7/16/2015

FitnessFranchisorsAvoidFranchiseRegulations|BlueMauMau,Franchisenewsforfranchisees

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FitnessFranchisorsAvoidFranchiseRegulations
PostedWed,2014100119:22byJanetSparks

LOSANGELESAmericashealthandfitness
crazehasgenerateda$78billionrevenue
worldwide,accordingtoFirstResearch,aleading
providerofmarketanalysistoolsforvarious
industries.Butthereisonedisturbingquestionas
tohowthesefitnessstudiosandexerciseplansare
skyrocketingthegrowth.Howmanyareoperating
asunlawfulfranchisesthroughlicensing
opportunities,certifiedtrainingprogramsanddance
partyworkouts.
Onefitnessstudiofeltthestingofastatefranchise
regulatorlastJuly.TheMinnesotaCommissionof
Commerceissuedaceaseanddesistorderto
FitnessEvolution,whichdisclosedthattheyhad
fivelocationsoperatinginthestate,oneowning
threelicenses.Thecompanyadvertisedthatitwas
notafranchise.Intheceaseanddesistletter,
FitnessEvolutionanditsofficers,directors,
employeesandotherswereorderedtodiscontinueofferingorsellingfranchisesinthestateof
Minnesota,untilitsfranchiseregistrationwasincompliance.Theregulatoralsorequiredthatwithin60
daysFitnessEvolutionhadtoshowproofthatrescissionoffershadbeenreceivedbyallfranchisees,
showingthecurrentstatusofeachone.Itfurtherorderedthatthecompanyhadtopayapenaltyof
$5,000.00.
CaliforniasDepartmentofCorporationssentadesistandrefrainorderMay29,2012toPopPhysique.
BeginninginAugust2011,thecompanysoffertoprospectivebuyerswastopurchaseexclusivelicense
agreements.Thelicensegavethemtherighttoestablishandoperateitsboutiqueballetbarrefitness
andexercisestudiosunderPopPhysiquesdistinctivenameandtrademarks.WhenPopPhysiques
websbeganadvertisinginMay2012thatithadeightstudiosinCaliforniaandanadditionalthreecoming
soon,itcaughttheattentionofregulators.TheyimmediatelyrecognizedPopPhysiquesprogramfor
sellinglicensesasafranchiseunderthestatesFranchiseInvestmentLaw.
Inexchangeforpaymentofa$15,000licensefeeand5percentmonthlygrossroyalties,PopPhysique
saiditwouldsupplyitspartnerswithanexclusiveterritory,rightstouseitstrademarknameandlogo,
initialtrainingforteachersandstaff.Italsoprovideddetailedsalesandmarketingplans,andsupportin
realestateselection,marketing,design,openingandbuildout.Licenseesarealsorequiredtoprocure
prioragreementforallpromotionsandpriceadjustmentsofferedtocustomersandonlysellPop
PhysiquemerchandiseorcarrybrandsconsistentwiththePopPhysiqueimage.Afteritsinvestigation,
Californiaconcludedinitsceaseanddesistorder,Thatsafranchise.
AfterB3Studios,LLCwassentaceaseanddesistorder
byWashingtonStateSecuritiesDivisionthecompany
enteredaconsentorder.Itwasdeterminedtobeselling
franchisesinthestatewithoutbeingregistered,as
requiredbyWashingtonFranchiseInvestmentProtection
Act.B3offeredandsoldlicensestoOregonand
Washingtonresidentstooperatebarre3fitnessstudiosin
theVancouverandBellevue,Washingtonarea.The
companyoffereditsuniqueexercisemethodsand
programsforinstructions,theuseofitstrademarks,
serviceandtradenames,copyrightedmaterialto
prospectivelicensees,andrequiredaninitialfeeof
$10,000frombuyerswithanongoingfeeof3percent.

Arefitnessprogramsbecomingthewildwild
west?
Thereisavastnumberoffitnessandhealthclubsand
exerciseprogramsadvertisedontheInternetworldwide.
LagreeFitnessinBurbank,California,isonethatis
questionableregardingitssalestechnique.Thecompany

