The FHI/Busy Body bankruptcy: Gaining perspective with history and a peek at the future -- Part 1

This was the SNEWS headline: “Busy Body no more.” But it’s not from 2009. In fact, these words headlined our story in SNEWS more than eight years ago. Take a look back with us at the rise of this Busy Body to see what stores and what people were sucked up along the way -- and how the fall progressed to a bankruptcy reorganization that to many seemed to masquerade as a liquidation.
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In the first part of this story, SNEWS will take you through a review of the history behind Busy Body with perspective on the first incarnation and the building of the second incarnation that eventually ended in a late 2008 bankruptcy. In our second part on Feb. 15, we’ll review the transition from acquisition mode to bankruptcy filing, what many of the owners of retail businesses that were acquired are now doing, and we’ll also take a look at the status of the bankruptcy case.

This was the SNEWS® headline: “Busy Body no more.”

But it’s not from 2009. In fact, these words headlined our story in SNEWS more than eight years ago -- on Oct. 29, 2001.

Wrangling in bankruptcy court continued 15 months after the latest collapse of the national retail entity, although officially Busy Body is again, of course, … no more. (Click here to see our October 2001 story.)

Much was lost in the second bankruptcy and eventual demise of a chain of stores called Busy Body Home Fitness and Omni Fitness, both run by parent Fitness Holdings International (FHI): Jobs, of course, for the many hundreds of employees, as well as their security and their families’ securities. Hope perhaps, since this bankruptcy came at a time of overall economic despair and rising unemployment. Trust, too, not only by the public in buying from any independent store that sells fitness but also by suppliers who again had to pull out the red pen and swallow the losses that swept across the industry for approximately $10 million of a reported $28.8 million in liabilities That compares to the first round under different ownership with reported liabilities to the industry of $17.8 million.

Gone too, however, in the implosion are nine other regional retail businesses that were acquired by FHI during the last reign of Busy Body -- a total of some 115 stores, depending on how you slice it, from sea to shining sea that simply went buh-bye. Granted, some of those storefronts and owners and managers have returned, both in other businesses but also with the retail infill that began in the last year or two. The Ch. 11 bankruptcy reorganization case, however, still hangs in court, with its next hearing set for mid-March and a case against it by its unsecured creditors committee charging financial fraud now headed to appeal. (Click here to read an update on that case in a Feb. 1, 2010 story.)

With many former employees still on a job-hunt and a court appeal that could drag out for many months, the Busy Body/Omni Fitness head-shaker is bound to be a subject that isn’t ready to go away. So SNEWS thought a look-back at the history would offer some insights -- and perhaps some lessons.

Take a look back with us at the rise of this Busy Body to see what stores and what people were sucked up along the way -- and how the fall progressed to a bankruptcy reorganization that to many seemed to masquerade as a liquidation. (The photo to the right is a shot of the chain’s home page in August 2009.)

The Phoenix rises

It was fall 2001, five months after the prior incarnation of Busy Body filed Ch. 11 bankruptcy with its 83 stores, and the business was eventually pieced apart by the U.S. Bankruptcy Court, Southern District of Texas. Rights to the name regionally or various store locations were auctioned off to seven retail businesses across the country, plus to Hancock Park. In the West, Hancock Park -- its operating company was Fitness Holdings International (FHI) that was “dba” Busy Body -- bought the rights to the name plus 16 locations in two states -- California and Colorado.

Headed by President and COO Kenton Van Harten, a partner in FHI’s owner Hancock Park, Busy Body began to take life -- ironically again under the wing of FHI, which was its original owner, building the group from 30 to 80 stores. In 1998, Hancock Park sold the retailer to Rice Capital, which saw Busy Body into its first bankruptcy.

In the summer of 2002 -- only a few months later -- in its first acquisition, FHI took over three Fun & Fitness stores in Arizona from Mark Yagoda.

For the next two years, the company was on a tear, flexing muscles and pumping itself up bigger and bigger with each round.

2003

The real roll began in 2003 or two years after the rise from the ashes of the former Busy Body.

>> In October, the 17 stores that made up the western division of Omni Fitness, many of which started life as Exercise Equipment Centers, were acquired by FHI from then-owner Brunswick Corp. Van Harten said at the time, “Our goal has been to be the dominant dealer on the West Coast." Click here to see that Oct. 10, 2003, SNEWS story. 

