Stop Trying To Just Collect on Fitness Contracts

This is going to sound crazy, I know, but bear with me on this – we should stop trying to hammer consumers on contract delinquencies – it’s not where fitness clubs will succeed.  I know, I know – I’m in the collection industry, why would I say such a thing?

There’s a lot of math here, bear with me as I walk you through this.


The Fitness Industry And Where It’s Going

I wrote an article on the fitness industry back in 2014 – at that point, there were 27,000 fitness clubs across the US and Canada and the industry was valued at $28 billion dollars a year.  Fast forward to 2025, we’re up to 45,000 fitness clubs and the industry has grown to $44 billion.  That’s 13% growth year over year.

Now factor into this, the industry has an average churn rate of about 60% -- meaning if 100 people sign up to a gym, one year later 60 of them will have cancelled, quit, or worse, abandoned their fitness membership contract creating a delinquent debt.

(There are fitness brands out there high fiving each other over getting their churn rate down to 45% -- that’s how big a deal this is, hang on to this statistic, we’re going to circle back to this).

The average fitness club sends to collections 4.2 files a month (a lot can swing that, the membership base of the club, demographics and geography, or which fitness brand it is, but let’s just go with an average of 4 for now).  The average membership contract delinquency sent to collections is $546 (which again, a lot can swing that, being the average price of monthly membership fees, how many months are remaining in the membership, as allowed in a contract by state or province, but let’s go with this average).  That means 189,000 consumers are going delinquent … per month … for a total of just over $100 million dollars in delinquencies .. each month.

That’s a lot.

Now, that’s only a portion of the membership churn – lots of members end their agreement on good terms and don’t get sent to collections.  A club with 300 members is only sending 1.33% of it’s membership base to collections per month, or 16% per year.  There’s another 44% of their membership base that just end their contract at the end of the term, give proper notice, or are excused from the contract (medical issues, moving out of a coverage area, being a deployed servicemember, etc).  So that’s about 484,000 lost memberships a month and just 189,000 are delinquencies.  And since the fitness industry is growing, it’s safe to say those lost memberships are regained by new member sign ups.

The delinquency balances that end up in collections are from relatively affluent people with jobs, and discretionary income.  Sometimes it’s because of financial hardship, but in a lot of cases, it’s not realizing the consequences of not cancelling a contract with written notice, moving to a different city and forgetting, or life changing events. 

So what does the fitness industry do about this?


Economy Of Scale?

A fitness club manager has a lot of hats to wear during the day, and one of them is attempting to contact delinquent members – but there’s only so much they can do.  Even a large franchise group or fitness brand might have dedicated staff for recovering receivables – but how many times will they try to contact a former member?  Maybe three to five times?  And do they have scalable communication tools?  Unlikely.  They are going to be busy keeping their members happy, signing up new members, herding personal trainers and community events, and all the other work that goes into maintaining a fitness club.  And it's only 4 members a month going to collections, right?

Debt collection agencies are geared to communicate with the outside world – with a push of a button they can make thousands of telephone calls, outbound emails, or sms text messages.  So they’d be a great partner to collect on all these balances?

Sure, in the short run.

If a debt collection agency can recover 20% of the accounts assigned to them, there are 189,000 consumers are getting sent to collection each month,and 38,000 of those accounts are getting resolved (about $20 million dollars in recoveries) – but if you go back to the 60% churn rate, that’s the bigger problem – 484,000 lost members per month, each paying about $50 a month in fitness fees is a hole in the bottom of the fitness ship that’s bleeding $24 million dollars per month in member dues.

So what do you do about it?


Brand Reputation, A Kinder Approach, And A Solution

So, my company has been doing a fair amount in the fitness industry for the last 12 years or so – we probably represent about 5% of the clubs in the United States, and about 10% of the clubs in Canada (that’s about 3,000 fitness clubs sending 144,000 members a year to flow through our collection agency division.).

Sure, we could just pursue the delinquency balance as other agencies always have done – but that’s like slash and burn farming, it hurts the reputation of the fitness brand, hurts the reputation of our agency, creates consumer resentment, and does not resolve the 60% churn problem. 

Consumers need to be given options – yes they signed a contract, and yes they owe a balance, but if it was a misunderstanding or a life event, wouldn’t it make more sense to provide an option to reinstate their membership, either paying just the past due membership dues, or working out some sort of clemency, clean slate, or forgiveness?  And not affect their credit rating?

Affluent consumers with disposable incomes need to be given some breathing room to be made aware there’s a potential debt and give them the ability to resolve it in a painless way.  This means not taking a hard-line approach, it means negotiating in good faith.

In 2025, our recovery team recovered 20% of the membership and personal training accounts listed with us – *plus* we also on top of that negotiated with 5% of the accounts listed to be reinstated. 

If we did that across the entire industry, that would reduce the average churn from 60% to 55% (cue some high-fiving in the fitness industry) -- that would ‘cure’ or rehabilitate 9,400 members a month, or 113,000 members a year, allowing those members to be happy, think positively about the fitness club they return to each week, and the fitness clubs would retain about $5.6 million dollars a year.

That’s a lot too.


But Why Would A Collection Agency Do That?

Collections is no longer about telling people ‘pay up or else’.  The hard line agencies of the old days are either changing, or vanishing.  Collections is now about educating consumers about the credit bureaus, listening to consumers tell them about their personal financial picture, and providing financial literacy, sharing the contract terms they signed and letting them digest them, and then giving them solutions – and sometimes it means letting a member pay $100 on a past due $1700 account, and returning them to the fitness club in good standing.

Collection agencies that just demand payment in full might recover a little more in the short run, but it hurts their clients in the long run to not create a member reinstatement feedback loop that gets people back in their gym, the whole reason they exist.

Believe it or not, a collection agency can create a positive experience for the consumer – and they in turn can leave a positive Google Business Review for the agency, which encourages other consumers to see that agency in a positive light, and maybe return their call, or work with them.

They can use their economies of scale to augment a fitness brand's messaging being a partner for business growth, not just a hungry black hole where delinquent accounts go and some money gets spit back out.

I’ve attended fitness conferences all over North America, and I’ve had club owners high-five me for getting their members back.

And that’s why collection agencies should just stop trying to collect on fitness contracts.

Agree?  Disagree?  Drop me a note at blair@receivableaccounts.com

Thanks kindly,

Blair DeMarco-Wettlaufer
KINGSTON Data & Credit
226-946-1730
blair@receivableaccounts.com