Several health club owners are claiming a Layton, Utah–based third-party billing company has failed to pay them their share of their members' dues.
Aaron Stafford, owner of Stafford Fitness in Longview, Texas, said his problems with National Fitness Financial Systems began in August 2015. Payments from National Fitness, which used to arrive daily and averaged a few hundred dollars each, began to slow: a week late, then two weeks, then a month. In fall 2015, National Fitness stopped paying him all together—and the company now owes him an estimated $35,000 plus $15,000 in fees, he said.
Club Industry's calls and emails to National Fitness seeking comment were not returned. Stafford said his luck in reaching the company has been the same.
"They are notorious for screening [their phone calls]," Stafford said. He was able to speak with a representative of the company only after calling under the guise of getting data from National Fitness after switching to ABC Financial, Sherwood, Arkansas, for his billing.
Stafford has emptied his personal savings account to pay his 25 employees and hasn't taken a salary since National Fitness stopped sending him the dues money more than six months ago.
"We are barely able to pay rent, so we restructured the property tax," he said. "We had $24,000 in property tax due, and we didn't have the money. Taxes are accumulating, as are interest charges."
Online research led Stafford to Mark Greubel, owner of Greubel's MMA, a mixed martial arts studio in Augusta, Georgia. Greubel had similar complaints about late payments from National Fitness, and then in September 2015, the company stopped paying him at all.
A rep named Brandon told Greubel that the CEO wanted to speak to him and would personally call Greubel, but the CEO never did. Greubel, who employs 12 people, estimated that National Fitness at one time owed him $34,000, but with the time that has passed and extra fees he said National Fitness tacked onto his account, he is not sure anymore of the exact amount.
Once Greubel's bank balance went into the red, he accepted two loans from his former father-in-law, complained about the company on National Fitness' Facebook and Better Business Bureau pages and did a pair of local television news interviews to share his story. A week after the TV news stories ran, Greubel called Brandon again, and National Fitness paid Greubel $20,000 over a month.
"[National Fitness] pretty much bankrupted my company, and I didn't have the money to hire a lawyer," Greubel said.
On the Consumer Affairs' website, Greubel wrote: "They are using my money to pay for their bills. Isn't that theft? These people have the audacity to not only take their fee out of my money, but they keep our money too!"
In a recent phone call to National Fitness, Greubel recorded a conversation with the rep he has spoken to many times.
"Brandon told me that if [the company keeps] going like this, it is going to put 800 or 900 [health clubs] out of business," Greubel said.
Steve Wright and Kyle Buffkin, co-owners of Mega Fitness Gym 24/7, Myrtle Beach, South Carolina, aren't out of business, but National Fitness, which they began using in 2012, stopped paying them in October 2015 and now owes them about $6,000, Wright said.
"I have received calls from around the country with the same complaint," Wright said via email, adding that the Utah Department of Commerce and the state's Attorney General's Office told him to drive to Utah and file a complaint about National Fitness in person—or hire an attorney. Wright said he can't afford either option. He and Buffkin call and email National Fitness weekly but never get beyond the front-desk receptionist, they said.
Liz Allen and Ty Battle, co-owners of ZellaDor Wellness and Fitness in Utica, Michigan, began having problems with National Fitness paying late or paying incorrect amounts starting in January 2015, Allen said. She called National Fitness three or four times a day, hundreds of times, giving her wire-transfer information to a customer service representative each time, but she never received money from the company, she said.
National Fitness has since paid about $4,200 of the $5,000 that the company owes ZellaDor, but Allen and Battle are still recovering financially and neither is taking a salary.
"We'd only been open about a year and a half when all this started," Allen said. "Any money that comes in, we pay employees. We've been late on electric and cable bills. For us as a new business, every dollar counts."
Allen had to borrow money from her parents and let go group exercise instructors to stay afloat. At one point, Allen and Battle even worked the child care area themselves because the lack of money from National Fitness had forced them to reduce staff hours.
In October 2015, Allen and Battle switched to Gym Insight, Las Vegas, for billing services.
Greubel now uses Twin Oaks, Berlin, Connecticut, for billing services. Eric Claman, a software developer for Twin Oaks, said he noticed an influx of new clients from National Fitness in summer 2015. The company hired more client relations and technical support staff to cover the influx, but Claman didn't reveal an exact number.
ASF Payment Solutions, Highlands Ranch, Colorado, also has seen a higher than normal volume of transfers from National Fitness during the past several months, according to Sean Kirby, vice president of client relations for ASF.
"The feedback we've received from clients is the need for immediate and consistent cash flow from their collections that they felt was lacking with [National Fitness]," Kirby said.
In some cases, ASF has transferred clients within three days.
"In many cases we've been able to get the collections immediately and had them wired directly to the clients, thus helping them with their cash flow," he said.
Kirby noted that National Fitness has been cooperative in getting ASF the files it needs to switch customers without creating any further damage to the client relationship.
The reason for the payment issues is unclear, but a National Fitness phone representative told Allen that the company had a new accounting department that was manually processing transactions, causing payment delays. Stafford, however, was told by a National Fitness rep that the slow payments were due to one of its club clients allegedly stealing $500,000 from National Fitness itself.
Stafford contacted the FBI about National Fitness last fall, but Todd Palmer, public affairs specialist for the Salt Lake City division of the FBI, told Club Industry he could not confirm or deny the existence of an investigation.
National Fitness has an F rating from the BBB, with the most complaints—300 out of the 483 in the past three years—lodged by members of clubs who National Fitness allegedly continued to charge for dues even though their clubs had closed due to bankruptcy. Problems with product/service made up 169 claims. Other complaints involved club members who said they tried to cancel their memberships due to relocation, but National Fitness wouldn't cancel them.
The company's website says, "Our team handles billing so seamlessly that you'll only notice the growth in your membership dues and increase in profits to your bottom line." A line on its billing and collections page reads, "Unlimited Deposits – Receive your funds daily!"
As of now, some club owners are in a holding pattern with a company that they say is not only breaking the terms of its contracts but also likely will file bankruptcy soon, leaving them without recourse.