Gold’s Gym International has filed for bankruptcy protection in the United States, but “we’re absolutely not going anywhere,” according to the company in an announcement posted on their official website today.
The company is seeking financial rehabilitation by undergoing Chapter 11 bankruptcy. In a Chapter 11 bankruptcy filing, a company in the U.S. will continue to operate as it seeks to undergo rehabilitation through debt restructuring with debtors, liquidation of some assets, and massive corporate restructuring.
This is different from Chapter 7 bankruptcy, another type of bankruptcy filing in the U.S., wherein the company will terminate its operations, while liquidating all assets and distributing the proceeds from the sale of those assets to creditors and, if there’s any remainder, will be paid to the owners of the company.
Gold’s Gym bankrupt because of COVID-19
Gold’s Gym cites the COVID-19 global pandemic as primary reason for its decision to declare bankruptcy.
The coronavirus impact on the economy “spurred us to take immediate action, including the difficult but necessary decision to permanently close about 30 company-owned gyms (in the United States),” according to the company, but the “pre-negotiated filing will enable us to emerge stronger and ready to grow.”
Although the year 2019 was the company’s “strongest year of worldwide growth in company history,” according to Adam Zeitsiff, President and CEO of Gold’s Gym, “no single factor has caused more harm to our business than the current COVID-19 global pandemic and the temporary closures required to protect the safety of our members, team members and communities.”
The company expects it to successfully emerge out of bankruptcy “by August 1, 2020, if not sooner.”
As part of the company’s “typical first-day restructuring requests,” Gold’s Gym plans to seek court approval to enable it to continue paying suppliers, vendors, and employees in the ordinary course of business.
In addition, the company promises to:
- “Re-open our temporarily closed gyms in accordance with state, local and federal guidelines;
- Focus on the health and safety of our members and team members around the world;
- Provide team members wages, healthcare coverage, vacation and other benefits;
- Provide the highest level of support and guidance to our global franchise network;
- Support our numerous brand licensees around the world;
- Pay suppliers and vendors in the ordinary course on a go-forward basis;
- Focus on innovation, including finding even more ways to serve you inside and outside the walls of our gyms.”
Bankruptcy no impact on Gold’s Gym franchises
“While the COVID-19 pandemic certainly impacted our company-owned gym operations, we expect the filing will have no further impact on current operations,” Gold’s Gym adds in their official press release.
Similarly, the company explained that the bankruptcy will not “impact our licensing division, it is not associated with any of our locally-owned franchise gyms, nor will it prevent us from continuing to support our system of nearly 700 gyms around the world.”
Only company-owned gyms, mainly in St. Louis, Alabama and Colorado Springs in the U.S., will be closed. More than 700 gyms operating in 29 countries around the world will not cease business and will continue to operate.
Gold’s Gym Philippines “business as usual”
This means Philippine branches will continue “business as usual,” although the reopening of gyms may have to wait while most of the country’s major cities are still locked down in an Enhanced Community Quarantine (ECQ) scheme as a way to arrest the rising number of COVID-19 cases.
Gold’s Gym currently operates 26 branches in the Philippines. All branches in all areas, though, are closed, even in cities placed in General Community Quarantine (GCQ), a downgraded version of ECQ, since the government considers gyms, fitness centers, and sports facilities “non-essential.”
There is still no update when Gold’s Gym branches in the Philippines will be allowed to reopen.