Administrators report that UFC Gym Australia’s debt exceeds $15 million

The parent companies behind UFC Gym Australia, which entered administration at the end of May, are understood to have accumulated more than $15 million in debt.

Having been ordered on 22nd May by the Federal Court of Australia to pay $5 million to three former franchisees, the Ultimate Franchising Group Pty Ltd (UFG), UFC Gym Prospect Pty Ltd and Ultimate Franchising Group Properties Pty Ltd, the companies operating the Australian master franchise for USA-based UFC (Ultimate Fighting Championship) Gyms, entered administration on 23rd May.

The companies collectively held the master franchise agreement for UFC Gym Australia and New Zealand, which, at its peak had more than 10 fitness clubs in Sydney, Melbourne, Perth and the Gold Coast.

An administrator’s report subsequently lodged with the Australian Securities and Investment Commission shows that according to the appointed administrators, Rajiv Goyal and Christopher Johnson of insolvency firm Wexted Advisors, Ultimate Franchising Group Pty Ltd owes $15,654,000 to unsecured creditors.

In response, a UFC Gym Australia spokesperson told News Ltd that the company had appointed administrators because it was the “best option available” to stabilise its financial situation and added it was “considering a range of options” following the Court judgment.

In his recent judgement, Federal Court Justice Thomas Thawley declared Mazen ‘Maz’ Hagemrad, Director of Ultimate Franchising Group Pty Ltd (UFG), UFC Gym Prospect Pty Ltd and Ultimate Franchising Group Properties Pty Ltd, the companies operating the Australian master franchise for USA-based UFC (Ultimate Fighting Championship) Gyms, declared not “to be a reliable or credible witness”.

The Court found the company and its directors, Hagemrad and Samer Husseini had “engaged in misleading and deceptive conduct” during the process of selling franchises to the parties involved in the case.

Husseini has is understood to be seeking to appeal the Court judgment.

$15 million debt
According to proof of debt forms lodged with the administrators, there are a total of 62 creditors, with $160,000 owed to the NSW Department of Revenue.

An additional $42,000 is owed to 10 employees for unpaid wages while the Commonwealth Bank remains a secured creditor for a $670,000 debt.

UFC Gym Australia “may have been insolvent from as early as March 2023,” the administrators said in their report filed with the corporate regulator.

They added that early May after the Court orders were delivered was a more “definitive date” of when the company likely started to trade insolvent.

The report added that the company “remains insolvent, so it is not appropriate for control of the Group to be handed back to the director.”

Gyms close in wake of master franchisor’s administration
In the weeks and months leading up to UFC Gym’s administration, two other independent franchises also shut down.

The UFC gym in the Sydney suburb of Penrith closed at the beginning of March, blaming “Covid disruptions” and the “economic uncertainty” proliferating in Australia.

A UFC franchise in Narre Warren in Melbourne has also closed in recent months.

Immediately upon taking over the company the administrators shut down its Parramatta branch in western Sydney while the seven remaining Australian UFC Gyms are still operating as the administrators look for buyers.

Commenting on the Parramatta closure, administrator Rajiv Goyal told News Ltd “it was an unprofitable corporate store … we exited that store immediately upon our appointment.”

The closure has left members of the gym unhappy as membership have been automatically transferred to the nearest UFC gym, in Wetherill Park.

Another seven UFC Gyms franchises are also understood to have been sold but the administrator said these plans.

Also in May, the franchisors for UFC Gym in Singapore (not related to its Australian operations) were exposed for closing its UFC CityLink outlet without informing its members and leaving unresolved membership concerns.