Franchise Pick

20 opinions for Butterfly Life Chairman Gergley Offers Commissions to Ex-Franchisees

• Vice Versa
  Dec 18, 2007 at 8:42 pm

  After reading Tom Gergley’s letter, it doesn’t surprise me that he would make this offer. My gut feeling is that BFL is going down, or hopefully for the current franchisees sake, selling out to the Area Reps. I believe they are the ones who finally realize it’s imperative to reorganize their marketing strategy, since Tom and Mark only knew how to follow the same old Linda Evans marketing guidelines. That’s exactly why those clubs failed also. The area reps are the ones who have a lot to lose, considering they paid a huge chunk of money to Tom and Mark and probably know by now they’ll never make it back. How nice of him to offer to sell the closed locations. I wonder how far back his offer extends. Did he send this letter to “all” closed clubs since 2003? Maybe some of them will be over joyed. I’m sure they’ll be reading this post. We’ll see if he follows through. By the way, if you start to see releases being signed, you’ll know the end is near for BFL!!!

• Sherleylock Holmes
  Dec 18, 2007 at 10:10 pm

  Gergley’s “offer” reveals his consciousness of guilt. Simple. Transparent. Unctious.

• Mothra
  Dec 18, 2007 at 10:43 pm

  Sean,
  A little bird told me (Oh, yuck!! Birds eat butterflies, don’t they? Oh, well, anyway …) that some franchisees who have been released from their lease obligations have not been able to sell their gyms because their landlords will not allow Butterfly Life to operate on their property any longer, new owner aside. A dog is a dog is a dog they say. Places to hang those “grand opening” banners might become hard to find.

• PRISON & INVESTORS
  Dec 18, 2007 at 11:39 pm

  so, tom, if you went to a restaurant and got food poisoning and had to go to the hospital and ran up a lot of medical bills and then when you were finally able to crawl out of bed you went back to the restaurant and told them that their food was rotten and then they told you to get lost because after all you saw yourself what was written on the menu and you ordered it yourself and the money’s spent and besides the restaurant has a permit from the health department hanging on the wall so you probably just have a weak stomach because no body else ever got sick except you but the truth is that a lot of people who went to that restaurant got sick but the restaurant decided for no special reason to give you and a few other people who got sick too a coupon for a free order of bean dip the next time you visit the restaurant if anyone decides to make bean dip so go away please go away because even though the food is rotten at this restaurant it’s the best restaurant there is and it’s going to put Olive Garden out of business so see there and the court of public opinion will see what a great restaurant it is because this restaurant has waiters and cooks and a maitre ‘d with years of experience who will go visit anyone in the hospital with food poisoning and that lawyer you people hired will just go away too and don’t forget that the coupon for the expired bean dip expires soon so don’t miss out so, tom, that’s how it is with you, huh? is that just how it is, huh, tom? twisted, man, scooby-dooby

• sean
  Dec 19, 2007 at 9:52 am

  Mothra said: Sean,
  A little bird told me…that some franchisees who have been released from their lease obligations have not been able to sell their gyms because their landlords will not allow Butterfly Life to operate on their property any longer…Places to hang those “grand opening” banners might become hard to find.
  I’m not sure I understand the reference in the letter to these resales not being commissionable. If the sales force is not commissionable on these territories, they will certainly not be priority sales… perhaps even steered away from. Not that they should be a priority…

  Does anyone know the answer to my snide - but real - question about bankruptcy? If a franchisee closes, declares bankruptcy protection from creditors, then receive $15,000 resulting from the resale of the territory, say, 6 months after ithe BK’s discharged, do they keep the money or does it go to creditors?

