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Effect On the Industry

Industry analysts see many possible outcomes to Bally's financial woes: the company files for bankruptcy protection, it goes completely under, it's granted the 90-day extension and is able to stay afloat, it changes management, or it sells Crunch and other non-core assets.

According to an online poll on Club Industry's Fitness Business Pro's Web site which asked the question “What do you think should happen to Bally next?,” 34 percent of the 35 respondents thought Bally would file for bankruptcy; 26 percent said Bally needed to get a new CEO and management; 17 percent believed the company would incur charges from the SEC and attorney general; 20 percent expected Bally to sell Crunch; and 3 percent thought the company would continue as is.

Consultant Michael Scott Scudder, who has 30 years of industry experience, doesn't expect Bally will go under anytime soon, but if that happens, he said it could cause a ripple effect throughout the fitness industry.

“If they had to declare bankruptcy and shut down their operations entirely, then you would have 4 million dues-paying members that wouldn't have a place to exercise,” he said. “If Bally declares bankruptcy and says, ‘Thank you. Good night. Manager, please be the last one out and turn out the lights,’ then you would have 21,000 employees without jobs.”

However, turning loose those members and employees may not be bad for the industry, he said. The 4 million members, which represent about 10 percent of the entire U.S. club membership, would be released to other clubs and the 21,000 employees would become available to understaffed clubs. Because Bally tends to price its monthly memberships at a low rate, clubs that charge $9-$19 a month for memberships would benefit the most from the closing of Bally, Scudder said.

However, if Bally management plays its cards smartly, Bally could avoid bankruptcy, said Rick Caro, president of Management Vision, and actually reemerge as a more powerful company with fewer but better units and a stronger financial structure.

TAGS: News
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