is your business legally fit?

Nothing puts a spanner in the works of a business like a legal complication. Here are some points to consider when establishing, buying or running a fitness business.

You might be about to launch a new fitness business, or maybe you run an established one. Perhaps you’re expanding, buying or franchising an existing enterprise. Either way, you have a detailed, thoroughly researched business plan.

You’ve worked out (excuse the pun) the type of fitness services to offer, your training methodology, your unique selling proposition or market niche and your mission and values.

You’ve found the perfect location for your new business or next facility, and you know what equipment you need (and what you definitely don’t need!).

You have a team of trainers (employed or contracted), a number of facilities or you franchise your fitness business.

You’ve picked a name for your business, had your logo professionally designed and agonised over the colour scheme that best represents what you do.

Your website, facebook, twitter and other social media and marketing are all integrated.

Everything seems just right.

But what if something goes wrong – will you be legally covered? Simply taking on board the advice of apparently successful family, friends, colleagues and clients (even though they have no specific expertise in the matters they are advising you on) is not enough to ensure you are protected. Ironically, you probably cringe when you see people at your fitness facility doing ‘exercises’ that their unqualified mates told them about. You know that with the advice of a professional they could be achieving their goals much more safely and effectively. But are you making the same mistake with your business?

Myriad legal issues affect the day-to-day operations of fitness businesses. This is the first in a series of articles addressing a number of areas you should consider when establishing, expanding, buying, reconfiguring or running a fitness business. Topics to be covered in future issues include:

Structure

What sort of structure (e.g. sole trader, company, trust, partnership) should be used for operational, liability, asset protection, succession, taxation and related issues?

What should you consider and what sort of agreements should you have in place if you’re going into business with a partner (including your best friend or a family member)? For instance, after a number of years your business partner may decide that he wants to spend more time with his young children and no longer wants to work as many hours in the business as you do. How would you address that? Wouldn’t it be better to address potential future issues such as this when you first go into business with your partner, rather than having to deal with the awkwardness later on?

You’ve built up a successful business, but you have been sued and are at risk of losing your house. How did that happen?

You plan on paying your spouse a salary, even though he is a stay-at-home parent, because one of your friends advised you that it would save you tax. Is there a structure that will allow you to legally do so?

Your brand

Your mate told you that all you need to do to start your business is register a business name or incorporate a company. This is partly correct, but registering a business name (or company) alone gives you absolutely no proprietary interest or exclusive rights to that name.

You’ve also spent a lot of time and money on signage, advertising, setting up your website, facebook Page and other social media and marketing promotions. People are starting to recognise and know your business by its name, logo and slogans. Then you receive a letter from a firm of solicitors advising that the use of your name and logo is infringing the rights of its client and you have seven days to cease using your name and logo. They are also demanding that you pay damages.

Alternatively, you propose to expand into another State, but find out that another fitness business there is already using your name. Disaster! How do you protect against these things happening to your business?

Premises and lease

You’ve found the perfect premises in terms of location, size and layout. You sign a lease and then find out you can’t operate 24/7 or do the other things you wanted to do to the premises. Or worse yet, you can’t operate your business at all. Can you just give the keys back? What are your rights and obligations at the beginning, during and end of the lease?

Permits and authorities

What would happen if a local council officer interrupted one of your regular high attendance sessions and told you that you weren’t authorised to do what you were doing and had to stop? Do you have all the required permits and authorities to operate your business?

Membership agreements

They’re basically all the same aren’t they? So you base yours on a form used by a well known fitness chain. After all, it must be OK if they’re using it – isn’t it?

The Consumer Affairs departments in each State, as well as the Australian Competition and Consumer Commission, have issued guides or circulars about membership agreements, including terms they consider to be in breach of the law. Does your agreement comply?

Employees/Contractors

It doesn’t matter what you call them because you have the same rights and obligations with both, other than the manner in which you pay them – right?

Website hosting

You have a disagreement with – and stop paying – the company that hosts and controls your website, and the next morning they shut it down. Unfortunately, you don’t have access to the necessary licences and code to move it to another host. What do you do now, and how do you protect against your website being held to ransom?

Standard form agreements

All equipment, finance/supply agreements, facility management systems, direct debit, personal guarantees and franchise agreements are ‘standard’ aren’t they? So there’s nothing to be concerned about?

Insurance

You’ve taken out insurance, but one of your trainers (who has no qualifications in massage) injures a client while giving him a massage as part of the session. Will your insurance cover you in that or similar situations? Oh well, it doesn’t really matter because the trainer was a contractor and you can’t be sued, can you? There goes your house again.

Franchise agreements

You’ve always dreamt of setting up your own independent fitness business, but you’re currently running a 24/7 fitness franchise. Your best mate then invites you to become involved in the perfect opportunity to set up a new independent fitness business on the other side of town – but you need to act fast. Does your franchise agreement prevent you from doing so? And what happens at the end of the franchise agreement?

Laws

Your mate told you that the Australian Consumer Law doesn’t apply to your business because you’re only providing fitness services. What laws actually apply to your fitness business?

Buying an existing fitness business

All of the points above – and a lot more – apply when buying an existing fitness business. All of these will be addressed in the upcoming series of articles and will assist you in making your business legally fit.


Leon Ponte, Juris Doctor (Law), is a founding principal of the Melbourne-based law firm, Ponte Earle – Business Lawyers for Business®. He has a strong personal interest in the fitness industry, holding Certificate III and IV, and has provided advice to fitness facilities, personal trainers and suppliers to the industry. ponteearle.com.au

Any questions?

If you have a legal question about running a fitness business, email editor@fitnessnetwork.com.au and your question may appear in the next issue.

 

The content of this feature is provided for your information and the author and Australian Fitness Network accept no liability. For specific advice on legal matters relating to your fitness business, contact a practicing legal professional.