The California-based company also said that it will permanently close more than 100 locations, the company said in an online statement to its clients.
“We are implementing a financial restructuring,” the company said. “This process gives us the opportunity to reposition 24 Hour Fitness by eliminating debt and closing clubs that were either out-of-date or in close proximity with other ... clubs.”
Removing financial and operational constraints will allow the company to focus entirely on transforming its business and the club experience for the better, the company said in its statement.
The news comes as 24 Hour Fitness is following government and public-health guidelines to reopen locations amid the pandemic, according to the press release. As clubs reopen, members will have access to any 24 Hour Fitness center through the end of the year, regardless of membership level.
In the release, 24 Hour Fitness said it has secured $250 million in funding to help reopen its remaining clubs by month's end.
“If it were not for COVID-19 and its devastating effects, we would not be filing for Chapter 11,” CEO Tony Ueber said in the company's news release. "We expect to have substantial financing with a path to restructuring our balance sheet and operations to ensure a resilient future.”
Filing for Chapter 11 doesn’t mean for certain a company will go out of business. Some firms use it to eliminate or restructure their debts while they hope to emerge leaner.
Ueber said the restructuring will result in reinvestment in its existing clubs, open new ones and introduce "several new innovative products and services," the release states.
Last month, PYMNTS reported Gold’s Gym International Inc. filed for Chapter 11 bankruptcy protection citing financial disruptions created by the virus. The Dallas chain said it will permanently shutter 32 corporate-owned gyms and restructure its balance sheet. CEO Adam Zeitsiff said the filing will ensure the company’s viability for decades.
In a PYMNTS interview in April, Fritz Lanman, CEO of ClassPass, a New York company that provides access to a variety of fitness classes, said the effect of COVID-19 has been catastrophic. Almost every player, he said, has spent weeks scrambling to shut down their business while helping their staffs to ride out the crisis. The switch to workouts guided by an online program has helped some fitness enthusiasts get through it.
“There’s nothing like being in a class physically with a community and an instructor,” he said.
PYMNTS’ latest survey, the COVID-19 Business Recovery Report, found that commerce has been upended as businesses work quickly to find new ways to offer services during shutdown orders and prepare for safe reopenings.