President Biden Could Reopen Stimulus Talks. What Does That Mean for the Fitness Industry?

Some studios were shut out of PPP money and others found the loans cumbersome. Will the government consider grants?

The exponential spread of covid-19 in the U.S. leading up to end-of-the-year holidays is raising the prospect of new restrictions on public places and self-imposed periods of staying homebound. Some gyms and fitness studios — one that survived spring shutdowns, reduced foot traffic and the costs of protective equipment — will not survive this stage of the pandemic, warns an industry trade group.

“With cases on the rise again, a number of states have put curfews and a number of states are considering lockdowns,” said Jeff Perkins, assistant Vice President of government relations for the International Health, Racquet & Sportsclub Association (IHRSA). “San Diego has gone into ‘purple.’ There is a vulnerability with a certain number of closures that is becoming an issue.”

Anyone hoping for a lifeline from the federal government will probably have to hold on until 2021, if they can.

President-elect Joe Biden has called for Congress and President Donald Trump to pass another economic relief bill before Biden takes office on Jan. 20. But negotiations for a sequel to the C.A.R.E.S. Act, passed in March, have been at a standstill for months. As many of the benefits of that $2 trillion package petered out, the Democrat-controlled House passed $2.2 trillion H.E.R.O.E.S. Act in October, meeting Trump’s stipulations about cost. But leaders in the Republican-controlled Senate have insisted on a smaller budget of $500 billion. The bill has languished. With the political world consumed by Trump’s efforts to stop the certification of the election, economic relief will probably wait until Biden takes office.

For the fitness industry, Perkins said two things are certain: The cost of no intervention would be catastrophic and the C.A.R.E.S. Act did not account for a months- or years-long struggle to stay afloat amid continuing virus concerns.

According to data gathered by the IHRSA, 480,000 jobs and $15.6 billion in revenue were lost in the fitness industry because of coronavirus. The organization predicts, at the current pace, 25 percent of American clubs that existed in 2019 will close by the end of 2020. “That is not all on the failure to provide relief,” Perkins stipulates. “There has been less demand.”

The October version H.E.R.O.E.S. Act is Biden’s template for future efforts. Much of the bill’s $2.2 trillion go towards copying or continuing programs from the C.A.R.E.S. Act; most income taxpayers would get another $1,200 stimulus check and those receiving state unemployment benefits would again receive an additional $600 per week. Some new additions include billions for housing assistance, contact tracing and school reopening efforts.

The main mechanism to help businesses is still the Paycheck Protection Program (PPP), which disturbed forgivable loans to eligible businesses. When the C.A.R.E.S. Act was passed, loans were forgiven if at least 75 percent had to go to payroll and another 25 percent could go to facility costs, like rent, mortgage and utilities. The rest the business would be required to pay back. In June, Congress loosened restrictions so that 60 percent could be spent on payroll and 40 percent on facility costs. The H.E.R.O.E.S. Act dedicates $30 billion to the program, a paltry sum compared to the $659 billion from the C.A.R.E.S. Act.                   

As a way to ensure the survival of their businesses, many fitness studios found the PPP confusing, insufficient and/or inaccessible.

Many studios were ineligible because they pay instructors as independent contractors, a common method in the fitness industry, but by the bill’s definition, there are no paychecks to protect in such cases.

Jennifer Dixon, owner of Thrive Yoga and Wellness in Chattanooga, Tenn., sought aid when the studio shut down in March. “We didn’t qualify [for PPP],” she said. “It was structured for a traditional corporations with employees.” Dixon said that, before the pandemic, the studio had 27 teachers, 18 of who taught once a week, but none were employees.

The studio utilized another program. In May, Thrive was approved for an Economic Injury Disaster Loan, a low-interest Small Business Administration loan for which qualifications were loosened after the pandemic. Dixon said the amount was a little less than a year of its operating budget.

She fears using the money. She has a year’s grace period and then she will have to start paying it back in installment payments. “He had to use a little bit,” she said. “I’m trying my darnedest not to.” Profit margins are slim, particularly since the studio reopened with fewer customers for each class. Dixon doubts she can manage the debt.

Companies that received a PPP loan experienced frustration and confusion in using the money and some say stipulations attached diminished their ability to plan for what turned out to be a long period of hardship.

Philadelphia’s NovemFit is a “group-based functional training” gym, according to co-owner Joe Ling. The business had been affiliated with CrossFit but broke off its association over then-CEO Gregg Glassman’s controversial comments about the death of George Floyd.

Shuttered for a month, Ling and his partner Lesha Vozobule were anxious for PPP money in April after the C.A.R.E.S. Act passed. They employed eight instructors as part-timers. Though there might not be much meaningful difference between the way NovemFit and Thrive Yoga and Wellness offered employment — both provided steady, though not full-time work — the distinction meant Novem was eligible for PPP.

The business received a loan of about $50,000 in May and began dishing out money to furloughed instructors. Ling said they were careful to account for every dollar because anything not spent on payroll or facilities has to be repaid.

When NovemFit reopened in August, the money had already been spent. Ling said he is grateful but the studio has had no assistance for the subsequent stage, in which they operate with fewer customers, amid a world controlled by the virus for the foreseeable future. The stipulations attached to the PPP money meant they couldn’t save it and utilize it strategically over months. “They assumed we’d only be dealing with this for four months” said Ling.

For this reason, the IHRSA’s Perkins said he favors grants over forgivable loans. His ideal aid package is the Health & Fitness Recovery Act, co-sponsored by U.S. Reps. Michael Quigley (D-IL) and Brian Fitzpatrick (R-PA), for which the IHRSA lobbied. The act sets aside $30 billion for the fitness industry and allows for grants of up $10 million or 10 percent of a business’s 2019-to-2020 business loss, whichever is less. The money can be used for payroll costs, rent payments, utilities, debts to suppliers, maintenance and supplies.

Setting aside a pot of money for one industry is a large ask, but Perkins said the fitness industry is sufficiently unique in its challenges and important in a world dominated by health concerns to warrant such a step.

“We’re often grouped with bars and restaurants in terms of businesses that will have to shut down, but there is no curbside pickup for fitness,” he said. “There are a lot of ways to keep members engaged online but there are some unique aspects to fitness.”

He said there is “a lot of economic heartache” around the economic impact of COVID-19 but the fitness industry should be given a lifeline particularly because people are worried about their health. “That’s why we are here,” he said, “to help people stay healthy and boost their immunity.”