• Fool Me Once...
  Dec 19, 2007 at 10:36 am

  Sean: Their MO has always been to wing it day by day. Thus the problem for all the failures. They take the money and leave the problems to you. That’s why they decided to sell areas. The AR’s are left holding the bag and all the problems. You’re right about the commissions. Tom probably thought no one would catch that “little” remark that makes all the difference in selling. As far as bankruptcy…again, I’m sure that hasn’t been thought through clearly either! They pocket your money, as always, and then deal with issues…actually they never deal with the issues!!! Mark is in hiding and I wouldn’t be surprised if Tom joined him shortly. Thanks to the AR’s money, Tom and Mark are enjoying a very profitable existance, no matter what their financials state. Maybe it’s time for an audit…

• Ex Ms Contours
  Dec 19, 2007 at 11:08 am

  Sean wrote “If a franchisee closes, declares bankruptcy protection from creditors, then receive $15,000 resulting from the resale of the territory, say, 6 months after ithe BK’s discharged, do they keep the money or does it go to creditors?”
  Here’s the way it goes…you MUST declare, when filing bankruptcy, any monies you might receive in the future. If your landlord say is suing you for what’s left of your lease then they file a proof of claim to that future money you are suppose to get. The Trustee keeps your case open for a longer period of time until it’s decided there won’t be any money for you to get from the franchise. This is solely up to your Trustee’s disgression . Then the court files Notice of filing report of no distribution, combined with order fixing deadline to object thereto. There is a deadline set for your landlord or creditors to object to your case being discharged. If they don’t object and they close your case, then you get to keep any money you get after that. Hope that helps Sean.

• Linda
  Dec 19, 2007 at 11:09 am

  Was just on franchisegator.com an saw their announcement on 12/4 for 10 grand openings. I love the description of their “…exclusive Life Vision technology…”which is nothing more than a large TV showing DVD’s every 30 minutes for classes and 15 mninutes for lectures. The circuit training is just like all the rest out there. And the “Weight Loss Express” is a program they used years ago during the Linda Evans club days. They dupped a lot of us in the beginning explaining “verbally” that this technology would be an upright 65″ monitor shot with two cameras showing a “life size” image (5′5″ tall) teaching classes. That’s one of the main reasons we all bought into this. After they received our final payment, we were advised to purchase a regular 65″ television, and Mark had no recollection of his explanation of the exclusive Life Vision technology!!! How convenient, since it was a verbal statement and nothing was in writing. But there are those of us out here that have proof it was said. I don’t know where Gergley gets “unrivaled in the industry” since his 30 minute circuit is a copy of many others who have gone before him. His spin is called “a truly holistic approach…” If potential franchisees due their due deligence, they will find that they are behind the times in this “approach.” The Weight Loss Express was used years ago during the Linda Evans club days. All they do is recycle what they know. They have never been able to come up with anything innovative after Bruce Fabel, the then president, was fired because of personal differences with Mark Golob. That was a major mistake and the fact that they misrepresented Mark Mastrov of 24 HR Fitness as being heavily involved in this “new innovative” approach. He was never involved other than financially. Due deligence will open your eyes to fascinating information. Contact the American Association of Franchisees and Dealers (www.aafd.org) before you hand over your hard earned money!!!!

• sean
  Dec 19, 2007 at 1:28 pm

  Fool me once said Mark is in hiding and I wouldn’t be surprised if Tom joined him shortly.
  What do you mean he’s in hiding? He’s no longer running the company?

  Also: Have the ARs shared their roles in the “new agreement?” Are they splitting the other half of the franchise fees, getting it all, getting none?

  I’d be interested in what the other provisions to the agreement will be.

• Fool me once
  Dec 19, 2007 at 2:51 pm

  Sean: Mark Golob has been playing “Where’s Waldo” for many months now. I have been advised by those who have tried to contact him directly that they are told he is busy running other parts of the company and are quickly forwarded to Tom Gergley. Maybe the rumors in the previous blogs regarding laying low due to a sexual harrassment suit isn’t far off base. I really don’t know if the area reps know anything about the new agreement yet. I do know that Tom advised them in mid November, not to worry about the mediation that was taking place with the AAFD members. I wonder what he’s telling them now. I hope they’re taking these blogs to heart. Can’t wait to see what 2008 holds!

