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With most of the pieces of the former Leisure Fitness business now sold off, what remains are two business entities already marching into the potentially lucrative region ready to go head-to-head — while still haggling over a few last pieces of the bankrupt business.
LFI Holding LLC — with principals Ron Mendola of Key2Fitness and Paul Bastianelli, former CFO for now-defunct Leisure Fitness — acquired the inventory, most of the intangibles such as website and trademarks, and the lease designation rights for seven stores and the warehouse of the old Leisure business, already paying close to $700,000 for the bundle.
Florida-based retailer Busy Body/Gyms To Go, although unsuccessful at the bidding in the U.S. Bankruptcy Court, District of Delaware, and in negotiations with the bank, has busily acquired leases in key locations near former Leisure stores — ones that LFI may be occupying.
In addition, LFI, which was formed days after Leisure suddenly shut its doors Sept. 19, has hired James Bond as its retail sales and marketing director and expects to re-hire about 60 of the former Leisure staff, Bastianelli told SNEWS®.
Bastianelli said his company will keep the name Leisure Fitness and also said they expect to open stores on Nov. 14. Carlos Vazquez, co-owner of Gyms To Go (GTG), told SNEWS he will have four stores open by Thanksgiving — Tyson’s Corner, Va.; Rockville, Md.; and King of Prussia, and Ardmore, Penn. — with two more soon after and before the end of the year. (Click here to read an Oct. 28 SNEWS story, “Busy Body/Gyms to Go to take on mid-Atlantic with gaps opened by Leisure and Omni.”)
But that raises the first of two items in dispute: leases.
The court earlier this week said in its order approving the asset purchase that LFI must file a motion to assume or reject leases no later than Nov. 18, with a hearing regarding those assignments set for Nov. 25. That order, finalized Nov. 6, also stated that LFI “shall not conduct any business at any location until such time as the court approves the assumption and assignment of the lease….”
According to Bastianelli, LFI “already has the lease designation rights” and the court dates were just “outside dates,” but he said the judge will let it go forward as long as his group has agreement with the landlords.
“If we have agreement with each landlord, the judge (won’t) slow down the process,” Bastianelli told SNEWS Nov. 6.
Vazquez, on the other hand, said LFI still has to put a motion before the judge and go before the court on Nov. 25 before it can move in and open the doors for business. “As far as I’m concerned, nothing’s changed,” he told SNEWS. Initially, Vazquez had eyed some of those locations but now has others earmarked so his plans are moving along, he said, no matter what.
The other bone of contention is the designation of the telephone numbers, including business, fax and cell lines. The court in its order earlier this week stated neither LFI nor another party can take further action with the numbers, and Mendola has filed a motion contesting that statement. (Click here to see a Nov. 5 SNEWS story, “Key2Fitness team apparently nabs Leisure Fitness’ assets in court auction and bank sale.”) No hearing on that has been set.
Vazquez is entering the region with several of his top suppliers in Florida, including Precor, Inspire and FreeMotion. LFI’s Bastianelli wouldn’t commit to the suppliers they have lined up: “We’re working that through right now. We’re working feverishly to secure our lines.” At retail and for commercial, Key2Fitness sells Hoist, Powertec, Octane, Star Trac and Lifespan, per its website, although Bastianelli would not say if all of those would continue with the new business.
Some of the new Leisure Fitness stores they will open will cross-over with the two Key2Fitness stores that Mendola opened after he parted ways with the former Leisure operation, where he was a partner through the mid-1990s. That means the two operations will be consolidated, Bastianelli said, with the Key2Fitness brand gradually phased out.
“The reality is, we have great stores and great people,” he said. “Bottom line is, Leisure Fitness … did a lot of great things over its 13, 14 years in existence.”
The equity in the name, he said, outweighs any negatives that may have been gained in the last few weeks and, with the website and name, it allows the new company to be “turn key.”
When asked how the new company would be allowed to handle warranty and service on the inventory of brands it may not carry, he said he wasn’t sure yet.
Regarding the mammoth expansion and immediate competition in current economic times, Bastianelli admitted some risk.
“There’s certainly risk, no doubt about that,” he said, “but this economy can’t stay like this forever…. We’re in the final stretch to get the doors open.”
SNEWS® View: A region that lost in one fell swoop 19 stores in key locations will suddenly by the end of the year have nearly that many back in action. Luckily, the local media dropped the story of Leisure Fitness’s sudden demise after the first news appeared, so many consumers in the area likely don’t even know what happened and won’t be afraid to come back through the doors. With these economic times, however, anybody will have a tough row to hoe at fitness retail, and we at SNEWS only hope business acumen is not being colored by bravado.