Major Australian gym chain collapses in $5 million dispute: multiple franchises close their doors
UFC Gym Australia, which at its peak had more than 10 gyms in Sydney, Melbourne, Perth and the Gold Coast, has gone under and a number of disaffected franchises have closed their doors.
It comes after the gym’s parent company was ordered to pay more than $5 million to several franchise owners after a messy four-year legal battle, it said. news.com.au.
A trio of parent companies of UFC Gym Australia, a mixed martial arts gym franchise founded in 2009, voluntarily filed for bankruptcy on May 23.
It was one day after a court-mandated deadline for the parent companies and their directors to pay $5.2 million to three franchisees.
UFC Gym Australia is a mixed martial arts gym franchise founded in 2009
A court ruled that the company and its directors had “engaged in misleading and deceptive conduct” during the process of selling the franchises.
The judge ruled that UFC Gym Australia co-executives, Mazen Hagemrad and Samer Husseini, had claimed that two of the franchises were profitable and made profit predictions, when in reality they were losing money.
Karim Girgis, the former owner of UFC Balcatta in Perth – a co-owner of one of the three franchises that took the company to court and won – said he feels “pretty gross” about the saga.
The payment (of $5.2 million) was due on the 22nd. They went into administration on the 23rd,” he told news.com.au.
Mr. Girgis fears that he will not be able to recover the money. Legal fees alone cost him and the other two entrepreneurs $850,000.
A spokesperson for UFC Gym Australia said the company had appointed administrators as it was the ‘best option available’ to stabilize its financial situation and added ‘the company is fully confident in the future’ of the continued existence of the brand in Australia.
One of the directors is reportedly appealing the court ruling.