Gym contracts: Fit for today?

Gym contracts have been a hot topic of discussion as the fitness industry has grown and matured. In this article, we’ll explore how contracts have evolved, member expectations, and key need-to-knows.

A gym contract outlines the terms of membership between your club and a member. These terms are essential to protect both your business and your members.

Over the years, the terms of specific gym membership contracts have come under scrutiny. And consumer expectations of memberships are everchanging and influenced by other industries. So, there’s a frequent need to adapt the gym membership types and contracts you offer.

For many gyms and fitness clubs, it’s necessary to offer a variety of different gym memberships. We look at how you can take a friendly approach that’s win-win for you and your members.

Gym contracts & memberships – a mixed history

The fitness industry has grown and is constantly evolving. And so are gymgoer expectations of memberships, contracts, and payments.

Many gyms that emerged in the 1990s and 2000s had business models that often reflected traditional ways of operating.

A membership would be required that would be paid upfront or in monthly instalments over a specified period. Memberships could last as long as 3 years.

Members would sign up in club (online joining is a recent innovation for gyms). And pay a joining fee by cash, cheque, or credit/debit card. Then either set up a standing order or sign a Direct Debit agreement for monthly payments.

Lengthy gym contracts

Many people in Australia and New Zealand signed up to lengthy fixed-term gym contracts. Often without realising the terms they were agreeing to. So, complaints to consumer affairs organisations rose. In one year alone, NSW Fair Trading received 456 complaints about health clubs and gyms.

Complaints included:

A fairer deal

There are particular guidelines you must follow depending on your location (some states vary). Some restrictions you may find include:

The rise of flexible subscriptions

Just as workout choices change, so do consumer expectations and preferences of how they access gyms.

In late-2021, research found that 23% of gymgoers were looking for competitive pricing when choosing a gym. And 13% wanted a flexible membership.

This research also found that of those who’d cancelled a membership during COVID, 35% wanted to save money. And 21% didn’t want to be locked into long-term agreements.

At the same time, the subscription economy boomed. These subscriptions range from streaming platforms like Netflix and Disney+, to food, cosmetics, and pet boxes.

Many of these subscriptions allow members to cancel with ease at any time. Members often simply lose access at the end of the period they’ve paid for.

Now more than ever, members are looking and expecting to be able to access gyms in a similar way. Many members who cancelled in 2022 did so indirectly. These members cancelled their payment at the bank or experienced a failed payment.

Is it time to rethink gym contracts and cancellations?

Short answer, yes. There’s a place for a range of gym membership types and price points in an effective gym pricing strategy.

Many gyms and fitness clubs offer a variety of membership options, including:

Fixed-term gym contracts offer you benefits as a gym owner or operator including cashflow upfront and predictable income.

Even with a 12- or 6-month contract in place, members still cancel their payment. Or ask to cancel before their contract term is up.

Is it time to scrap fixed-term gym membership contracts?

For some clubs, the cons may outweigh the benefits of fixed-term gym contracts. But the answer isn’t always clear cut.

For some clubs, it’s best to add flexible rolling memberships, to complement fixed-term options. For others, offering only flexible rolling membership contracts may be more efficient.

A starting point for most fitness businesses, is to look at how you reduce and manage cancellations.

Reducing cancellations

There are simple ways to reduce the number of members who ghost your club by cancelling their Direct Debit or failing to pay.

This article is full of tips to help you cut silent cancellations (and more insights into why members quit the gym): 5 reasons why members quit the gym & how to cut cancels.

Above all, build a culture that welcomes and values gym member feedback. So, you’ll encourage dissatisfied members to speak up before an issue becomes cause for cancelling.

Make sure members know how to update their payment details (and let them do this online). So, it’s less tempting for them to step away if a payment fails as they’ve switched bank accounts.

Also, make it easier for members to freeze their membership for a specific period.

Solve member headaches before they cancel. Make it easy to keep payment details up to date. Strategically offer freezes. And you’ll be on the path to reducing cancellations.

Managing cancellations

Some members will want to cancel. If a member is locked into a contract for a specific number of months, make sure they can cancel without hassle in certain circumstances.

Whether a member is on a fixed-term or flexible contract, make sure the cancellation experience is positive. That means making it clear how to cancel. Members should be able to end their membership online. And tell you why they are leaving, in a discreet, non-confrontational way.

Leave the door open for a future return. As the member leaves, make it clear if there will be any further payments taken. And exactly when their access to the club will end.

The easier you can make it for joining members to understand how cancellation works. Then, the easier it will be for members to cancel how you want them to. Causing you fewer headaches down the line.

Handling payment failures

When a member misses a payment, traditionally some gyms have chosen to charge the member an extra fee.

Many members cancel payments because they weren’t aware they needed to cancel in a certain way. Or didn’t know about specific terms they’d agreed to. And payments often fail if a member is experiencing financial hardship.

So, these fees for missed payments can negatively impact both businesses and consumers.

Forward-thinking gyms and fitness clubs often choose not to charge these fees.

When a payment fails, top priority should be automatically attempting the collection again. And letting the member know what’s happening and how to resolve the issue and/or get in touch.