• Kelly
  Dec 20, 2007 at 7:53 pm

  Bigger question from a tax geek: when is $15k really $15k? I’m thinking that the $15k is probably income to the recipient and is, therefore, slightly less than $15k after all. Of course, that would hinge on how the initial moneys were reported on the tax return (as a loss?).

  Sorry, it just popped into my head.

  The offer letter is interesting because it appears to try and set itself apart as NOT an offer letter (hence the bold at the bottom). I guess it’s an effort to make you feel as though your risk is mitigated when it’s arguably not.

• BD
  Dec 20, 2007 at 8:32 pm

  I can stay silent no more.

  Script for Former Butterfly Life Owner:
  Mary, now that you have lost your investment and have very little left wouldn’t you like to hear an exciting offer that will help keep your financial condition going down the same path? Great! Let me tell you how this works. First, in the unlikely event we sell your territory we will let you keep 50% of the franchise fee that we have collected for the second time. Then if you didn’t have had to hoc your remaining equipment to pay your mortgage, we will allow you to sell it and won’t even charge you a commission! But wait there is more! If during the course of this fabulous opportunity we are able to coerce you into signing one of our lovely termination and release agreements, all bets are off and you are on your own! So Mary, can we sign you up today?

  Script for Current Butterfly Life Owner:
  Mary, we have had some intermittent reports of clubs in distress and as a result wanted to make you a fantastic offer that is intended to assist all franchisees improve the overall franchise operation system. Let me start by offering you “no enrollment” as one of our valued franchisees. Sound familiar? Next beginning in 2008 we will be reducing your royalty payments by $200. This will be offset by an increase in our direct mail program costs, but hey we going to keep using the same tired postcards! What’s more, it also will allow us to continue relying on you the franchisee to pioneer our brand! Then we will provide several other training and group opportunities of questionable value given that they are just copies of what we did in our last failed franchise venture. The best news of all is once all of this fails we will assist you in selling your territory and equipment for a unreasonable fee. So Mary, can we sign you up today?

  Meanwhile back on planet Earth…………

  Ask yourself, did Butterfly Fitness suddenly come to their senses and decide they really should be trying to help “improve the overall franchise operating system” or are there other forces at work here? Maybe the Area Reps put pressure on BFI to address these issues because selling franchisees is just too hard when so many can barely pay rent? Maybe it was the FORCE? Or could it be they finally started reading all those stats they receive each month and realized there was a problem? Like that would be hard to discover. Or maybe it was something in the Kool Aid? What ever the reason, one thing is clear. The Butterfly Life Chapter of the AAFD may not have brought BFI to their senses, but it was the catalyst of change. If you are reading this then you too can be an instrument of change by joining the AAFD. There is strength in numbers.

  WHAT ARE YOU WAITING FOR!

  Oh, I’m sorry, do you need some water to wash that Kool Aid down with?

  BD

• sean
  Dec 20, 2007 at 9:50 pm

  Kelly said: The offer letter is interesting because it appears to try and set itself apart as NOT an offer letter (hence the bold at the bottom).
  I found it curious also. He asks for a response if you DON’T want the deal before you actually know what the deal is. And why are these part of a new agreement and not simply improvements to the existing system? What concessions are included in this agreement?

