Holder, who was a multiple franchisee of Club Physical through three of the Colven New Zealand companies, had, according to the court ruling, not adhered to the franchise agreement of the Club Physical Franchise in New Zealand when he re-branded his three franchised gyms to Jolt Fitness.
According to Paul Richards, franchiser of Club Physical, Holder, who had become a franchisee at three clubs during 2009/2010, tried to buy the entire franchise outright during 2012 but Richards had declined to sell. Richards further claimed that he received a lawyer's letter "out of the blue" stating that Holder had cancelled franchise agreements for the three Club Physical Clubs.
During the court hearing, Holder's attorney, Stewart Germann, claimed that Richards failed to provide proper support, failed to adjust the business model to allow for new competition and produced marketing campaigns that members found offensive. Therefore, the action taken by Holder was one taken to ensure survival of the gyms after numerous failed attempts to resolve issues with Club Physical. Club Physical rejected all these claims. Judge Helen Winkelman ruled that Jolt Fitness had to stop trading immediately, but after an appeal by Holder, granted a 10 day stay.
This stay resulted in Holder and Richards reaching an agreement whereby Richards would purchase the clubs as going concerns and restore all three Jolt Fitness gyms back to Club Physical. Although the nature of the settlement between the two parties is unknown, Germann had previously told Judge Winkelman that should Jolt Fitness gyms be forced to close, the imposition of the injunction would "terminate the defendants" business with catastrophic effect.
He added that Holder stood to lose his NZ$2,1-million capital investment in the businesses and the first three defendants (part of the Colven New Zealand group) would be rendered insolvent. The closure of the gyms was avoided by the purchase of the three Jolt Fitness gyms by Club Physical as going concerns and the withdrawal of both parties from any further legal action.
According to Franchise New Zealand magazine and website, the costs for both parties involved in this dispute would have been considerable. "Apart from such direct costs as legal fees, signage and promotional material, PR consultants fees and lost or cancelled memberships, there would also be damage to brand value and, of course, considerable distraction for both parties from their core businesses."
They further said that the unusual aspect of the dispute was the way the professional media and social media were utilised to gather public support among gym members, many of whom appear fiercely loyal to one side or the other. "Taking franchise disputes into the public arena in this way can be dangerous; one group of Australian academics has termed it 'kamikaze conflict'. However, some mediators regard conflict as a potential stimulus for improvement in a franchise system."
Holder emphasised that the Southern African Colven Group and the New Zealand Colven Group were operationally and financially completely independent and have separate directors. Holder stated that the only connection between the two groups are the names and the shares owned in both groups by the Holder family and that the actions in New Zealand will have no effect whatsoever on the Southern African operations.
Holder further commented that he was grateful to his friends and colleagues in George "whose support had been amazing".
Holder recently won the 148km Round the Mountain Cycle Challenge in New Zealand, in what is believed to be a new record of 3 hours, 40 minutes, 50 seconds and now jokingly describes himself on his facebook page as a professional cyclist instead of a gym owner.
Club Physical gym members and staff protesting outside the High Court in New Zealnd during the court case involving ex-George businessman, Stuart Holder's High Court hearing. Photo: Club Physical.
ARTICLE: FRAN KIRSTEN, GEORGE HERALD JOURNALIST
