Gold’s STUDIO, which is the brand's training community with boutique-style group fitness programs such as Gold’s FIT, Gold’s BURN and Gold’s CYCLE—as well as a recovery area. In the 10,000-square-foot scalable footprint model, franchisees have the option to include a hybrid functional training space that can serve as an area for group fitness with Gold’s FIT.
"After putting a significant amount of time and research into this, we feel now is the best time to begin developing our world-class facilities in this more scalable fashion," said Craig Sherwood, Gold's Gym's chief development officer. "I'm excited to connect with both current and potential franchisees to share how this new model is made for the future of the fitness industry, providing full-service amenities with added financial and regional benefits."
Gold's Gym is seeking potential investors interested in its scalable footprint opportunity in areas where this flexible model would be ideal for available commercial space and the community.