PopPhysique'swebsiteasksreadersto#ShowUsYourCheeks

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hasuseddifferentnamesoverthepastfiveyears,althoughownedbythesameperson,Sebastien
Lagree.LagreeFitnessoperatesover70locationsaccordingtoits
lagreefitness.com/licensing/website.Itpromotes,LAGREEFITNESSisoneofthefastestgrowingand
hottestworkoutsinthefitnessindustry.Becomepartofourfastexpandingnetworkofstudiosandoffer
yourclientsthelatestcrazeinHollywoodshotfitnessindustry.Butitadds,LagreeFitnessisNOTa
franchise.Wedonotrequirealengthycontractorroyaltyfees,nordoweinterferewithhowstudio
ownerswouldliketoruntheirbusiness.LagreeFitnessisalicensingopportunity.Thewebsiteliststwo
differentopportunities.Licensing(notafranchise),andCertificationforitsProformerandMegaformer
equipment.
TheNewYorkTimesreportedthismonththatLagreehasbuiltanempiresellingthousandsofhis
machinesatacostof$7,000each.WhilemostMegaformersaresoldtofitnessstudiosthatlicensehis
method,healsosellstocelebritydevotees,includingSofiaVergaraandKimKardashian.
CrossFit,inWashingtonD.C.toutsitselfasforgingelitefitness,acompanythatoperatesanaffiliate
program.Thecompanyaimstoprovideaprogramthatwillbestpreparetraineesforanyphysical
contingencynotonlyfortheunknown,butfortheunknowable.Arecentbrandchannel.comarticle
statesthatCrossfitlicensesitsnametomorethan9,000affiliatedgymsforanannualfee($3,000),but
confesseshavingthousandsofaffiliatedlocationsacrosstheworldmakesitextremelyhardtofishoutthe
realsfromthefakes.Thereportsays,Afterall,partofthesuccessofabrandcouldbedirectly
relatedtohowwelltheypolicetheirtrademark(s),andCrossFitslegalteamisnostrangertothegoodol
ceaseanddesistletter.ThebrandhaspreviouslygoneafterCrossGym,CrossFat,CalderaCrossFit,
CrosFitFoodandDontCrossMe,ImFit,tonameafew.
CrossFitisalsodealingwiththethreatofbecomingagenericterm,asdidthePilatesworkoutbrands.A
federaljudgeruledpilatestobeagenerictermandfreeforunrestricteduse.Thearticlesaysifthere
arenosignalstoidentifyabrandsauthenticity,relevance,consistencyandpresence,itcreatesanopen
opportunityforotherstomoveinonthebrandandforcustomerstobecomeillinformed.
Today,oneofthemostpopularprogramsisZumba,allowingparticipantstodancetheirwaytofitness.
Incessantlyfeaturedontelevisionworldwide,Zumbahastakenthefitnessindustrybystorm.Zumba
Fitnesspromotesthatitisagloballifestylebrandthatfusesfitness,entertainmentandcultureintoan
exhilaratingdancepartyworkout.Coinedfitnessparties,Zumbaclassesblendupbeatworldrhythms
witheasytofollowchoreography,whichprovideeffective,totalbodyworkouts.
Foundedin2001,thecompanyisnowthelargestbrandedfitnessprogramintheworld,reportingmore
than12millionweeklyclassparticipantsinover110,000locationsacrossmorethan125countries.
Coinedfitnessparties,Zumbaclassesblendupbeatworldrhythmswitheasytofollowchoreography,
whichprovideeffective,totalbodyworkouts.PartofZumbasprogramistheZumbaInstructorNetwork
(ZIN),whichteachesinstructorstosucceed.Itpromotes,OnlyZINMemberscanaccessthefullpowerof
theZumbabrand,andgetexclusiveresourcestobecomesuccessfulinstructors,entrepreneursand
communityleaders.YoucanbecomeaZINMemberforUS$30permonthduringorafteryourBasic1
InstructorTrainingorJumpStartGoldTraining!
ZunbaFitnessrecentlyannounceditisteamingupwithMadDoggAthletics,Inc.tocombatcounterfeiting
oftheirbrandsinMexico.Theystatethattheyarecommittedtoenforcingtrademarkstoensurethattheir
customersreceivetheexceptionalqualitytheyhavecometoexpect.Theysystematicallyenforcetheir
rightsthroughceaseanddesistletters.

Attorneysevaluatefitnessprogramswebsites
LastMayRochelleShelleySpandorf,ofDavisWrightTremaine,andtwoofherfirmcolleagues,Jennifer
BrockettandAnnaBuono,delvedintothefitnessconfusiontofindoutwhat,ifanything,differentiatesa
nonfranchisecertificationfitnessprogramfromafranchise.Theydidtheiranalysisthroughcompanies'
websites.
Spandorfexplainedthatasubstantialamountoftheirpracticeinvolvesevaluatingiflicensingand
distributionprogramsarefranchises.Ifmanyoftheseareillegalfranchises,thennotonlyhavethese
companiesviolatedfranchisesaleslaws,buttheyareengaginginunfaircompetitionwithcompetitorsand
otherswhodocomplywithfranchiselaws,shestated.Shesaidoneoftheirclientsisinthesame
generalmarket(fitnessclasses)andhecontinuallyaskswhyhehastocomplywiththelawsifeveryone
elseinhisindustrydoesnotcomply.
InanAmericanBarAssociationLawJournalarticletheCaliforniaattorneysanalyzedindetailhowthe
FederalTradeCommissionexcludedbonafidecertificationprogramsfromitsregulationoffranchising.
Itstates,Asaresult,thereremainsadearthofguidanceonwhatpreciselyconstitutesabonafide,or
nonfranchise,certificationprogram.Theyconcludedthattheexclusionisnarrow,andveryfew,ifany
promoters,whoaimtoprofitbylicensingsocalledcertificationprogramsarelikelytoqualify.They
remindfitnesscompanies,Merelycallingalicensingprogramacertificationprogram,however,willnot

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removeitfromfranchiseregulation.
Spandorfsaidsheunderstandsthatgovernmentbudgetsaretight,butlaxpublicenforcementonly
encouragestheproliferationofprogramslikethesewhereeachcompanycopiesitsformatbasedona
competitorsprogramandprobablywronglyassumesthatifthecompetitorisanonfranchise,thenits
programmustalsobeanonfranchise.Laxpublicenforcementalsomakesitharderforattorneysto
convincetheirclientstobelievethemwhentheydescribetherisksofnotcomplyingwithfranchiselaws,
Spandorfstated.
RelatedArticles:
FitnessCenters,FranchisorsorNot?(pdf)writtenbyRochelleB.Spandorf,JenniferL.Brockett,
andAnnaR.BuomofortheAmericanBarAssociation'sFranchiseLawJournal,Spring2014
TorturertotheStars|NewYorkTimes
brandchannel.com
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