Gym memberships: Unfair, or just good business sense?

For many of us, every new year brings with it a renewed determination to get fit. This, you tell yourself, will be the year I get in shape. “It’s about time,” you say, “imagine how much better I’d feel”. And in the name of shedding pounds you join a gym.

Fast-forward a few months and, like so many others, you’ve found yourself in financial difficulty and can no longer afford to pay. Be it redundancy, a health issue, or simply the need to make cutbacks. As it stands, few gyms will lend a sympathetic ear. Many will keep you locked into your contract, or demand you pay the outstanding monthly instalments upfront. In light of the economic downturn, for many individuals this is simply not an option. Consequently the national news has been littered with stories of vulnerable people being unable to afford their memberships, some of them even taken to court as a result.

In August 2011 the Office of Fair Trading (OFT) secured from the High Court an enforcement order preventing Ashbourne Management Services Limited (AMS), a gym management company, and its directors from recommending, using or relying on certain unfair contract terms. Ashbourne had been dealing with clubs with a “low monthly subscription”, and advising them to adopt membership periods of 12, 24 or 36 months. It referred to members who had fallen behind with their repayments as “defaulters”, and consequently had them dealt with by registering their defaults with a credit reference agency. This, Mr Justice Kitchin concluded, amounted to unfair commercial practices.

These scenarios, coupled with the 2011 Ashbourne ruling, prompted the OFT to last month open an investigation into whether long-term gym contracts are unfair. Launched under the Enterprise Act 2002, it will see the OFT scrutinise a number of companies that operate gym and fitness club chains, or who provide management services to gyms. It is considering whether these companies are using or recommending unfair contract terms in breach of the Unfair Terms in Consumer Contracts Regulations 1999 and/or engaging in any unfair business practices under the Consumer Protection from Unfair Trading Regulations 2008.

So what of long-term contracts? Many maintain they are unreasonable, as often willpower flags and people neglect to use gyms a few months on from joining. The 2011 High Court ruling addressed this. Mr Justice Kitchin said the “average consumer tends to overestimate how often he will use the gym once he has become a member and further, unforeseen circumstances may make continued use of its facilities impractical or unaffordable… yet, having entered into the agreement, they are locked into paying monthly subscriptions for the full minimum period.”

However, he made a distinction between year-long memberships and those which tie customers in for upwards of 12 months. He concluded the problem lies primarily with the latter.  Indeed, Bannatyne Fitness was keen to stress “We do not offer contracts for more than 12 months including the notice period, which we believe is the issue central to the OFT’s current review and welcome its examination of the use of out-sourced debt collecting agencies, which is a practice we do not employ or support.”

But for John Treharne, CEO of The Gym Group, a company which offers no-frills gyms, contract free, memberships are “an unnecessary business practice” altogether. He explained: “It is absolutely unnecessary to tie people in because in the longer term you upset them. Over 40% of our members have never been the member of a gym before because they don’t want to commit to a contract.

“They [gyms] may have the short term benefit because you tie them [customers] in for 12 months, but when they go they are invariably disgruntled; they won’t sign up again and they won’t come back you. They then go and tell their friends they are disgruntled. And now you’ve got people with cancer, out of jobs, being taken to court over payments – that’s not the sort of publicity you want.”

Mr Treharne added: “I have a fundamental problem with memberships being compulsory, which is what memberships are. We totally disagree with it and it’s not what the customer wants.”

Meanwhile research from Mintel indicates growing numbers of gym-goers are resolving to stay loyal to their clubs, with 11% actually planning to spend more on the leisure pursuit. Its latest research, conducted last month, questioned Brits about their leisure spend in the past 12 months. It found just three in ten consumers admit that they have cut back on using private health & fitness clubs over the past 12 months. Private health and fitness clubs, it found, has the lowest net spending decline of all leisure activities (-16%) in the past year. So assuming members are increasingly loyal to their gyms, why the need to lock them into a contract?

Bannatyne Fitness maintains its membership agreements “enable us to deliver a sustainable UK-wide business model, which ensures we can continually invest in our health clubs providing high-quality facilities and highly-trained professional staff. We also believe that living healthily is an ongoing commitment and our members place their membership at the heart of their healthy lifestyles.”

An interesting trend has emerged on the back of many people being unwilling to tie themselves into any such contract. This sentiment has seen the emergence of a host of no-frills, contract-free gyms. Offering purely work out space, free of the saunas, pools and steam rooms which so often hike up the price of memberships, customers can come and go as they wish. And that convenience has seen their popularity soar. John Treharne, CEO of The Gym Group, said:

“We have 300,000 members who want an environment where they can come and go as they please. A lot of our members are students, they can come and then quit over the summer when they go home, and then return when they come back to university.”

“The basis of what we are trying to do is to provide a service which is what people want. Our research found most people who use the gym are not bothered about a steam room, and they certainly don’t want to have to pay for it.”

Mr Treharne went on: “Our concept is a little bit like budget hotels or airlines, which have been very successful in the market but they’re not pretending to be something they’re not. The budget market transformed the airline market.”

So what about a middle ground, in which both long and short-term contracts co-exist? This is the model adopted by Fitness First. A spokesperson said the group offers “several options for membership including a four week no commitment option, a four month membership and now a month-by-month rolling contract – so there are a number of flexible options for members.”

Meanwhile David Jones, marketing director of Fitness First, explained the group has worked with the Plain English Society to ensure their contracts are transparent and easy to follow. “And, of course, we’re sympathetic to those who have suffered injury or illness and therefore cannot use the gym,” he said.

So looking forward, what does the future hold for gym memberships? Mr Treharne said: “We [no-contract gyms] are shaking up the current status quo and it’s my belief we will see the same thing that’s been happening in the airline market – we will see a change.

“They [contract gyms] can’t carry on doing what they have always done. I just don’t think in the future that health clubs will be able to exist in the market with long-term contracts, so it can only be a good thing for the consumer.”

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