CURVES INTERNATIONAL: You Failed? Pay Up!

When you’re considering a particular franchise opportunity, most franchisors will provide you with a wealth of sales literature, marketing brochures, videos, and legal documents (FDD), as well as an ample supply of timeworn cliches (”You’ll be in business FOR yourself, but not BY yourself”).

Franchisors should provide you with one more thing: The email or certified letter they’ll send you if you fail.

Ask for it. Get it. Read it. Think about it.

Don’t listen to the franchise salesperson when he tells you If you think negative thoughts you will kill the success fairy!

Realistic ain’t negative.  And this letter contains an important message:  As a franchisee, you are under a legal, contractual obligation to succeed.

Curves Email to Closed Club Owners

A reader at Unhappy Franchisee posted the email that Curves International (The AAFD “Franchisor of the Year“) allegedly now sends to Curves franchise owners who are in distress, have run out of money and closed their struggling clubs:

From: Wendy Law

I have received notification that you have closed your club. I have attached the closing requirements if indeed you have in fact closed. Please contact me and let me know the reason of the closure.

The resale department has received information to indicate that you abandoned (closed) your facility. You realize, of course, that closing your facility is a breach of the terms of your franchise agreement with Curves International, Inc. (“Curves). You place yourself in default of the terms of your franchise agreement and you not only remain responsible for all delinquent fees (including monthly royalties/advertising fees), but also all future fees due and owing to Curves (including maximum monthly royalties/advertising fees) for the remaining Term of your franchise agreement. If you fully comply with all Curves’ requirements, including the procedures listed in the attached Closing Procedures document, Curves will allow you the opportunity to pay a settlement fee and execute a Mutual Release with regard to said franchise.

The completed Club Worksheet, Intent to Close Facility form, and an active, inactive, and archived member list must be returned to the resale department within two (2) business days of your receipt of this email by facsimile to (254) 751-3035 or by return email.

Carefully review attachments. If you have any questions please feel free to contact me. I hope to assist you through this transition and to make it as smooth as possible.

Sincerely,

Wendy Law

Resale Specialist

Curves International, Inc.

If and when a Curves franchisee closes their club during the term of their franchise agreement, Curves International dispenses with the touchy feely stuff one encounters in Curves franchise marketing.  No, you won’t even get a “We’re sorry to hear…” or “Our condolences…”

In fact, in the closing email CI doesn’t even pretend that they know – or care – whether your club is dying or dead except in regard to what you owe them.

February 1st, 2008 CI began requiring franchise owners who closed clubs prematurely to pay a $10,000 closing fee (”Failure Fee” Our term).  Readers report that Curves often accepts what they can get from the distressed franchisees, and negotiated as low as $2000.

Then there are the “delinquent fees (including monthly royalties/advertising fees), but also all future fees due and owing to Curves (including maximum monthly royalties/advertising fees) for the remaining Term of your franchise agreement.”  Unhappy Franchisee readers have reported Curves demanding amounts averaging from $29,000 to $49,900 in future royalties and fees.

This does not include the outstanding credit card debt, past and future lease payments, and all that is owed to equipment cos. and vendors.

A Contractual Obligation to Succeed

Curves International CEO Gary Heavin recently attributed the high rate of SBA loan defaults to the reselling of Curves franchises at inflated prices by greedy 3rd parties.  Perhaps Curves International, Inc. should require every new franchisee who enters the system to read and digest this farewell email.  There will be less of a backlash for the Franchisor of the Year if it’s clear that franchisees are contractually obligated to succeed.

Franchisees should know coming in that failure is not an option.  At least for Curves International.

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Photo:  Unhappy Franchisee