• Broke and Hopeful
  Dec 24, 2007 at 10:34 pm

  Agreements, releases, commisions, lets make a deal! Let’s see if someone out there has a nail file in their pocket….might make a good key or maybe even be used as a “get out of jail” card.
  For all of the franchisee’s that are still open and don’t know who or what to believe anymore….remember most attorney’s have a free consult. Somewhere in this nightmare you have to start believing in someone…so start with yourself. What is your gut telling you?
  You have read a lot of information here, Sean has posted some very good points and things to think about. If you want to continue to believe in BFL, like some of the area reps ( because it makes them sick to realize they could lose $250,000.00+) then by all means that is what you should do. If you are uncertain about what to do, like so many others, don’t just sit back and wait for the fire works. Stand up and be a part of the fire works…..by forming the BFL chapter with the AAFD, it has got the attention of Tom G. Too little too late for a lot of people, but if you are still open and want to salvage any part of your investment……take control! Don’t give them your club! If you don’t want to join the AAFD, then think about what you do want and how you can get it…standing there all alone.
  Or join the AAFD, keep your club, debrand it, bring in your own line of clothing/tee shirts,nutritional supplements, vitamins, make up, go co-ed, or have husband & wife nights, contact Humana Insurance about their Silver Sneakers program, where they pay you to hold co-ed group exercise classes, think retail! The only way to make it today is to have something more than memberships. There are many possibilities if you look for them. How much better off would you be, doing all the things that BFL corp. won’t let you do? Doing things they promised you and never delivered on. If you’re going down…go down with a fight..fight for yourself. If you love your club, your members, helping others…then stand up and say “NO MORE”.
  In case some of you have not heard….. as of Sept. 30th, 2007 ( the end of their fiscal year)
  BFL LOST $875,000.00. How? According to their “books” advertising and payroll. So now there is NO advertising going on unless you want to count that same old postcard crap( that the franchise owners foot the note for) and everybody except “family” has been laid off. But then with clubs closing daily and some not paying royalties……opps……wake up people. The writing is on the wall,(AAFD) not in the sky!
  Merry Christmas and God help us, may 2008 be a better year for those of us that lost it all in 2007

• Titanic
  Dec 25, 2007 at 6:33 pm

  Any break down on that payroll? How much do the owners pay themselves, their family members? If you are losing money, just like the clubs, owners shouldn’t be taking a paycheck home.

  How much did they pay for advertising to promote club memberships or was it all really just spent on advertising to sell franchises? I’d bet at least 80% is for the latter.

  I wonder if Mark and Tom got Coal in their stocking from Santa?

• More Damage Control from Tommi & Markie Poo
  Jan 9, 2008 at 11:38 pm

  AMENDMENT AND MATERIAL MODIFICATION OF FRANCHISE AGREEMENT
  FOR EXISTING BUTTERFLY LIFE FRANCHISEES

  This amendment and material modification of franchise agreement (the
  “Amendment”) is made this __ day of January, 2008 (the “Effective Date”), by Butterfly
  Fitness, Inc., a California corporation (the “Franchisor”), and ____________________
  and ________________ (collectively, the “Franchisee”), and ___________________ and
  __________________ (collectively, the “Guarantors”), if applicable.

  RECITALS

  Franchisor and Franchisee are parties to a Franchise Agreement dated
  ___________ __, 200_ (the “Franchise Agreement”). All terms not defined in this
  Amendment shall have the meaning set forth in the Franchise Agreement.

  Franchisee desires to amend and modify the Franchise Agreement. Franchisor
  consents to the amendment and modification subject to the terms of this Amendment, if
  Franchisee executes this Amendment prior to February 1, 2008.

  AMENDMENT AND MODIFICATION

  I. Section 6.01(b). The following shall be inserted after the last sentence of Section
  6.01(b) of the Franchise Agreement:
  “During the calendar year 2008 only, Franchisee shall pay a reduced

  royalty fee of $800 each month. All other terms and conditions regarding

  the royalty shall remain unchanged.”

  II. Transfer Fees and Assistance to Sell. Franchisor will waive the transfer fee
  on any sale if Franchisee is a Butterfly Life franchisee whose Butterfly Life Center was
  opened prior to December 11, 2007 and if the Butterfly Life Center is sold prior to
  December 31, 2010.
  III. General Release, Confidentiality and Non-Disparagement. Except as otherwise
  stated in this Amendment:
  Franchisor, and its owners, successors, representatives, assigns and affiliates,
  release and forever discharge Franchisee, any Guarantors, and their owners, successors,
  representatives, assigns, and affiliates, of and from any and all obligations, liabilities,
  losses, damages, claims, actions, suits, proceedings, investigations, demands,
  assessments, judgments, costs, and causes of action, whether known or unknown, which
  Franchisor now has, or at any time has had, or may at any time have, arising prior to and

  including the date of this Amendment, except as otherwise stated in this Amendment.

