July 30, 2021

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There's nothing like our health

Burn Fitness files for bankruptcy, closing Livonia gym due to pandemic strains

3 min read

“I absolutely think the lockdowns here were egregious,” said Tushman, who also serves as vice chair of the Michigan Fitness Club Association. “They went too far and too long, and they told the story to be afraid.”

Many other gyms and fitness studios have gone under since the lockdown began in March 2020. Small independent businesses, such as Live Cycle Delight and Rebel Cycle Studio in Detroit, were the first to throw in the towel. Franchise locations followed, including the Retro Fitness in St. Clair Shores and YMCA locations in St. Clair Shores and Livonia. Larger chains have halted new openings and, in some cases, contracted — Fitness 19 shuttered locations in Farmington, Livonia, West Bloomfield and Commerce Township.

Nationally, fitness industry revenue fell 60 percent in 2020, and 17 percent of gyms closed permanently, according to the International Health, Racquet & Sportsclub Association. Some of the country’s largest chains, including 24 Hour Fitness and the iconic Gold’s Gym, filed for Chapter 11 bankruptcy.

Industry leaders have argued that fitness was ignored during the pandemic in more ways than one. By closing gyms in the name of public health, Tushman said, officials gave rise to sedentary lifestyles, which helped cause the “Quarantine 15” weight gain for many people. Secondly, while bars, restaurants and movie theaters flexed their lobbying muscle for state and federal aid, gyms largely fell by the wayside.

Burn Fitness received around $675,000 in Paycheck Protection Program loans for its three locations, according to federal data. Additionally, Tushman said she received two local grants worth a couple of thousand dollars each. She said the assistance covered only about two months of payroll and that she invested “tens of thousands of dollars” in HVAC upgrades and electrostatic sprayers.

“The fitness industry did everything right … we invited MIOSHA (Michigan Occupational Safety and Health Administration) into the gym,” Tushman said. “We were rewarded with bankruptcy.”

Burn Fitness employs around 60 people across its locations. The Livonia closure will result in 15-20 layoffs, Tushman said. She plans to notify the location’s 2,000 members about the closure, “make them whole” and offer transfers to the other two locations.

“I know that people think that lockdowns saved lives, but it also took peoples’ livelihoods,” she said.

Tushman started the business in 2010 after successfully beating breast cancer, crediting her survival to exercise, health and wellness. The company had been profitable and earned almost $5 million in revenue in 2019 and was “never late for a single rent payment or bill in 10 years,” Tushman said. That changed in 2020 when revenue was cut by more than half, and the small gym chain lost half of its members because of the pandemic.

Tushman is optimistic about keeping her other locations open, but much is riding on the goodwill of landlords. She said the property owner in Clawson is allowing her to pay 30 percent of the normal monthly rent and holding off on collecting back rent until the business rebounds. She said her landlord in Rochester Hills is also showing patience.

In some cases, landlords are forbidden from reducing or forbearing rent, based on certain loan covenants. It’s unclear if that played a factor in the Burn Fitness dispute with Grand Sakwa in Livonia.

Alan Greene, senior lawyer at Detroit-based law firm Dykema, which represented Grand Sakwa in the rental lawsuit, said the property manager tried to settle out of court but it was Burn Fitness that refused. He said the company “discussed settlement on the threat of filing for bankruptcy” only after the $350,000 judgment against them.

“While Burn Fitness (a major tenant) of the shopping center failed and refused to pay any rent or other charges for over a year, the Landlord was still required to make debt service payments, tax payments, utility and security payments, maintain the parking lots and landscaping, etc.,” Greene said in an email. “We recognize the hardships that the pandemic has created on many businesses, both to landlords and tenants. But I want to say that the claim of Burn Fitness that we were not willing to work anything out is completely false.”

Gov. Gretchen Whitmer said Thursday that capacity at gyms and other public gathering places will increase in tandem with vaccination rates. While that’s “too little, too late” for Burn Fitness in Livonia, Tushman said, she thinks the rest of the business will regain its strength.

“I still think this industry is going to have a recovery starting in June,” she said.

— Crain’s Senior Reporter Kirk Pinho contributed to this report

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