The majority of states require health clubs to hold some kind or license or registration, Each license type has its own set of requirements, depending on state/local laws and regulations. If you plan on starting a health club, there are several steps that need to first be taken.
What Is the Definition of a Health Club?
A “health club” is a general term that often refers to entities which offer training, assistance, and/or facilities for the maintenance or development of physical and personal wellness.
Health clubs may include:
- Sports and bodybuilding clubs
- Tennis clubs
- Health spas
- Martial arts schools
- Other similar physical training courses
Operating Without a License
Health clubs that operate without a license (or with an expired one) may be subject to penalties. Furthermore, entities who violate any provisions of the state’s laws and regulations are liable to receive a civil fine. The amount of the civil fine is different for each state, but can be as high as $2,500 for each violation.
Health Club Licensing: Step-by-Step Guide
A significant part of opening a licensed health club is meeting the appropriate prerequisites before starting the license application process. First, ensure that you’re registered with the appropriate regulatory authority. In most states, this is either the state’s Division of Consumer Affairs or the Division of Consumer Protection.
Depending on the local and state regulations – as well as the type of business – you might need more than a business license to operate as a health club. Specific regulations and licensing requirements like sales tax permits or food licenses may apply. To find out more case-specific information, check with a city official or your chamber of commerce.
General Health Club License Requirements
To operate a health club, every state have their own unique regulations and statutes which govern various aspects of health clubs activities. Each health club owner must ensure that their operations and membership contracts are compliant with all applicable laws and regulations.
To become registered or licensed, you first need to complete an application process that’s governed by the state or local statute. In the application forms, you’ll be required to provide information regarding your business. This information includes the name, address, and phone number of the health club, as well as the name and address of the club owner.
During the application process, applicants will have to provide member information as well. This information may include, but is not limited to, membership costs and price schedules, the type of services offered, sample membership contracts, and approximate number of members.
Applications often require additional items such as site plans, proof of insurance, or financial statements.
Application forms which are not properly completed or unaccompanied by the required documentation are often considered incomplete and can slow down the licensing process.
A pre-opening sales permit is usually required of health clubs who want to sell membership contracts before the opening of the club.
State and Local Requirements
The majority of states require health clubs to hold a license though there are a few exceptions. For example, all health clubs and spas that provide membership contracts in New York and Colorado must file a letter of credit, certificate of deposit, or a health club surety bond.
An inspection of the premises is part of some states’ health club licensing requirements. For example, in Connecticut, applicants are not allowed to operate or sign any membership contracts before the club has been inspected and approved by the Department of Consumer Protection.
Membership Contract Restrictions
Consumer protection laws often affect health club membership contracts. Most health clubs are required to allow the membership holder the option to cancel their contract within a certain period after receiving a copy of it.
Health clubs that offer membership contracts for a duration of more than 24 months must provide the consumer with an option to renew the contract annually.
Most license application forms and all other applicable documentation can be accessed online via the state’s licensing agency’s website. Submit your license application to the licensing agency and ensure that you have included all required additional documentation.
Health Club Surety Bonds
Since health clubs generally require pre-payment of fees, requirements have been established to protect consumers. This is why health clubs are usually required to obtain a surety bond to ensure customer protection in the event the health club goes out of business or fails to conduct business lawfully. In such an event, the amount of the bond is used to refund the clients’ membership fees.
Requirements and costs of the bonds are established at the state level. Some states require health clubs to post bonds based on the length of membership contracts they offer.
For instance, New York health clubs are required to furnish a $50,000 surety bond if the club offers 12-month contracts. However, if the club offers 12-to-24 month contracts, the bond amount must be increased to $100,000. Additionally, the bond amount is also dependent on the applicant’s credit report.
A surety bond is required as part of some Health Club license applications. Overall, the Health Club bond ranges between $20,000 and $300,000. Health clubs with more than one location may need to increase their bond amount or furnish additional surety bonds.
Typically, the cost of a health club surety bond is charged as a percentage of the total bond needed. The surety bond usually needs to be in place before you submit your license application. Health Club bonds usually need to be renewed annually, before their expiration date.
Fees and Taxes
Along with the license application form, the applicant is required to submit a registration or application fee. The fees are usually non-refundable and vary between $100 and $800. The annual registration fee may also be based on the number of unexpired membership contracts. Additional fees may apply and vary depending on state regulations.
All product sales (e.g. gym bags, equipment, clothing) are subject to sales tax, whether the club sells wholesale or retail.
Registration and Renewal Timeframes
Health Club licenses and bonds often need to be renewed annually. The renewal period is set by each state. Some states require Health Club licensees to send renewal notices approximately 30 to 45 days before the expiration date.
If you do not want to renew your Health Club license, you may be required to give the applicable authorities a certain notice period. For example, in Pennsylvania, the Bureau of Consumer Protection must receive a 90-day notice before the proposed cancellation date.