2020 lasted 366 days, one day longer than most due to it being a Leap Year. But for many people, the year may have felt like it lasted much longer. The COVID-19 pandemic, protests and the election made for a long year. Because of that, you may have forgotten some of the news that happened this year.
With that in mind, Club Industry is recapping the 12 biggest fitness industry news stories of the year. Keep in mind that this list is not necessarily of trends, although some of the news items (such as a long list of bankruptcy filings) could qualify as trends. Some of the events are inter-related, and for that reason, some of the news has been grouped together.
1. COVID-19 Gym Shutdowns and Reopenings
Concern about the coronavirus at the beginning of 2020 began to grow more serious as March arrived and case numbers began to increase. It took a radical turn around March 14 when officials in state after state began to order businesses, including health clubs, to temporarily close in an effort to curb the spread of the new virus for which public health officials were still determining how best to mitigate its spread. Some states never ordered club closures, but for gyms in states where closures were ordered, many suffered through months of those closures, leading to staff layoffs and bankruptcies. Some club operators defied those orders and remained open. Others began offering online workouts, a business practice that grew through 2020. In addition, some companies faced billing issues as members complained they were charged for dues despite their clubs being closed.
Over time, many states began reopening gyms but usually with restrictions on capacity and with physical distancing requirements and mask requirements. Often, group fitness classes were prohibited.
As fall arrived, coronavirus cases began to climb again, leading some states to reimpose closure orders or restrict gyms further. In California and Washington, for instance, gyms in much of the states can only operate outdoors.
COVID-19 has had a detrimental effect on many fitness businesses. A September Yelp report on business closures showed that from July to September, the fitness industry had a 23 percent increase in closures with 6,024 total closures, 2,616 of which were permanent.
Data from major payment processing firms showed that 15 percent of gyms had permanently closed as of Sept. 30, according to IHRSA, the trade association for commercial club operators. IHRSA estimated that the industry had lost more than $15 billion in revenue and 480,000 jobs as of Oct. 1.
On average, health club operators project their 2020 revenue will be 63 percent of their 2019 revenue, according to the ClubIntel report “The Fitness Industry’s Re-Awakening Post-COVID-19 Facility Closures.” Seventy-five percent of operators project their 2020 revenues will be below 75 percent of 2019 revenue while 45 percent say it will be between 51 percent and 75 percent.
2. Health Club Bankruptcies
IHRSA estimates that one in four health clubs will have closed permanently by the end of 2020. But some club operators have chosen to file for Chapter 11 restructuring instead of closing. And that includes some of the largest brands in the business.
The first large chain that filed for Chapter 11 restructuring was Gold’s Gym, Irving, Texas, which did so on May 4 after coming off a 2019 where it logged 22 American franchise agreements and opened 35 locations, a company record. The bankruptcy was for the corporate business and did not involve franchisees, who make up the majority of Gold’s Gym locations.
24 Hour Fitness, San Ramon, California, was the next big name to file for Chapter 11, which it did on June 15. At the time of the filing, the company’s total debt was $1.4 billion, according to its Chapter 11 filing. The debt included $500 million in unsecured bond debt due in 2022 and $930.3 million in principal amounts outstanding under its prepetition credit facility as well as rental expense for its clubs. The plan at that time was to secure approximately $250 million in debtor-in-possession (DIP) financing. 24 Hour announced last week that it expects to emerge from bankruptcy by the end of this week.
On Sept. 14, Town Sports International, Jupiter, Florida, filed for Chapter 11 restructuring. The bankruptcy affected Town Sports brands New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs, Washington Sports Clubs, Lucille Roberts, Total Woman, and Around the Clock Fitness brands, although all brands were expected to continue to operate as much as possible during the pandemic. The company failed to pay outstanding revolver balances that were due on Aug. 14. It had a $177.78 million term loan facility that was due on Nov. 15, but it said it did not have sufficient funds to pay it. The company noted it would look for a buyer through debtor-in-possession financing as part of the restructuring. As a publicly traded company on Nasdaq, the company also suffered from issues related to conforming to Nasdaq requirements and iwas delisted in October.
