Virgin Active and Planet Fitness members should note the impact that the COVID-19 lockdown will have on the remaining duration of their contracts.
As part of regulations to curb the spread of COVID-19, South African gyms have been closed since the start of the lockdown on 27 March 2020.
This has forced the country’s two biggest gyms – Virgin Active and Planet Fitness – to freeze memberships and stop their members’ monthly debit orders.
While this has benefitted members who are unable to use the facilities they pay for, it has had a substantial effect on the finances of these companies.
The companies have had to tap into cash reserves to keep paying employees, but this has proven not to be sustainable over the four months of lockdown.
Virgin Active has resorted to temporary layoffs, while Planet Fitness employees have taken pay cuts.
Both gyms have outlined extraordinary hygiene and sanitation protocols to limit the spread of COVID-19 at their facilities, should they be allowed to reopen.
These include the implementation of booking systems to limit the number of members in the gyms at a given time, the removal of certain equipment to promote increased distances between training members, and hospital-level cleaning protocols.
Nonetheless, gyms are not allowed to reopen under the most recent regulations under lockdown level 3.
MyBroadband asked Virgin Active and Planet Fitness how members’ contracts would be affected by the suspension of debit orders, what impact the regulations were having on their businesses and the industry, and what engagements they have had with the government over the reopening of their facilities.
Virgin Active automatically froze all membership contracts on 27 March, the first day of the national lockdown.
The gym told MyBroadband that no revisions would be made to the contract term for memberships, and the end date would remain the same as per the contract.
The company has had to navigate almost four months of closure during the lockdown restrictions, receiving zero membership revenue since 27 March 2020, while still continuing to pay its staff.
However, this approach is no longer viable, Virgin Active said.
“This position is not sustainable long term, with no date for reopening agreed with the government, and as such we have had to move ahead with temporary layoffs (not retrenchments) across our clubs, national head office and contact centre,” Virgin Active stated.
“To support our staff, they will receive at least 25% of their income despite temporary suspended employment,” it added.
The company said they would only be able to abandon these temporary layoffs if gyms were allowed to reopen.
“The industry has established and submitted to the government a set of protocols which would enable it to open safely at level 3, however, gyms are currently scheduled to reopen at level 1 and could therefore remain closed for an extended period.”
Planet Fitness confirmed that its members’ contracts will be extended by the number of months that the contract is frozen.
“Standard rules are that when a contact is frozen, then the term of the membership is extended by that same amount of time,” it stated.
Most of its memberships are between 12- or 24-months. The vast majority of these are out of the minimum duration and for those memberships there will be no impact, Planet Fitness noted.
While Planet Fitness has not suffered any job losses as a result of the lockdown measures, it has had to ask staff to take pay cuts and sought UIF funding for the affected employees.
“UIF funding payouts have been unreliable and has now ended. The business is burning a significant amount of cash as we have not been billing our members at all during Lockdown.”
While it said its position as one of the larger players in the industry provides it with the necessary reserves to meet financial obligations to some extent, smaller gyms are not in the same position.
Planet Fitness has made various submissions to the government over the closure of gyms, including a signed mandate which was submitted together with independent gym operators on behalf of the industry on 25 June, but no feedback has been received to date.
“We have also submitted our own communication together with Virgin Active, who were mandated to represent the industry and to date, we are still in the dark as we have not had any feedback at all – no communication has been forthcoming.”
“We have now requested a meeting with the Minister of Sport and his department to discuss the protocols we are proposing and the way forward,” Planet Fitness said.
“The longer we go on like this, and the continued delay in opening means that we may be forced to look at job losses as it is not viable to continue in this manner. There are several other industries that have opened up already who are not as safe as our industry.”
Despite the closure of its facilities, the company said it was still on track for expansion in 2021.