The fitness industry has grown a lot in the past few years. Gym memberships have increased by 28% over the past decade and by 5.5% since 2018. And data shows that Americans alone spend over $35 billion a year on gym memberships. Owning a gym is a full-time business and as such, you need legal contracts to protect yourself and your customers.
Gym contracts have had a bad reputation amongst consumers. And that’s mainly because of some policies that certain gyms follow which make people feel trapped in the contract. These can be tricky cancellation policies, long contact durations, and unclear liability clauses.
So now, gym owners need to be extra vigilant when drafting their contracts. Although there are legal teams that can guide you through the process, you should know the basics of what a gym contract looks like, what should be included and how these protect your business.
In this article we will look at what gym contracts are, what are usually included in gym contracts, and some key points to note when drafting a gym contract for your members.
Skip ahead to:
- What are gym contracts?
- Why do you need gym contracts?
- What is in a gym contract?
- 8 things to remember when drafting gym contracts
- The dos and don’ts of gym contracts
What are gym contracts?
Gym contracts are legally binding documents that define the terms of an agreement between the gym and people who use the gym. Your customers often have to sign gym contracts when they sign up for memberships or fitness classes.
These contracts differ from other legal contracts in the sense that the bargaining power is almost entirely with the gyms and the contracts are designed without prior discussion with the people who’ll be using the gym. Nevertheless, these contracts offer benefits for both parties and help minimize risk for everyone involved.
Why do you need gym contracts?
Gym contracts are important to protect you from liabilities and mitigate losses. Having the membership agreement in writing and signed by all parties involved serves as proof that everyone has understood and agreed to the terms and responsibilities.
These contracts also have other benefits for the business such as:
- Gym contracts summarize and clarify the expectations of both parties.
- Ideally, these help you maintain a list of customers that you can use to calculate your revenue for the next year or several months depending on the length of your contacts.
- Contracts may be a legal requirement where you operate.
- These help you establish specific terms of what is allowed and not allowed in the gym.
- These define when and how you’ll get paid, which is important for any business.
What is in a gym contract?
While creating a gym contract you have to take care of a host of factors. But two things should stay front and center. First being that the contract should be legally accurate and second that it should make your users feel at ease meaning that there should be limited usage of legal terms and it should be easily understandable.
Gym contracts can increase your memberships, which in turn might increase retention and that’s great for your revenue. According to a Bain and Co. survey, a 5% increase in memberships and customer retention can increase your annual profitability by 75%.
8 things to remember when drafting gym contracts
Now that you know what gym contracts are and why you need to have them, let’ look at the eight things all gym owners should include in their contracts:
1. Identify the parties and designate space for signatures
This section should go at the top of the gym contract. Here, you should mention the name of the person who’s joining your gym followed by the name of your gym and the location of the branch.
Other critical information you can include can be the date of the agreement, contact number, email, and emergency contact information.
You should conclude the contract with a section for signatures to show that both parties have read, understood, and agreed to the terms mentioned therein.
2. Length of contract
Defining the length of the gym contract is essential. It lets people know the duration for which they have to make payments and it can also help you offer better packages to users who opt for longer contracts.
You can either offer contracts for a specific time duration or include the pay-as-you-go feature, based on what’s better for your business. Both of these have their pros and often it’s a blend of the two that works best for businesses.
You should also keep in mind that governments have various restrictions on the length of contracts gyms can have. For example, health studio services in California can’t have contracts longer than 3 years.
3. Payment type and schedule
Your gym contract needs to outline the payment methods such as credit card, debit card or cash, the refund policy, payment schedule, and the consequences of missed payments. This section can also include the details of the fees, if any, which will be deducted from the various forms of payment.
4. Rollover on automatic renewals
You should create a separate section to mention if the contract has automatic renewals and also clearly define the conditions for them. Your customers should know when the deadline is for canceling their membership if they need to and when your business will charge their card for the automatic renewals.
This is the clause where most people have an issue because they aren’t aware of its existence when they sign the contracts. That’s why state governments have strict laws in place to protect customers from unfair renewal policies that you need to follow as gym owners.
