Strategy

Premier Fitness closes its doors

Complaints piled up until Premier stiffed the wrong creditor.

(Photo: Brett Gundlock/Boreal Collective)

Born to bodybuilder John Cardillo in the early 1990s, Premier Fitness (along with sister brands such as Mademoiselle Spa and Curzons) was a chain of well-appointed Ontario gyms. Like the misfit Average Joe’s in the 2004 movie Dodgeball, it aspired to provide a comfortable environment for ordinary folk to work out. (Its slogan was “Be yourself, only better.”) But Premier’s seemingly overzealous adherence to a worn business principle—collect outstanding balances from customers promptly while delaying payment to everyone else—helped cultivate a reputation more akin to the movie’s sinister Globo Gym.

So numerous are fitness clubs—and so aggressive the industry’s practices—that they’re frequent targets of consumer complaints. Premier, though, stood out. It strongly encouraged members to pay memberships using pre-authorized debits. The fine print stated members had to provide 30-day notice to cancel, even after their contracts expired. “If customers authorize us to debit them, they will continue getting debited until they notify us,” an unapologetic senior Premier executive told the Toronto Star in 2000. Complaints piled up, but Premier blamed customers. “In most cases, we’re right,” shrugged another executive.

Officials eventually reacted. In 2004, Hamilton Police’s fraud squad began investigating Premier’s business practices. The Competition Bureau later started its own probe, finding advertising deficiencies. (Premier lured customers with “free” trials, only to charge them for mandatory physical assessments.) Premier paid $200,000 to settle the bureau’s charges.

Premier sometimes squeezed its own people, too. Ruling in favour of an employee in a wrongful dismissal suit, an Ontario Superior Court judge described Cardillo as a “bully.” (Among other things, Cardillo told the gym manager “how useless he was, made threats, and generally treated [the employee] in a way that no employee should be subjected to.” Others endured stints without pay, resulting in Premier being fined $130,000 by Ontario’s Ministry of Labour earlier this year. “An investigation revealed the claimants were owed a total of roughly $75,000,” the Ministry concluded. “All wages were eventually paid, but some claimants waited up to a year.”

Contractors didn’t have it any better. Over the years, Premier became embroiled in many lawsuits from trade creditors. It stiffed Varcon Construction, which built shells in Oakville and Mississauga for new gyms. In another lawsuit, auditing giants Arthur Andersen and PricewaterhouseCoopers alleged Premier’s “modus operandi is to force trade creditors to commence an action to collect outstanding accounts and then raise spurious defences to these actions.”

With its business in terminal decline, Premier eventually stiffed the wrong creditor. DSM Leasing, which provided equipment leasing and financing, tipped the company into receivership earlier this year. By then, many of its 30 posh clubs had closed, while others have been purchased by new operators.