Sydney franchise of UFC Gym Australia chain collapses into liquidation owing $1.2m

A Sydney gym has gone into liquidation, with all of its staff terminated within three days. The gym has debts of more than $1.2m.

EXCLUSIVE

An independent franchise at a popular Australian gym has collapsed into liquidation just a month after the master franchisor appointed administrators.

In June, news.com.au exclusively reported that mixed martial arts gym chain UFC Gym Australia had gone into administration after becoming embroiled in a messy $5 million court case with several disgruntled franchisee owners.

A court ordered UFC Gym Australia to pay $5.8 million to the three franchisees, with the judge finding that the company and its directors had “engaged in misleading and deceptive conduct” during the process of selling said franchises to them. One of the directors is appealing this.

News.com.au can now reveal that a Sydney franchise went into liquidation just a few weeks later, though for unrelated reasons.

UFC Macarthur Square, based in Sydney’s south west, went into liquidation on July 11 and all employees were terminated three days later.

The company’s registered business name was Elvis Sinosic Enterprises Pty Ltd but it traded under the name UFC Macarthur Square, with Sydneysider Elvis Sinosic its director.

At its peak, UFC Gym Australia had more than 10 fitness centres in Sydney, Melbourne, Perth and the Gold Coast.

However, the collapse of the Macarthur Square branch marks the seventh gym to go under or leave the UFC Gym brand in the past six months.

The UFC Macarthur Square franchise has been passed on to the franchisor.

Ian Niccol of insolvency firm Aston Chace Group is the appointed liquidator for UFC Macarthur Square.

A document he lodged with ASIC shows that the business has debts of $1.2 million, but that included a substantial debt to the director, Mr Sinosic. The documents shows the director is owed $1 million for the money he poured into the now defunct business venture.

It’s understood the company’s landlord and the tax office are also owed money. Other creditors are owed $356,000, $231,000 and $166,000.

Mr Sinosic told news.com.au that his company went under “as a direct result of the government’s mishandling of Covid over the last couple of years and their lack of any support for small businesses”.

His gym was plagued with bad luck. Mr Sinosic took on the Campbelltown location in 2019 and was supposed to launch in March 2020 — the same month Covid-19 arrived on Australia’s shores.

He said the master franchisor of UFC Gym Australia going into administration also led to a “lack of customer confidence” in the brand.

According to the liquidator, the tax office issued a penalty notice against Mr Sinosic over an unpaid tax debt.

This meant if he hadn’t placed the company into liquidation, he would have been personally liable for the unpaid tax.

Mr Sinosic himself is a retired Australian professional mixed martial artist.

There was $39,000 cash left in the gym’s bank account when Mr Niccol took over its finances.

A UFC Gym Australia spokesperson said the former franchisee and the franchisor together agreed for him to relinquish the Macarthur franchise. It has since been taken back by head office.

“The franchisor continues to operate the MacArthur gym uninterrupted and customers have experienced uninterrupted service levels throughout,” the spokesperson added.

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The Balcatta gym (pictured) took the master franchise to court and had its franchise agreement voided.

This is the seventh gym to exit the UFC Gym Australia brand in the past six months amid a messy legal case as its branches rapidly dimish across the country.

The three gyms involved in the legal battle – UFC Balcatta in Perth, and also UFC Castle Hill and UFC Blacktown, both from Sydney – had their franchise obligations voided during the court case.

Then the Balcatta and Castle Hill gyms have since rebranded to Rival Gyms, while the Blacktown enterprise has shut down.

The UFC gym in the Sydney suburb of Penrith closed at the beginning of March, blaming “Covid disruptions” and the “economic uncertainty” proliferating in Australia.

A UFC franchise in Narre Warren in Melbourne has also closed its doors for good in recent months.

Then, a day after the UFC Gym Australia brand went into administration, the administrators shut down the company’s Parramatta gym, which was a corporate gym run by head office.

UFC Macarthur Square is the most recent loss to the brand.

UFC Gym Australia has lost half its franchises in the past six months.

In early May, Justice Tom Thawley from the Federal Court of Australia ruled in favour of the three disgruntled franchises — Balcatta, Castle Hill and Blacktown — after a four-year legal battle against the master franchise holder of UFC Gym Australia and New Zealand.

Ultimate Franchising Group Pty Ltd and Ultimate Franchising Group Properties Pty Ltd held the master franchise agreement and went into administration following the court judgement.

During the six-day civil trial, the judge found that the co-directors of UFC Gym Australia, Mazen Hagemrad and Samer Husseini, had misrepresented the gym’s financial position in order to sell franchises.

The directors claimed two of the franchises were profitable when they were actually losing money, told prospective buyers an estimated cost of starting up various franchises which was much lower than it turned out to be, that there would 1200 members in the space of 10 months and that gyms would break even straight away, according to the court’s findings.

Mr Husseini is seeking to appeal these findings.

Mr Hagemrad, one of the co-directors, also claimed to prospective buyers that he had “preferential payments” in place that would make “fitting out” their venue into a UFC style gym considerably cheaper, according to court documents, when in reality he marked up these prices and took a cut of the profit.

Some of the companies he referred franchises to in order to obtain branded equipment were run by his family members, but he denied during the trial that he received any “kick-backs’.

The Balcatta gym was awarded total damages of $1.7 million while the Blacktown one’s total payout came to $1.9 million. The Castle Hill gym was granted $2 million in damages.

Maz Hagemrad, a co-director of UFC Gym, was found to have misrepresented the business. Picture: Justin Lloyd.

Hagemrad was called an unreliable witness during the trial. Picture: Justin Lloyd.

An administrator’s report lodged with ASIC and obtained by news.com.au shows that according to the appointed administrators, Rajiv Goyal & Christopher Johnson of insolvency firm Wexted Advisors, Ultimate Franchising Group Pty Ltd owes $15,654,000 to unsecured creditors.

A UFC Gym Australia spokesperson said the company had appointed administrators because it was the “best option available” to stabilise its financial situation and added it was “considering a range of options” following the court judgment.

Of that $15 million debt, as well as owing millions to the three winning franchisees in the court cases, $160,000 is owed to the NSW department of revenue.

There is a total of 62 creditors, according to proof of debt forms lodged with the administrators.

An additional $42,000 is owed to 10 employees for unpaid wages.

The Commonwealth Bank remains a secured creditor for a $670,000 debt.

UFC Gym Australia “may have been insolvent from as early as March 2023,” the administrators said in their report filed with the corporate regulator.

They added that early May after the court orders were delivered was a more “definitive date” of when the company likely started to trade insolvent.

The gym chain had reported a loss on trading in March, with the company experiencing a $100,000 deficit for the financial year.

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