In Depth: How a Fragile Business Model Left Gym Giant’s Members Out 1.6 Billion Yuan

Will’s Fitness, a once prominent upscale gym chain in China backed by L Catterton Asia, has suddenly halted offline registration for customer refunds following the closure of its final location, leaving customers uncertain about recouping their prepaid memberships.[para. 1] The only remaining way for members to register for refunds is now through a single online channel, and the majority of Will’s closed gyms have been leased to new operators, some of whom are offering discounted service packages to former Will’s members as partial compensation for lost memberships.[para. 2]

A principal operator taking over closed Will’s sites is mYSTEPS Life, started by Hu Guoxiong, a former Will’s CEO. Hu, known for prioritizing sales — including requiring coaches to double as salespeople — left Will’s in 2013 after a dispute with founder Wang Wenwei. Critics, including former managers, claim Will’s was more focused on cash flow and aggressive sales than delivering quality training experiences for customers, allowing almost any tactic as long as payments were secured.[para. 3][para. 4]

Will’s collapse highlights the risks of China’s prepayment-driven fitness business model. This system, which is ubiquitous in China’s fitness industry, involves collecting large upfront payments through multi-year memberships, supposedly to ensure service and foster loyalty. However, the model is susceptible to flawed expansion, heavy advertising, insufficient transparency, and sometimes leaves customers with worthless memberships when businesses fail.[para. 5][para. 6] Will’s, at its height, ran over 130 gyms, mainly in Shanghai, but its reliance on advance sales and costly packages made its finances fragile, similar to the now-defunct Tera Wellness.[para. 7]

Currently, Will’s owes staggering debts: 1.6 billion yuan ($224.6 million) in prepaid membership and class fees to its members, and many struggle to secure refunds even with court assistance.[para. 8] The company’s rise and fall is a striking illustration of how a prestigious private equity-backed enterprise can falter.[para. 9]

L Catterton Asia, the private equity arm of luxury group LVMH, bought 80% of Will’s parent company for 2.4 billion yuan in 2018. Despite their extensive experience in consumer investments, the firm’s leaders, including partner Scott Chen as chairman, lacked hands-on knowledge of the fitness sector. As a result, management turnover was high, with many externally hired managers lasting less than six months, and L Catterton exerted strong control, often reshuffling leadership.[para. 10][para. 11][para. 12][para. 13]

Under L Catterton Asia, Will’s saw rapid expansion — opening 90 new or renovated locations from 2018 to 2021 while shutting down underperforming outlets. However, after the 2022 Shanghai lockdown and intensifying competition from niche gyms, Will’s shifted to monthly payments and self-service sign-ups, but results were insufficient.[para. 14][para. 15]

Efforts to stabilize cash flow failed as China’s weak economic recovery hit gym revenues. Will’s monthly cash flow dropped to under 100 million yuan — sometimes below 50 million — making it impossible to meet its 90-million-yuan monthly costs.[para. 16][para. 17] Paychecks stopped by November 2024, sparking wage protests and the abandonment of gym offices. Rapidly failing conditions led to unpaid bills and deteriorating facilities.[para. 18][para. 19]

Aggressive, deceptive sales tactics — including falsely selling memberships as appreciating, tradable assets — drew regulatory scrutiny and customer lawsuits. In May 2024, Shanghai authorities limited gym membership terms to 24 months or 5,000 yuan and imposed deposit controls, causing further distress at Will’s, which had opposed these new rules.[para. 20][para. 21][para. 22][para. 23]

After attempts at strategic restructuring, mYSTEPS Life took over 20 Will’s locations and agreed to honor select Will’s memberships and classes, while integrating key personnel and diversifying its offerings into a broader fitness platform. mYSTEPS Life claims to differ from traditional models by allowing monthly payments and ensuring deposits are supervised, addressing longstanding concerns about member funds.[para. 24][para. 25][para. 26][para. 27][para. 28][para. 29]