Payment issues can be an emotive topic for affected members.

That’s why it’s important to choose a gym billing software partner with the technology and highly trained team to support your members. This takes pressure off your team. And makes it easy for members to manage and catch up on payments, as well as accessing help and advice if needed.

Adapting to changing expectations

As we’ve seen, gym membership contracts have evolved as the industry has grown and matured. Member expectations have changed, influenced by experiences with other industries and the wider world.

As a gym business, you’ll need to continue adapting to meet member expectations. That might mean:

The wrap up…

The fitness industry continues to evolve and expand. And so have gymgoer expectations. This means making sure you offer members the right access options for their needs.

Above all, contracts need to be in line with current consumer protection laws. And with consumers more accustomed to highly flexible subscriptions for all sorts of products and services, members expect similar of their gym.

Engage and motivate members. Proactively reduce the risk of cancellations. Making leaving a positive experience. And you’ll drive lasting business success. Retaining more members for longer and encouraging former members to return.

Give members more of what they want with the right gym management software partner by your side. Request a demo to see the value that Xplor Gym can bring to your business.

Gym Contracts: Frequently Asked Questions (FAQs)

What are gym contracts?

A gym contract is a legally binding document. It defines the terms of an agreement between your fitness business and your members. Typically, it’s signed when joining your club, this can be in a digital format.

Gym contracts should benefit and minimise risks for both parties. Your business AND your members.

Why do you need gym contracts?

It’s important to have gym contracts in place to protect your business from liabilities and lessen the risk of losses. Written and signed membership agreements serve as proof that everyone has understood and agreed to the terms laid out.

Other reasons for having a gym membership contract in place include:

Offer rolling monthly memberships and/or casual access options? You’ll still need members to agree to certain terms within a gym agreement or contract.

What is in a gym contract?

A gym contract will include a list of terms and conditions. These explain the exact requirements of both your gym and a member.

If terms are broken by a member, they can be banned from your gym. And their membership taken away. Likewise, if your business breaks the terms, a member can end their membership.

Gym contracts should include:

Are gym contracts legally binding?

Gym contracts are legally binding documents in Australia and New Zealand.

Members sometimes look for ways of exiting and breaking gym membership contracts. Sometimes members are entitled to cancel. For example, due to injury, serious illness or a change in financial circumstances. Likewise, if cancellation contract terms are unfair, members can cancel without penalty.

There may also be a cooling off period after signing up during which a member can change their mind and cancel.

Terms are there to protect both sides. It’s vital to make it clear under what circumstances a member can cancel, how to cancel, and any costs that will apply.

You should make it as easy as possible for members to review their gym contract.

How do I write a gym contract?

Make sure your gym contracts are in line with consumer protection laws. It’s advisable to work with a qualified expert when writing a gym contract. Write different versions of your contract to suit different gym membership types.

What different types of gym membership contracts exist?

There are many types of gym membership contracts on offer. And many clubs will have more than one on offer (check out gym membership pricing for more info). Typical gym contracts include:

Annual memberships

Typically paid upfront for the period by card (and, in certain cases, by cash or bank transfer).

These memberships can be beneficial for business cashflow with payment received immediately. Usually, they are the cheapest access option for a member, and allow the member to commit for a year. So, they’ve already paid and don’t have to work out how to cover their gym membership as a monthly expense.

It’s easier to lose a member after their annual membership is up. So, clubs need to focus on engaging and motivating these members throughout the year. And it’s important to have an effective multi-channel renewal campaign in place.

Monthly fixed-term memberships

Lasting for 12-months (or a shorter period), members sign up to a fixed-term contract. And pay in monthly instalments. It’s very common for members to pay by Direct Debit. This offers favourable protections and control for consumers. Increasingly, clubs are accepting recurring card payments too.

Benefits of this type of membership include the stability a fixed commitment brings to your club with predictable income. The ability to automatically switch the member to a rolling contract with a specified notice period once the fixed-term ends (providing your gym contract allows for this).

On the other hand, this type of contract isn’t always popular with members. Members tend to dislike the inflexibility of a locked in period of time. Clubs find members don’t pay attention to the terms agreed to and silently cancel their membership at the bank. And this can create admin headaches that take up time and money.

Rolling monthly memberships

Often marketed as ‘no contract’. These gym memberships let members cancel with no or short notice. Members typically pay by Direct Debit or recurring card payment. Members will still sign up to a short-term contract or agreement with terms and condition.

For members, rolling monthly memberships allow access to facilities and services. Members aren’t locked in by a fixed-term contract. So, they feel free to leave if they want to.

For clubs, these memberships cater to growing demand for flexibility. And create a gym contract that competes with many big chains and low-cost operators.

When offered alongside fixed-term memberships, rolling monthly memberships will usually be more expensive.

Income can be less predictable for clubs. Yet, with many members failing to meet fixed-term commitments. These memberships allows clubs to anticipate that income will not be guaranteed.

Clubs offering rolling monthly memberships must focus on engaging and motivating members. So, they keep visiting and using their membership. A solid strategy for re-engaging high-risk gym members is essential.