Article updated December 2019.
What Gyms Need to Know Before Selling Gift Certificates
When selling gift certificates, it's important to know what the specific laws are in your state. If you aren't careful, it could cost you.
Selling gift certificates can be a great way to introduce fitness newcomers to the services your club provides. They also allow friends and family to support their loved one's gym habits—since they don't necessarily need another Christmas sweater or a fancy birthday dinner.
However, before you make the decision to sell gift certificates, you should acquaint yourself with the gift certificate laws in your state.
Gift Certificates Continue to Grow in Popularity Each Year
For 2019, the National Retail Federation (NRF) predicted holiday shoppers would purchase an average of three to four gift certificates with an average value of $47 per certificate, once again making them one of the most popular gift choices. Second only to clothes and accessories.
A report from Packaged Facts shows U.S. adults spent $42 billion on gift cards in 2018. NRF predicts gift card spending to reach close to $27.5 billion in 2019.
Gift Cards, A Great Opportunity, But Potentially Costly
While gift certificates may be an excellent opportunity to boost your revenue, there are traps for those new to gift cards, and they can be costly.
“NRF predicts gift card spending to reach close to $27.5 billion in 2019.”
In fact, SoulCycle, Inc. was embroiled in a class-action lawsuit—Cody, et al v. SoulCycle Inc.—over its handling of classes sold in packages ranging from one class to 50. The cycling packages come with different expiration dates depending on the number of classes purchased. A single cycle class expires after 30 days, while 50 class packages are good for 12 months.
SoulCycle has since settled the case, which cost them $9.2 million.
Under the settlement, SoulCycle agreed to reinstate up to two classes per customer or reimburse customers $25 for each of those classes. SoulCycle also changed its policies to clarify that purchasing a class or series of classes is not the same as buying a gift certificate.
If you sell gift certificates or are considering doing so, the SoulCycle settlement reaffirms the importance of knowing the rules of the road.
For instance, some states mandate that merchants provide cashback when the gift certificate balance is low. In California, gift certificates with a cash value of less than $10 are redeemable in cash.
Arizona recently passed a law that prohibits the money on gift cards from having an expiration date. It is important to be aware of the gift certificate laws where you operate, or it could really cost you.
Check your state government’s web page for more specific information pertaining to the laws in your state. If you have questions or comments, please contact IHRSA public policy.
Jeff Perkins is the Vice President of Governance & Public Affairs for IHRSA. He's responsible for monitoring and influencing legislation at the state and federal level to protect club business models and operations, and help promote the health benefits of exercise. Jeff enjoys running, soccer, ice hockey, and ice cream, not in that order.