  Franchisee, any Guarantors, and each of them, for themselves, their owners,
  successors, representatives, assigns, and affiliates, release and forever discharge
  Franchisor and its owners, successors, representatives, assigns, affiliates, officers,
  managers, employees and agents, of and from any and all obligations, liabilities, losses,
  damages, claims, actions, suits, proceedings, investigations, demands, assessments,
  judgments, costs, and causes of action, whether known or unknown, which Franchisee or
  any Guarantors now have, or at any time has had, or may at any time have, arising prior
  to and including the date of this Amendment, except as otherwise stated in this
  Amendment. Franchisee and any Guarantors represent that no third party claims an
  interest in any claim released by this release.

  This Amendment is executed by the parties for the sole purpose of amending and
  modifying the Franchise Agreement as set forth in this Amendment and this Amendment
  shall not constitute nor evidence as an admission on the part of any party. The parties,
  for themselves, their agents, employees, and legal counsel, shall keep the terms of this
  Amendment confidential and secret unless required by law or court order, and shall not
  make, or cause to be made, any untrue statements concerning the other party or this
  Amendment which may have the effect of disparaging the other party or in any way
  harming the other party’s business reputation. Franchisee and any Guarantors further
  agree that Franchisee and any Guarantors will not disparage the personal or business
  reputation of the directors, officers, managers, members, shareholders and employees of
  Franchisor.

  IV. Miscellaneous.
  A. Entire Agreement. This Amendment, and any attachments and documents
  referred to in this Amendment, constitute the entire agreement among the parties with
  respect to the subject matter. This Amendment is executed without reliance on
  representations or statements of the persons released or their representatives, other than
  as set forth in this Amendment. No amendment shall be binding unless in writing and
  signed by the party against whom enforcement is sought.
  B. Joint and Several. Franchisee and any Guarantors shall be jointly and
  severally liable under this Amendment.
  C. Severability. Each provision of this Amendment is severable. If, for any
  reason, a court or arbitrator having valid jurisdiction deems any provision of this
  Amendment invalid, such determination shall not impair the effect of other provisions of
  this Amendment. Such invalid provisions shall be deemed not to be a part of this
  Amendment.
  D. Attorney’s Advice. Franchisee and any Guarantors represent that an
  attorney has advised them in this transaction and in executing this Amendment.
  E. Waiver of California Civil Code Section1542. Each party fully

  understands that facts relating to any matter covered by this Amendment might be found
  to be other than, or different from, the facts now believed by it, him or her to be true.
  Each party expressly accepts and assumes the risk of such possible differences in fact
  and agrees that this Amendment will nevertheless remain in effect. Each party
  expressly waives any rights, benefits and protections that might have been afforded by
  California Civil Code section 1542, which provides:

  [A] GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
  THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
  FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
  KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
  SETTLEMENT WITH THE DEBTOR;
  and any statutory, common law, or other doctrines of similar force and effect of any
  jurisdiction, under state or federal law.

  Signed as of the Effective Date.

  Franchisee:

  a _____________________________

  By:___________________________
  Print Name:___________________________
  Title:___________________________

  Franchisee:

  a _____________________________

  By:___________________________
  Print Name:___________________________
  Print Title:___________________________

  Guarantors:

  _____________, Individually

  _____________, Individually

  Franchisor:
  Butterfly Fitness, Inc.

  By:______________________________
  Thomas Gergley, Chairman/President
  $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

  TRANSLATION:

  The first section only saves Butterfly franchisees $2,400.00 for this year. It is not a great deal of money. Besides, what happens next year?

  The second section presupposes a market for resales. How many units have resold in the last 24 months? Is it realistic to assume that a failing unit can be resold? There is no market for failing units. Who would be foolish enough to buy one?