YogaWorks, Santa Monica, California, filed for Chapter 11 restructuring on Oct. 14 and permanently closed all its studios. Under the direction of its existing management team, YogaWorks continues to offer its live-stream and on-demand digital platforms, YogaWorks Live and MyYogaWorks, as well as its teacher training and workshop departments. As part of the Chapter 11 process, YogaWorks entered into a purchase agreement with Serene Investment Management to serve as the stalking-horse bidder for the company and agreed to acquire the YogaWorks digital and education business and intellectual property.
Also on Oct. 14, Cyc Holdings LLC, which owns indoor cycling chain Cyc Fitness, filed for Chapter 11 restructuring. Zengo Fitness LLC and Cycle House, both of which are affiliated with Cyc Holdings, were part of the filing.
YouFit Health Clubs LLC, Deerfield Beach, Florida, filed for Chapter 11 bankruptcy on Nov. 9. The high-volume, low-priced club chain sought a sale to its lenders in a debt forgiveness plan. The purchase price was listed at $75 million. Rick Berks, who founded YouFit in 2008. resigned in May, citing philosophical differences with the company’s financial partner group. His daughter, Christy Berks-Stross, also resigned in May. She had served as the company’s director of real estate development and legal counsel for real estate, corporate and general matter.
On Sept. 14, Flywheel Sports Inc. filed for Chapter 7 bankruptcy, liquidating the company, closing its 42 studios and laying off its 1,200 employees. Founded in 2009, Flywheel grew to have 42 studios in California, Colorado, Florida, Georgia, Illinois, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Washington state, and Washington, DC. In August 2019, Flywheel closed 11 of its underperforming studios in multiple markets.
The latest Chapter 11 filing came from In-Shape Health Clubs, Bakersfield, California, which filed on Dec. 16. The company plans to restructure and move forward with reopening clubs once the state allows it to do so.
3. Peloton to Buy Precor
Rumors of a possible sale of Precor had been circulating for more than a year, but it surprised many when the buyer turned out to be Peloton, which announced on Dec. 21 that it would purchase Precor for $420 million. The purchase makes sense to many considering the pandemic and temporary club closures helped Peloton’s sales soar to a point that its overseas manufacturing plants could not keep up, causing long delays on product deliveries. The growth in sales of its bikes and treadmills caused the stock prices of Peloton to rise, although its delivery delays concerned some investors. The two U.S.-based Precor manufacturing plants are anticipated to help alleviate the delivery issues in the United States.
The sale is expected to close in early 2021. At that time Precor will operate as a business unit within Peloton. Precor President Rob Barker will become CEO, Precor and general manager, Peloton Commercial. He will report to Peloton President William Lynch.
4. Sale of Gold’s Gym to RSG Group
Gold’s Gym emerged from its Chapter 11 restructuring process in July with the announcement that RSG Group, a company in Germany that also owns the McFIT brand of clubs in Europe, had won a bid for Gold’s Gym at $100 million. RSG Group finalized the sale on Aug. 24 and then let go Gold’s Gym President and CEO Adam Zeitsiff as well as more than 40 other executives and team members. Sebastian Schoepe, president of RSG Group North America, was named as the new Gold’s Gym CEO.
5. Departure of CrossFit Founder and Sale of Company
CrossFit had a tumultuous year in 2020. In early June, its founder, Greg Glassman, made comments on Twitter and in a company Zoom call related to the death of George Floyd, the unarmed black man who was killed by a Minneapolis police officer on May 25, that people on the call said were objectionable. Because of the comments, several CrossFit affiliates disaffiliated with the company, and Reebok ended discussions with CrossFit to continue its sponsorship of the CrossFit Games. After Reebok’s decision, Glassman apologized for his comments.
But Glassman also was the subject of several stories, including this one by the New York Times, that alleged he sexually harassed women on the staff. Glassman denied those allegations.
He retired on June 9, and then on June 24, the company announced that Glassman was selling CrossFit to Eric Roza, a CrossFit affiliate in Boulder, Colorado. In November, CrossFit announced it was moving its headquarters from Scotts Valley, California, to Boulder, according to Morning Chalk Up, a website focused on CrossFit news.
