Doubts over clubs’ fitness to trade

WHEN a man loses $328 it is hardly an event to cause much excitement. So why, on May 14, did the Ministry of Fair Trading issue a press release lamenting the loss incurred by Douglas Bradshaw, a 60-year old from Nollamara?

The answer, it seems, cannot be easily found in the statement itself. Like many government documents it is a case of reading between the lines, which is exactly what Briefcase set about doing.

Mr Bradshaw lost his $328 when a health club in Girrawheen collapsed. The Ministry used his loss as a trigger to issue a general warning about pre-paying club fees.

What the Ministry did not say (but might like to) is that sections of the health club industry are not very healthy at all.

In recent months, the Ministry’s file dealing with consumer complaints about health clubs has grown fat. So fat that an investigator has been assigned specifically to take a closer look.

Regular readers of Business News will have noted a number of stories recently about the health club industry. Readers with long memories will not find this surprising. Back in the 1980s, one of Perth’s highest of high-flyers was a fitness freak named Laurie Potter. He built up an empire of sweat shops which attracted thousands of customers, including his good mate (then Premier) Brian Burke.

Potter’s brief moment of fame came crashing down when he expanded too far, too fast and found that the heavy capital requirements of a health club must have a constant flow of new members to service the debt.

Thousands of people lost thousands of dollars because they had pre-paid their memberships, some even signing up for lifetime services at clubs which closed their doors overnight.

History, as we are told, has a habit of repeating itself. Mr Bradshaw’s $328 loss should serve as a timely warning about pre-paying for any service that can be subjected to economic hard times.

Apart from high capital costs, health clubs also suffer from a notoriously fickle customer base. People sign up but quickly drop out (the annual turnover rate is close to 60 per cent). Health club fees also fall into the category of extremely discretionary expenditure.

When budgets need to be cut it is quickly seen that walking the dog can replace the club fees.

The Ministry’s statement of May 14 was a timely call, if only to warn customers to check on how they pay. The best method is a monthly credit card debit rather than annual lump sums. At worst, a month’s fees are lost, but even this can be clawed back in some cases.

Membership is proving hard to hold (totally predictable in tough times) and the extra 10 per cent GST cost has not helped. It would not be surprising to find that some clubs are falling behind in paying their bills and meeting other statutory government charges.

It’s a pity the boys (and girls) at Fair Trading can’t speak more openly when they want to issue a warning. But, after missing the finance brokers so badly, it seems they are trying this time with health clubs.

Hard to figure just what the connection is

WILL someone please buy Telstra a new pocket calculator, or suggest it employs someone who takes less delight in making life complicated.

Take the latest special offer from the telecommunications company – broadband Internet access for a monthly cost “from just $54.95”. It sounds good, until you try and work out how Telstra arrived at the figure.

Buried in the fine print at the bottom of the advertisement are three options. A three-month connection, the minimum under the deal, costs $563.85, which equals $187.95 a month, so that’s not so special. A 12-month connection costs $918.40, or $76.53 a month and the 18-month connection is $1178.10, or $65.45 a month.

From where does the $54.95 come? From the missing deduction, of course, the one not mentioned in the advertisement.

Two phone calls to Telstra, and a call back from their own accounts people, provided this little gem. The $54.95 is the monthly cost after deducting a $189 installation fee from the 18-month contract, which leaves a cost of $989.10, or $54.95 a month.

There, simple isn’t it. Just deduct the missing figure and you have the answer.

Briefcase wonders what genius thought that one up?

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