Trouble brewing for Curves

Curves International Inc., whose
30-minute workout for women once made it among the world’s fastest-growing
franchises, seems to be running out of steam.

Over the past three years its U.S.
franchisees have been closing outlets at a rapid rate, shrinking the chain by
about a third: to 5,208 U.S. sites at the end of last year from 7,748 at the
beginning of 2007, according to a recent franchise disclosure document the
company filed with state regulators. More than 1,000 Curves vanished across the
country in 2009, while just 35 new locations opened.

Franchisees and industry experts
point to a failure to keep up with changing trends—including more flexible
hours for busy working women—cheaper competition and the tough economy as major
reasons for Curves’ decline.

The company disagrees with its
critics, contending that much of the club closings were intended as part of a
plan to “prune the system,” according to Curves President Mike
Raymond. Some owners had bought into Curves for the wrong reasons, he says,
“they were motivated primarily as investors rather than owners.”

Curves was one of the world’s most
popular franchised fitness centres as of the end of 2008, boasting nearly four
million members world-wide, compared with 3.5 million for runner-up Gold’s Gym
International Inc., according to the International Health, Racquet and
Sportsclub Association, an industry trade group. Figures for 2009 aren’t yet
available, the group says.

Financial statements filed by the
closely held company show it to be profitable. For the year ended 31 December,
Curves earned $16.4 million on revenue of $84.1 million, compared with earnings
of $17.2 million on revenue of $128.7 million the prior year. The revenue
falloff reflects lower franchising royalties and equipment sales. Franchisees
pay the company 5 per cent of their monthly gross plus another 3 per cent for
advertising.

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