So make sure that you write it in a visible place or highlight the renewal clause and all the terms and conditions associated with it.
Cancellations are a touchy subject for most users. So you need to design this section carefully to improve members’ experiences, especially during the coronavirus pandemic. First, you should identify and define the cancellation types such as suspensions v terminations.
Then clearly mention other details including the length of notice period for cancellation, the termination fees, and conditions that allow you to unilaterally cancel the user’s membership.
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You might also want to include the details of the refund policy in case of cancellations. Some gyms return a certain percentage of the membership fees if the contract duration is not up yet and the circumstances for cancellation are unavoidable such as an injury or relocation.
Here, you can reassure your members that their sensitive information will be kept secure and clearly mention which information qualifies as ‘sensitive’.
7. Mention the terms of liability
Safety is always an important aspect for gyms and health studios. So your contract should clearly mention the compensation agreement in case of a personal injury.
And also plainly state the circumstances where your gym will be liable for a customer’s injury. These could be, for example, faulty equipment or bad judgment on the part of the personal trainer.
Also, explain the type of compensation you’ll make in case you’re liable. For example, will you pay the medical bills or just a set sum of money? You should take care not to unfairly skew these clauses in your favor as that is an unethical practice.
8. Explain your offer and services
Your gym members should know exactly what they’ll be getting for their membership. Hence, you should accurately explain this in the contract as best you can.
Your offers can include points such as the availability of personal trainers during certain hours of the day, the number of yoga classes a person can attend and the different facilities members will have access to under specific membership plans.
It’s better to be clear and concise here so that you don’t overwhelm the reader. But also don’t leave room for misinterpretation.
The dos and don’ts of gym contracts
Now that you know what you should include in the gym contracts, here are some general best practices that you should adhere to:
Do highlight consequences of breaching the contract
This practice saves both parties from unnecessary legal fees down the line. You should specify the terms that classify as a breach of contract as well as the consequences of it.
Do offer trial periods
Trail periods can improve conversion rates and increase memberships. You can offer trial periods for predetermined charges or as a pay-per-visit for some weeks.
These can prove to be especially beneficial for people who seem interested but are reluctant to sign an agreement due to prior bad experience(s). You can use the trial period to show them how your gym is different and hopefully convert them to members.
Do be clear in your language
Gym contracts fall under the ‘consumer contracts’ category in legal jargon. That requires your contract to be in ‘plain English’ for a consumer to understand it without a lawyer.
You should hire professionals to draft your contract but create the final one in easy-to-understand language and use commonly known terms so as not to confuse the reader.
Don’t just follow a template
Although templates are great to get a general idea of what should be in your gym contract, it’s best to create your own contract or modify the template you like. That’s because the services you offer, your terms and conditions, or other specifications might be different from other places. And the policies for those might not be covered in the template.
Don’t include any undisclosed fees
Whether it’s the signup fees, monthly membership fees or cancellation you should be as clear as possible about all the charges your customers will have to pay. You can even divide the fees into sections and mention the maintenance or additional services charges that might be applied per month, annually, or at the time of termination of the contract.
Don’t revise contracts too often
Revising the contract or amending them too often might make it difficult for you and your regular members to know what the terms and conditions are or what additions there is and what’s been removed from the contract they had previously signed.
Some might confuse it with a new contract and assume that the conditions of the previous one are nullified.
You’ll also have to inform all your members about the changes which can be rather time-consuming. So prepare a thorough document from the start and try to keep the revisions to a minimum.
Gym contracts are legally binding agreements between your gym and the gym members. These are important because you can save your business from fines and legal fees by following best practices when it comes to gym contracts.
Each year gyms suffer heavy fines due to consumer litigation or violation of state laws. For example, in 2016, 96 health clubs in New York, including planet fitness, paid a total of $38,600 in fines due to violations regarding required disclosures to consumers and waiver of liability provisions.
You should consult a professional legal team to design your gym contracts. And include critical information in it such as details of your offer, terms and conditions, privacy policies, cancellation details, and payment schedules.
Once the contracts are in place, keeping track of them might not be so difficult especially if you use innovative fitness management software that can keep all your information secure in one place!