Volo Innovations

The ripple effect is a term used to describe consequences of event that are beyond your control. These ripples are often far reaching and may have a blanket affect. The current economy has had this very affect on numerous businesses and several fitness centers have closed their doors and filed for bankruptcy from small mom and pop operations to larger fitness chains this ripple has hit businesses hard and consumer confidence even harder.

Some fitness members are being left with little to no recourse when a club closes hence the increase in popularity of surety bonds. Wise gym members or those whom have been stung once are now starting to ask before they sign if the club caries a surety bond and the amount.

What is a surety bond?
A surety bond is a contract among at least three people.

• The principal or primary party who will be performing the contractual obligation - the health club
• The oblige or the party that is the recipient of the obligation - the member of the health club
• The surety who ensures the principal's obligations will be performed - usually the states attorney general for health clubs

These bonds offer security to the gym member that should a facility close or not live up their obligation under the membership contract that the member will be able to seek restitution from the amount of the bond.

Who must be bonded? How much?
Health club bonds are not limited to just health clubs but instead reach multiple businesses that offer prepaid memberships with the amount to be determined by length and types of memberships. The fees and types of companies that must buy bonds depend on the state. Businesses must check with their attorney general to see if they are required to post a bond and how much this bound will cost for. Typical bonds requirements can range from $50,000 for 12 month memberships to a higher $150,000 for 2 and 3 year memberships.

Fitness industry business types that may require surety bonds:

• General health and fitness clubs
• Racquet and tennis clubs
• Gyms
• Weight loss centers
• Self-defense schools
• Personal or athletic trainers - currently only if they have a facility
• Body building clubs

Who could be next?

• Yoga studios
• Pilates studios
• Boot Camp operations - no facility needed
• Personal or athletic trainers - no facility

Should your business get bonded?

I believe that it is only a matter of time before this becomes a necessity in order for businesses to ensure the peace of mind of their members. Add to this the pressure on the government to rebuild consumer confidence and before you know it the current legislation will have a ripple effect that will soon include your business.

I would recommend that if you can afford it that you take initiative to be ahead of the curve and take out bond to provide your members and clients the security to buy from you. You may want to advertise the fact or just keep it on your contracts.

The second option is to switch your business model to post billing versus pre-paid memberships. Some businesses may charge an initiation fee to cover initial cost; this fee may be refunded at the end of term similar to the leasing of property. Remember don't spend these fees instead use place them in a separate account as you may be required to refund with interest depending on your state.

There several different options and successful business opportunities that may suit your business needs so do some research and make sure that you are properly covered for all circumstances that may face your business. This will also protect you from personal liability and possible criminal proceedings.