Getting in shape is definitely a top priority for a lot of Americans, and rightfully so- with more than one third of our country classified as obese, fitness should be high on most people’s to-do list. But exercisers who are shopping for a gym should make sure that their prospective health club is licensed and bonded in their state and has the appropriate health club surety bond for state, local, and federal requirements. At the same time, health club owners should secure proper licenses and bonds because both consumers and the government will be looking.
Surety bonds are basically a guarantee that the bonded business will operate in accordance with all applicable laws and will perform each business transaction ethically and in good faith. Each one is executed by a company who specializes in the sale of surety bonds and is an agreement between the bonded company and the entity requiring the bond, which is generally a state, local, or federal government who will benefit (generally on behalf of a consumer) if a valid claim is filed against the bond.
Health club bonds, as is the case with most surety bonds, protect the gym member in the event of financial failure or fraud. Before health clubs were required to become bonded, a large number of clubs failed due to poor financial management or even fraud, leaving members on the hook for pre-paid fees and membership charges. Health clubs would sign hundreds of new members and then simply disappear often less than a month later or would continue to charge membership fees after their business failed due to financial difficulties. In order to counteract this trend, most states now have legislation requiring health clubs to purchase a surety bond before opening their doors or signing their first member. What’s more, the health club is required to post the bond in a prominent location so that members can know quickly and easily if their health club is one of the many that have complied with state law and become bonded.
The health club surety bond will ensure that, in the event of fraud or business termination, the Attorney General of the state will have the ability to reimburse members for their lost membership fees. Bond amounts differ from state to state. For instance, regulations for New York surety bonds require gyms to post a $50,000 bond if they offer 12 month memberships, $100,000 for memberships lasting up to 24 months, and $150,000 if their contracts last up to 36 months. In addition, many states require health clubs with multiple locations to purchase supplementary bonds to cover the other locations. Prices for the bond are generally around 1-4% of the bond amount, depending partly on the health club’s financial statements and credit score. If you are looking to open a health club or already have, posting bonds is most definitely a step not to be missed. Advertising your business as “Licensed and Bonded” attracts customers because it gives them the peace of mind that they will not be scammed out of their money or be forced to pursue tiring legal action. The costs of securing surety bonds are low compared to the benefits they promote.
This is a guest post written by avid health enthusiast and fitness nut, Kevin Kaiser, wanting to prevent people from being scammed.