Tuesday, May. 19, 2009

Peak gym members sweating new rules

Ever since the owners of KX Fitness decided to resume independent ownership of two former Peak Fitness franchises on Feb. 1, some members have been left confused about where they can — and can’t — work out.

Lawyers for both sides are hammering out an agreement on how to direct members who signed up in Apex and Clayton while they were still under Peak Fitness ownership. They’re also contending with Peak’s “metro card” holders — members who paid for access to all Peak gyms and still expect to work out in Apex and Clayton, even though they’re no longer associated with Peak.

“We’re doing due diligence,” said KX attorney Hans Huang on Thursday. “There is no official agreement in place yet. We’re still working with the attorney general’s office.”

Meanwhile, KX co-owner Kim Shackleford is scratching her head about what to tell the folks walking into her gym every day.

“My understanding is that they can use the facility until we sign the [final] papers,” she said. “It’s really confusing to all of us right now.”

Shackleford originally opened the KX gym on West Williams Street in Apex in 2003. The Clayton facility followed in 2006. In 2007, she decided to franchise with Peak to devote more time to her son, who was born with Down syndrome. She and ex-husband Kevin Bunn retained land ownership at both locations.

Shackleford said when she got wind that Peak might close both gyms, she decided to try to save them. “It’s been quite a transition for all of us,” Shackleford said. “The members are seeing this as a feud, which isn’t there at all.”

Laura Haid, Peak’s vice president of operations, said they are honoring all memberships originating from the Apex location at all other Peak gyms. The closest alternatives are in Cary, Durham and Fuquay-Varina. Haid said she may have an update as legal negotiations continue, but none surfaced as of press time.

The latest Peak headlines haven’t been reassuring. Members at the Duraleigh Road location in Raleigh showed up to a padlocked door this month, despite a January order from the state attorney general’s office to give members advance notice of any gym closing. The January lawsuit, filed by the attorney general’s office in Wake County, also stipulated, among other things, that Peak had to designate a single point of contact for consumer complaints and purchase and maintain bonds for customer refunds for all its North Carolina locations.

Parent company Peak Capital Holdings, LLC filed Chapter 11 bankruptcy in April.

Shackleford questioned Peak’s business model, which offers cheaper monthly rates than competing gyms — Peak’s monthly fees average about $15 compared to other gyms asking double or triple that.

“It’s not a secret they left us in a mess,” she said. “You can’t run a business like that.”

She maintains she still wants to be fair to the Peak members. She’s offered some the option of exhausting their original Peak contract at KX and renewing with KX at their old rate. But she said to offer a similar deal to everybody would be too much of a financial strain.

“We’re trying to be fair but we’re also trying to pay our bills,” she said.

Haid has blamed the company’s financial woes on a “challenging economy” and characterized the gyms that closed as under-performers that are part of a master restructuring and consolidation plan.

In April, Peak’s bankruptcy records showed over 200 creditors with a combined debt of $500,000 to $1 million. Their assets were listed at $50,000.

Shackleford is still optimistic about working out a deal with Peak that both she and the members can live with.

“We really are doing our very best to make something good come out of this,” she said.

KX Fitness gyms are located at 908 W. Williams St. in Apex and 11694 U.S. 70 W. in Clayton.