  The third section is a release that covers Butterfly for pre-purchase misrepresentations, but does nothing for the franchisee. Essentially, Butterfly is buying itself a release for royalty reduction of $2,400.00. It is a great deal for Butterfly, but a lousy one for the franchisees. The fact that they are offering such a program, is an indication that they are nervous, and believe themselves vulnerable to a legal attack.

• In the Know
  Jan 15, 2008 at 12:55 am

  Kudos to More Damage
  This latest offering is no more that a Release and Hold Harmless for the price of $2400. If you are in the market to sell your club you best beware. Unless you disclose to your potential buyers, the counter claim, the environment and the true reality of being a Butterfly, you too could be held accountable. Don’t worry, the market isn’t beating down doors to become a BFL.
  Area Reps, you sign and later when you are wondering where your ROI has gone you will just have to be quiet and not take action.
  Franchisees beware of the wolf in sheep’s clothing. How much have you invested ,how did you get here and how much do they want EVERYONE’S SILENCE! ALOT! You sign and you are agreeing that everything you were told during the sales process, pre purchase was correct , true and something you can live by and pay rent. Can you? If Corporate wants to help, why do they need a release, Mark/Tom just help your franchisees and build your Company as you have publicly stated is your desire. Or is it? Or are you praying that everyone doesn’t get it.
  Where is the final 2007 Franchise Renewal?

• Sunshine
  Jan 30, 2008 at 4:46 pm

  AND …todays mail holds this for some of the remaining BFL franchisee’s………and the story goes on with more lies to try to protect themselves( Corp.). Did they send out an email to the remaining “open and happy and successful” club owners about the counter suit filed against them..why NO! Wondering why not?
  Read this email sent out today:
  “We have been made aware of the negative smear tactics in the e-mails that have gone out in regards to the Amendment. It’s sad that this small disgruntled group continues to spread lies and negativity designed to hurt your business and the company. It’s a false and desperate attempt to prevent you from receiving major benefits for your franchise business. The truth is they really don’t care what happens to you or the fact that you need to remain positive and upbeat in order for your business to get your quality time and attention.
  We are committed to adding value and helping you grow your business each and every day. The revenue producing programs we are launching will provide extra revenue to your bottom line and help your members get better results. We will continue to work for you adding great programs and services. All of us staff at the corporate office are here to support you each and every day. Please feel free to contact me with any questions you may have.”

  Where the hell was all the support and concern 12-18 months ago? Could it be that all those “disgruntled, bad business people” were smart enough to get the attention of those in command? If the lies were all lies ( and could not be backed up) does anyone think this case would be heading into arbritration? If so, I have a broker that would love to sell you some beautiful sunny white sand beachfront property in San Ramon.

• Panic Control mode
  Jan 30, 2008 at 10:33 pm

  So, Ms. Cathy Galli, personal assistant to Tom Gergly…..do you really believe that anyone is going to be stupid enough to sign and fax back your amendment? I find it quite funny that you would find the need to issue this email today…..is it because no one has sent them in yet??? Perhaps, they are smarter than Tom and Mark think they are……hummmmmm.

  I particularly love the last part where you state that you “are here to support us each and every day.” So, why is it when a troubled franchise owner calls any one of you and leaves a message……that no one ever calls them back. Perhaps, you should be open and honest with everyone and let them know that during this month’s scheduled BFL University training…..it had to be cancelled because there was only one person scheduled to attend. Could it be that the “party is over”? Before you used to have up to 30+ suckers in a class. What happened? Could business be slow these days? Geez….I wonder why.

  How much longer can you continue to operate your skeleton crew at corporate when you can no longer sell any more franchise rights or collect any more royalties? Cathy, are you willing to work for FREE? Time will tell…..but, I forgot….Time IS against you.

• sean
  Apr 26, 2008 at 7:10 pm

  Here’s a current Butterfly Life franchise offer posted for your input:

  Butterfly Life Franchise Offer: 10 Franchises for $65K.

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