Court order stalls breakaway gym franchise

A fitness club franchisee who cancelled his franchise agreements and rebranded three Auckland gyms without warning has been told to stop operating with immediate effect by the New Zealand High Court.

On 8th February, club owner Stuart Holder cancelled Club Physical franchises at three Auckland gyms, in the suburbs of Three Kings, Botany and Westgate, rebranding them under the Jolt Fitness banner.

Ruling on an injunction brought by the owners of the Club Physical gym franchise, Justice Helen Winkelmann today (Thursday 7th March) granted an interim injunction that means Jolt Fitness is not allowed to operate a fitness business at or within five kilometres of the Three Kings branch until further order of the High Court.

In the New Zealand Herald, Business Reporter Ben Chapman-Smith expanded on the injunction, reporting that Justice Winkelmann's decision to grant an interim injunction means that "with regard to the other two branches, Jolt has been told it cannot trade at the Botany and Westgate premises until further order of the Court.

"No other restraints were issued which means Jolt could effectively open up another gym next door if it wanted and was able to.

"Jolt Fitness' cross-application to stop Club Physical from accessing the contact details of the franchisee's gym members, and from contacting those members was declined by Justice Winkelmann."

"A spokesperson for Jolt Fitness said the owners were this afternoon processing the decision and not ready to make a comment.

"Holder's lawyer, Jason Goodall, told the court last week that his client had no previous experience running gyms and, under the franchise agreements, Richards was supposed to provide business support.

"Richards had not been meeting his obligations and this was putting the clubs' futures in jeopardy prior to the sudden rebrand, Goodall alleged.

"A major point of contention was over the type of marketing materials being promoted by Club Physical. Flyers for a dating agency called 'Two's Company' were being put into new members' packs last August and Holder was also unhappy about an advertisement which showed aliens shooting fat people, with the slogan 'Get the fat ones first'.

"Phillip Rice, lawyer for Richards, said Holder had cancelled the agreements at the same time as franchise fees - which had been waived for the first two years - suddenly became payable."

The dispute between the two operators had been described as having "global implications" for the franchising industry by the Franchise Association of New Zealand.

A future date for both parties to bring their full cases before the Court and for a permanent decision to be made has not been set.
With thanks to Ben Chapman-Smith, Business Reporter APM Digital.

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