>> Fitness Warehouse’s nine stores in the San Diego, Calif., area and owned by the founders of Hoist Fitness were next a month later. Van Harten confirmed the company’s intent to become “the dominant dealer on the West Coast.” Click here to see that story, “Busy Body snaps up Fitness Warehouse, grows to 48.” 

Perspective: By the end of the year, FHI’s Busy Body had grown both organically and through acquisitions to 47 -- its total after various closings and openings. The Fitness Experience had hit 55 at the end of the year after its 2002 merger of its 35 stores with Ohio’s Exercare (17) -- click here to see that 2002 story; 2nd Wind was also beginning to ramp up, hitting 26. Click here to see our FitBiz report for the year ending in December 2003 covering who was who at retail.

With each acquisition, Van Harten reiterated to SNEWS that the company’s only goal was to be the biggest and best in the West, that it would always only do retail, and that it had no designs on the East.

2004

This was a huge year for the company as it mowed down four others:

>> On May 2, Chip Hunnings announced he and his partner, Bill Wagner, sold their nine All About Fitness stores in Colorado and Arizona to FHI. (Click here to read those details.) That move leap-frogged Busy Body to the retailer with the highest number of stores since The Fitness Experience had started to retrench. Van Harten said, "As we've always said, our goal is to be the dominant player on the West Coast.”

>> The end of May, FHI took over the nine stores that were Exercise Equipment of Nevada run by Phil and Arlene Huddleston out of Reno. "We're staying busy," Van Harten told SNEWS at the time. That story can be found here

>> In August, Gregg Spieker’s Advanced Exercise Equipment in Colorado, also with nine stores, was bought by FHI. (The SNEWS story can be read here.)

>> Concluding the year in November was the acquisition, again from Brunswick and Life Fitness, of the eastern division of Omni Fitness and all of its then 46 stores. They were, per Van Harten, to be run separately since it contradicted the previous emphasis on a focus in the West. "It's not a secret that Life Fitness/Brunswick has wanted to get out of retail, and we like specialty retail and we think we're good at it," Van Harten told SNEWS. "We've always said Busy Body was staying in the West, and it is…. It's separate people, separate regions."

Perspective: In one year, FHI-owned stores had jumped to 58 with an additional 46 under the East’s Omni flag. The Fitness Experience ended the year at 36 although less than a month later it declared bankruptcy and disappeared. Dick Enrico’s 2nd Wind continued its growth path, climbing to 39 in the Midwest. Click here to read the SNEWS FitBiz report on the state of retail as of December 2004. 

2005

Money was still plentiful, it seemed, so the acquisitions continued -- for now:

>> The month of May rolled around and, this year, FHI had an offer that 24-year owners Mike Cirillo and Jim Watson of The Fitness Store, based in Northridge, Calif., couldn’t refuse. Their six stores were taken over from Watson, who had semi-retired a couple of years earlier, and Cirillo, who said he was ready to fully retire. Click here to read more about it.

>> Last but not least of the acquisitions came in August when Ran Radzewsky and Eli Ner-Gaeon sold their LA Gym Equipment business to FHI. Having founded their first store in 1988 as newcomers from Israel, they spoke proudly of their accomplishments and of the reputation of their chain of now 13 stores had gained. Nobody at the time realized the acquisition would be FHI’s last; SNEWS had the details in its Aug. 17, 2005, story

Perspective: The FHI empire, with its Busy Body and Omni stores, hit a peak of 120 at the end of 2005. The Fitness Experience was gone, and 2nd Wind had jumped to 56. The summary of what was what at retail as of December 2005 is in the SNEWS FitBiz report here

Suddenly, the mad dash to grow seemed to stall, although the economy -- so far -- was still in good shape. In fact, the best year among many in fitness was still to come in 2006. By then, however, FHI and Busy Body’s rush for growth had trickled to a stop and it was going to be less than a year before the rumors began about its future (or non-future) and less than two years before its bankruptcy papers landed in the court.



In our next part on Monday, Feb. 15, SNEWS takes a look at those years, what some of the owners of acquired stores turned to, as well as what the future could hold.

--Therese Iknoian

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