Mathew Murphy May 5, 2008 Page 1 of 2 FITNESS industry franchise Beach House Health and Fitness is embroiled in claims it has sold private information about its members, has failed to pay out employee entitlements and has had legal action taken against it to reclaim unpaid debts.
Beach House Health and Fitness was last year ranked second by BRW magazine in its "hot franchises" issue, but has now attracted the interest of the Australian Privacy Commissioner.
A BusinessDay investigation has also found that property giant Westfield took action against Beach House in the Supreme Court of South Australia last month for arrears in rent.
Documents lodged with the Australian Securities and Investments Commission on April 11 show Westfield made an application to wind up the company under the Corporations Act.
Westfield confirmed it had taken the action but declined to comment on the case or how much money Beach House owed it. Corey Radcliff, a senior associate with Ramsden Faes, lawyers acting for Beach House, said the dispute had since been resolved.
In January, the fitness group also borrowed an undisclosed sum from Baystreet, the financing group run by the Smorgon family, to increase its cash flow.
Mr Radcliff said the facility was one of several that had been refinanced since BusinessDay started its investigation.
Beach House founder Adam Price told BRW last year he hoped to have 100 franchises around Australia by the end of 2007. Instead, Beach House has closed or rebranded as many as 13 of its fitness centres.
Three have shut their doors in the past month, giving staff and gym members less than a week's notice.
The Beach House centres at Morwell and Warrnambool are the most recent casualties.
But it is the closure of the group's Chelsea Heights centre last month, the first Beach House Mr Price opened back in 1998, that is being put under the microscope.
BusinessDay believes that the private details of Chelsea Heights members, including bank account details, have been sold to the Fenix Fitness Centre down the road without authorisation from members.
Asked about this, Beach House general manager operations Tony Griffiths said members had not been signed over. Rather it was a "suggestion" that they join Fenix.
But a letter to members, obtained by BusinessDay, said an "amicable deal" had been struck between the two clubs, that Fenix would honour memberships and be in touch with Beach House members.
Beach House then, through its lawyers, said its directors were bound by confidentiality in regards to the matter.
Matthew Evans, a Beach House member for almost 10 years, said he and other members planned to write to the privacy commissioner and Beach House about what he said was "an upsetting misuse of private information".
"Members have been left with little choice but to go to Fenix up the road because it is the only gym in the area," he said.
"It is wrong that they have just handed over private information of members without any consent. They have handed over bank account details, our occupation, our address … the whole thing has been a complete balls-up."
Australian Privacy Commissioner Karen Curtis has encouraged other Beach House members who believe their information has been passed on without consent to contact her office.
"In general, the Privacy Act requires organisations to inform individuals at the time of collecting their personal information if they intend to disclose that information to any third parties," she said.
Sources have told BusinessDay that:
â– Former Beach House employees, including one who quit more than a year ago, have not been paid their superannuation.
â– The group could not afford to pay casual employees at its Morwell club over the Easter period.
After agreeing to supply BusinessDay with a full list of clubs that had closed or been rebranded, Mr Griffiths then sent an email saying he was unable to do so because of privacy reasons.
BusinessDay believes Beach House has 36 active clubs and about 17 more in development.
"I am sure you understand we have various confidentiality agreements in place regarding the sites that have either been rebranded or where franchisees have finished their tenure," he wrote. "This prevents me from discussing any details."
Mr Griffiths said Beach House had 42 sites scheduled to open over the next 12 months.
Beach House declined to comment on the claims that it could not afford to pay staff and still owed former employees superannuation.
Fenix Fitness did not return calls from BusinessDay. The Age
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