Bally Total Fitness is an American fitness club chain with four hundred gyms in seventy cities, and claims four million customers.[1] At its peak, prior to filing Chapter 11 bankruptcy in 2007, Bally operated nearly 440 facilities located in 29 states, Mexico, Canada, Korea, China and the Caribbean under the Bally Total Fitness, Crunch Fitness, Gorilla Sports, Pinnacle Fitness, Bally Sports Clubs, and Sports Clubs of Canada brands. In response to an increasingly competitive market invaded by niche clubs catering to specific market demographics, Bally has diversified into franchising, with over thirty Bally facilities now operating as franchises. The company's headquarters are located in Chicago, Illinois.
History
The company traces it roots to 1931 Lion Manufacturing which was later named Bally Manufacturing (named for its successful pinball product called the Ballyhoo. Its success at building slot machines led the company to open casinos in Atlantic City and Las Vegas.[2]
In 1983 it purchased Health and Tennis Corporation of America in 1983 and Lifecycle exercise bike manufacturer. In 1987 was the world's largest owner and operator of fitness centers. It further expanded with the purchase of the American Fitness Centers Nautilus Fitness Centers. Included in the acquired clubs were ones connected to Vic Tanny and Jack LaLanne. The various brands were consolidated under the Bally Total Fitness brand in 1995.[2]
In 1996 it was spun from its casino owning parent. In May 1998 it was listed on the New York Stock Exchange trading under the ticker symbol of BFT.
Bankruptcy
Bally filed for bankruptcy in August 2007, with outstanding debts of $761 million.[3] Over the preceding ten years, its stock price had fallen from a high of approximately US$37.00 to less than $0.37 on the Pink Sheets, a plunge of over 99% of its value.[3] It was delisted from the NYSE.
On October 1, 2007, Bally announced its emergence from bankruptcy court protection, 100% owned by a hedge fund, Harbinger Capital.
On December 3, 2008, Bally again filed for bankruptcy due to problems arising from a global credit crisis. The company indicated that it would explore options including reorganization or possibly even a sale, but that it hoped to emerge from bankruptcy as soon as possible.[4][5]
Controversy
Bally Total Fitness has been the subject of controversy over their sales and membership cancellation practices, with some customers claiming they were misled into signing long term membership contracts that can last for three years, and subsequently found themselves dealing with collection agencies.[6] Complaints have also arisen regarding the 30 day free trial period that some Bally Total Fitness clubs offer. Members have alleged that when choosing the 30 day trial period, they must provide their bank or credit card account number to a Bally sales representative and in order for them to satisfy the trial period, the guests must attend the gym for 12 out of the 30 days in order for their trial period not to turn into a membership if the guest decides not to become a member. Even when satisfying the 12 day requirement, members allege that their trial period turns into a membership contract where the corporate fitness giant is deducting membership dues from their bank or credit card accounts without the members permission.
In April 1994, Bally paid $120,000 to settle Federal Trade Commission charges of illegal billing, cancellation, refund, and debt-collection practices. But consumers complain that little has changed over the years.[7] From 1999 to 2004, over six hundred customers complained to the New York Attorney General's office, leading to an investigation and subsequent agreement by Bally Total Fitness to reform their sales tactics in February 2004.[8]
According to ConsumerAffairs.com, "We get so many complaints about Bally Total Fitness, it's a workout just to sort through them."[9]
Paul Toback, a former White House aide in the Clinton administration who joined Bally as a corporate development officer in 1997, was named Chief Executive Officer (CEO) in late 2002, after predecessor Lee Hillman resigned.[10]
Investigations
Bally has been the subject of at least one federal investigation, in addition to the aforementioned probe into consumer complaints against Bally, conducted by the New York State Attorney General, regarding the firm's sales practices. In April 2004, Bally disclosed the U.S. Securities and Exchange Commission (SEC) was investigating its accounting practices. The company eventually restated its financial statements for 1997 through 2003.
The SEC has yet to complete its investigation, but an internal Bally probe blamed the company's "culture of aggressive accounting" on Mr. Hillman and former Chief Financial Officer John Dwyer; both men have repeatedly denied any wrongdoing.[10]
On February 28, 2008, the SEC formally filed financial fraud charges against Bally Total Fitness. Among the charges, the SEC alleges that in 2001, Bally overstated its originally reported stockholder's equity by roughly $1.8 billion (over 340%), and understated its 2003 net loss by $90.8 million (or 845%).[11]
References
External links
- FranchiseTimes.com - 'Weighty matters: Bally works to fend off bankruptcy', Jonathan Maze, Franchise Times (May, 2007)