6. Formation of State Alliances
With the temporary shutdowns of health clubs, studios, YMCAs, parks and rec facilities, university rec centers and other fitness businesses happening on a state-by-state basis, operators of those facilities came together in some states to form alliances. The alliance members worked to educate public health officials and state governments about the value of keeping gyms open and the efficacy of the safety measures in place at gyms, lobbied those officials for reopening, reached out to the press and discussed best practices among other actions.
In September, the California Fitness Alliance (CFA), which was the first alliance formed, filed a lawsuit in Los Angeles County Superior Court challenging the scope of California Gov. Gavin Newsom’s power to issue indefinite orders and what the CFA said is arbitrary treatment of fitness centers during the COVID-19 pandemic. The group sought to lift some of the restrictions on indoor fitness mandated in California.
HRSA offers a listing of many of the alliances along with website addresses and contact information on this page.
7. Changes at IHRSA
IHRSA experienced some changes this year. Its trade show and conference was to be held March 18-20 in San Diego, but on March 12, IHRSA cancelled the event after the California Department of Public Health recommended cancellation or postponement of gatherings of more than 250 people due to the COVID-19 pandemic.
Some suppliers shared with Club Industry that they were upset with IHRSA’s handling of the cancellation of the event and the refund and credit process.
Other people were dissatisfied with IHRSA’s early lobbying efforts during the pandemic, particularly the inability for the lobbying association to get the fitness industry included in the stimulus packages Congress passed to help businesses during the COVID-19 shutdowns. IHRSA hired additional lobbyists in April to help with future efforts.
In October, IHRSA shared that it had created two groups, the National Health & Fitness Alliance as well as the Medical, Science, and Health Advisory Council. The National Health & Fitness Alliance is a reworking of the organization’s Industry Leadership Council (ILC) into what IHRSA called “a stronger, broader-based alliance that represents the entire health and fitness industry.” The National Health & Fitness Alliance will contribute and raise funds to support and pay for the legal, lobbying and advocacy efforts of IHRSA in the United States. The group will also work with the state alliances that formed since the gym shutdowns caused by the COVID-19 pandemic.
8. Apple’s Launch of Fitness+
On Dec. 14, Apple launched its Fitness+ app, which offers studio-style workouts on the iPhone, iPad and Apple TV, incorporating workout metrics from Apple Watch. On the same day, Life Time, Chanhassen, Minnesota, announced it would include Apple Fitness+ as part of its memberships for no additional charge to members who have an Apple Watch. Apple Fitness+ will be part of the digital membership that Life Time will soon launch.
9. Cancellation of Industry Events
All of the industry events, from IHRSA to FIBO to IDEA to Sibec to Club Industry, were cancelled or postponed in 2020 due to the COVID-19 pandemic. Some of the event organizers offered virtual events instead.
10. Cancellation of Flywheel Purchase by Town Sports
On Jan. 6, Town Sports International announced it was purchasing Flywheel, but that deal fell through in April. The purchase plan involved a $50 million loan from Kennedy Lewis Investment Management, part of which was to have been used to refinance a $193 million loan that Town Sports was due to pay in November so that the maturity date could be pushed to 2024.
11. Silver Lake Partners’ Investment in Equinox
In early 2020, Equinox Holdings Inc., which owns Equinox, SoulCycle and Blink Fitness, received an investment for an undisclosed sum from Silver Lake Partners, a technology-centric private equity firm with $43 billion in managed assets, according to a Feb. 7 report by Bloomberg. Equinox Holdings Chairman Harvey Spevak told Bloomberg that the investment would help Equinox further develop its digital content platform and add up to 50 new locations per year, including an expansion to the Middle East.
12. United PF Partners Sold to American Securities
Early 2020 saw a second big investment in the fitness industry, this one by private equity firm American Securities, which bought United PF Partners, the largest Planet Fitness franchise group, for an undisclosed amount. At the time of the purchase, United PF Partners had 160 locations in 14 states spanning the West, Southwest, Midwest, South and Mid-Atlantic regions.