Bill Crawford, a health club operator who shut down four spas that failed in the Valley area during the last two years, is trying to stave off bankruptcy at a Universal City club he purchased last month.
This time, however, Crawford says he will not shut down the club without warning, as he did at Camp Granada in Granada Hills last October and at his Basic Training clubs in Westlake Village, Canoga Park and Thousand Oaks in 1983.
Instead, Crawford said in an interview, he has told members of The Reformatory Health Club on Lankershim Boulevard that their spa is in bad financial shape. With the approval of an impromptu committee of a dozen club members, who have paid anywhere from $39 to $109 for a one-year membership, Crawford has begun collecting an additional $2-per-visit use fee to keep the facility afloat.
Setting a Precedent
Although the reaction to his proposal has not been entirely favorable, Crawford believes his attempt to give club members control over the financial health of their facility "is going to set a precedent for the entire health club industry."
"We've all seen angry mobs of people on the outside of a club after it's closed down," he said. "I'd like to see that same angry mob inside, helping to save it."
Crawford, 31, said his plan to turn the club around is an attempt to improve his damaged reputation following the earlier club closures and to make club members aware that spas often run perilously close to disaster.
"People think owners shut their doors and haul out the equipment and make out like bandits when a club goes belly up," he said. "That's just not the case. Usually you lose your shirt trying to make the club survive."
Crawford blamed a complicated series of financial problems for the closing of Camp Granada. He said he made a mistake taking over a club that was already in bad shape, and had to close it after membership recruitment attempts failed and he ran out of money. He said the 1983 closures of the Basic Training spas were caused by the sudden souring of a deal to sell the chain. He claimed he turned over control of the chain to buyers who later backed out of the deal and left him responsible for many expenditures.
Crawford and another unsuccessful Valley club operator both said in separate interviews that they lost so much money and prestige when their clubs failed that they were forced to go into hiding. Both said they took unlisted phone numbers, moved frequently and tried to avoid running into any former business associates or customers.
"I put everything I owned into storage and just dropped out of sight, because there were so many people who really believed I had done all of this to cheat them," said Crawford.
Crawford's new club, which changed hands three times in less than a year, has had a checkered financial past.
Members who have been with the club through its various incarnations said it had been called Nautilus Tech Fitness Center until the owners abruptly shut it down last summer, leaving only a note that it had been closed temporarily for plumbing repairs.
Documents filed in U.S. Bankruptcy Court show that, last August, a corporation called Exercise Express Inc. purchased rights to the club and signed a lease for the building, which is owned by Lucasfilm Inc., shortly after Nautilus Tech closed down.
But, by December, the documents show, Exercise Express filed for protection under Chapter 11 of the federal bankruptcy code, seeking to reorganize payment of its debts.
(The corporation also owned Nautilus Sports Center in Van Nuys, which closed down suddenly in November, breaking membership agreements with about 2,000 people. Bankruptcy documents also show the corporation either sold or closed down eight clubs in Los Angeles and Orange counties last year, most of which had been in operation for less than one year.)
Last October, two months before Exercise Express filed for protection, another health club operator said the corporation sold him the rights to operate the Universal City facility.
The other operator, David Cirotto, said he ran the club for about two months before signing it over to Crawford. Cirotto said he made the deal because a civil suit he filed in connection with an earlier club closure was scheduled to come to trial, and he wanted to concentrate on those proceedings.
Despite his previous business failures, Crawford was able to reenter the health club without making a down payment on the Universal City club.
According to Crawford and Cirotto, Crawford simply agreed to pay the $24,000 remaining on Cirotto's purchase agreement with Exercise Express. He also inherited responsibility for lease payments to the building's owner and to the firm that provided exercise equipment. In addition, Crawford agreed to assume a $10,000 debt on the facility, which he said was mostly back rent payments. Bankruptcy court documents confirmed the nonpayment of rent.
Crawford said he is paying off the debt in installments of $1,000 a week to Exercise Express president Paul Snow's lawyer. Snow's lawyer, Tom Kontos, declined to comment on the situation.
Last Friday night, Crawford held a general meeting of The Reformatory's members to introduce the $2-a-visit policy that the membership committee had approved.
Several members demanded guarantees that he would not sell cut-rate annual memberships, as previous owners had done before selling the club. The practice is regarded as a sure sign that a club is in desperate straits and needs a quick injection of cash.
"I know of lots of clubs that are just raking in money," said one member, who identified himself only as Bob. "I think he's in the business to make money and, in my opinion, all this is going in his pocket. I just don't see why I should pay any more money . . . . It's his responsibility to honor his part of my contract."
But most of the members seemed pleased with the plan and with Crawford's willingness to open records to them and keep them informed about the club's financial condition.
"This man has laid out the cards for us, and I think that's commendable," said Roger Barnes, who said he paid more than $500 last year for memberships for himself and his wife when it was called Nautilus Tech Fitness Center, the venture that closed last summer.
"It's worth it to me to pay another $2 every time I come in here because . . . I can have a greater confidence that the club will be here when I return tomorrow."
To kick off his new payment plan and raise some quick cash, Crawford and the membership committee Sunday staged an aerobics fund-raiser with a live band, food booths, and health and nutrition speakers. Although committee members hoped the event would bring in more than $2,000 to fund a delinquent payroll for the club's staff, Crawford said the party only attracted about 200 participants and barely broke even.
Ten people who attended Sunday's party decided to become new members, however, shelling out $65 each for a registration card that will admit them to the club for $2 per visit. Crawford said those memberships are an indication that consumers realize that cheap, long-term club memberships are not such a deal if a spa suddenly closes its doors.
To help attract more daily business, Crawford said he would waive the $65 registration fee for all "health club orphans," members from other clubs whose spas shut down, so that they could use The Reformatory for only the $2-per-visit fee.
The Reformatory has a monthly overhead of almost $25,000, Crawford said. Without the $2 daily use fee, he said, the dealer who leases exercise equipment to the club would have reclaimed the machinery over the weekend, forcing the club to shut down.
Crawford estimates the use fee will bring in at least $18,000 each month. He said the club should have "no problem" selling at least 150 new memberships each month, which would add another $9,750 in registration fees to the club's monthly income and provide a net profit of about $2,500 each month.
Club member Pattie Evans, who joined the membership committee when it first met last Tuesday night, said she was assigned to call the lease-holder on the club's exercise equipment to work out arrangements for a delayed payment. A spokesman for Paul Menzel of Puritan Leasing in Santa Barbara said the firm was willing to take a wait-and-see attitude.
"He felt that what we were doing is something that could really work, so he agreed to give us some time," Evans said.
Like many members at The Reformatory, Evans had been victimized by the shutdown of other clubs in the past and expressed gratitude that Crawford had asked members to help, instead of closing the place without warning.
"We didn't know how serious the problem was before Bill sat down with us and explained his situation," she said.