Australian franchisor of UFC Gyms enters administration

Just weeks after being ordered 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, have each entered administration.

News reports today advise that the companies all went into voluntary administration on 23rd May - the day after the Federal Court judgement.

The Federal Court had found that UFG had indulged in “deceptive” conduct involving “profiteering”, misleading the franchisees about businesses which were "near valueless" and unlikely to operate profitably.

As reported by Australasian Leisure Management on 24th May, Federal Court Justice Thomas Thawley had found that UFC Gym’s Directors, Mazen ‘Maz’ Hagemrad and Samer Husseini, had falsely told franchisees that the businesses were profitable when they were actually losing money.

Launched in 2009 in the USA, UFC Gym Australia opened the mixed martial brand’s first international club in the Sydney suburb of Alexandria in 2013. At its peak, it operated 10 facilities in Sydney, Melbourne, Perth and the Gold Coast.

The voluntary administration means the franchise owners, while having been successful with their legal action, will struggle to get a cent of that money, with their legal fees understood to be in excess of $850,000.

The Federal Court judgement showed that Hagemrad and Husseini promised franchisees that their customer base grow to more than 1200 members in the space of just 10 months and that they would break even straight away.

In the last financial year, the UFC Gym Australia master franchise made a net profit of just $302,000, records show, while in the current reporting period, the company made $173,000 in profit.

Rajiv Goyal and Christopher Johnson of insolvency firm Wexted Advisors have been appointed as the administrators of the company.

Of the three locations in the Court judgement, the Balcatta (Western Australia) and Castle Hill (NSW) gyms have since rebranded as ‘Rival Gyms”, while the Blacktown enterprise has shut down in the wake of the Court judgment, which also deemed their franchise commitments were voided.

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.

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.

A UFC Gym Australia spokesperson reportedly said the company went into administration because it was the “best option available” to stabilise the business and that “the company retains full confidence in the future” of its brand.

Husseini is understood to be seeking an appeal.

Images: The former UFC Gym Bankstown (top) and UFC Gym Balcatta (below, credit: UFC Gym Balcatta).