4 Lessons for Investors to Learn from California Fitness’s Bankruptcy

For those of you unaware, the Hong Kong-based gym chainCalifornia Fitness had recently shut down its operations in Singapore, creating a big hoo-ha. This came after the chain had to end its business in Hong Kong after running into bankruptcy.

In a previous article, I had touched on three possible reasons behind California Fitness’ failure. I thought it’d be useful to draw some lessons from the saga. Here are four:

1. Always conduct due diligence before investing

2. Doubling down may be risky in some cases

3. Cheap companies may end up as a disaster too

(For the first three lessons, check out here)

4. Turning around a company is really tough

California Fitness’s previous owner, Wong Ping Kuen, knew about the gym chain’s hard sell practices. He tried to change it, but one of the chain’s former directors, Cheng kar-tat, stood in the way, along with the gym’s trainers.

There was nothing much Wong could do. Cheng was in charge of California Fitness’s operations and some of the gym’s trainers were earning high salaries because of the sale of high-priced training packages to the gym’s members; it’s natural that the trainers would be reluctant to implement any changes that Wong would have liked.

Billionaire investor Warren Buffett once wrote that “Both our operating and investment experience cause to conclude that turnarounds seldom turn.” Wong’s experience with California Fitness is a good example.

For more insights on investing and to keep up to date on the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat doesn't own shares in any companies mentioned.