Fitness Tee Co. parent company files for Chapter 11 bankruptcy

The Global Tee Co. LLC, a seller of motivational fitness apparel, has filed for Chapter 11 bankruptcy protection, citing the effects of the COVID-19 pandemic on the business.

The Cascade Township-based company, which does business as Fitness Tee Co., filed for bankruptcy protection on May 25 in the U.S. Bankruptcy Court for the Western District of Michigan. Global Tee is pursuing Chapter 11 under Subchapter V of the U.S. Bankruptcy Code, which allows small businesses to reorganize while allowing owners to retain a stake in the company.

Owned by CEO Scott Sandberg and located at 4850 Kendrick St. SE, Global Tee listed nearly $190,000 in assets, which include cash on hand, equipment, and blank and finished clothing inventory, according to court filings. That compares with $1.1 million in liabilities, including nearly $658,000 in unsecured claims.

In the filing, the company said it "has fallen behind in payments to its creditors, including taxing authorities" who have filed levies on its bank accounts, "which has interrupted cash flow necessary for continuation of (Global Tee's) business operations."

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Creditors with some of the largest priority unsecured claims include the city of Kentwood ($15,000), the Florida Department of Revenue Taxpayer Services ($16,900), the Indiana Department of Revenue ($6,400), the Michigan Department of Treasury ($6,400), the State of Texas Comptroller of Public Accounts ($10,500) and the Ohio Department of Taxation ($9,700).

Other unsecured non-priority creditors include Cascade Township-based Applied Innovation ($5,000), Lowell-based GFL Environmental ($3,300), Grand Rapids-based law firms Miller, Johnson, Snell & Cummiskey PLC ($5,000) and McShane Bowie ($1,500), Southfield-based 123Net ($11,510) and Donald Sandberg of Ada ($260,000).

According to the court filings, Scott Sandberg formed Global Tee in 2014 "from the floor of my residence." The company grew to employ 10 workers and ships globally, but has suffered poor ratings and loss of revenue in the last three years.

From the company's fitnesstee.com website, the retailer sells various styles of workout shirts printed with motivational sayings such as "Hot Mess," "Suck It Up Buttercup," "Works Out But Clearly Loves Tacos," "The Sass Is Strong With This One," and "I Don't Sweat I Drip Awesome Sauce."

Global Tee said it generated nearly $4.6 million in revenues in 2019, but sales dipped 27% in 2020 to about $3.3 million, and "has been recovering" since then, according to the filing.

The Chapter 11 filing states that Global Tee is "taking action to increase its revenues and reduce its operating expenses."

The company is represented in the case by Wyoming-based Dunn, Schouten & Snoap PC. Neither Sandberg nor his attorney responded to requests to comment at the time this report was published.

The falloff in sales for Global Tee during the pandemic occurred despite growth of the broader athleisure sector. According to a report from Grand View Research, the global athleisure sector, of which North America is the largest market, is projected to have reached nearly $331 billion as of 2022 and should expand at a compound annual growth rate of 9.1% through 2030.

In a social media post from April 2020, at the onset of the pandemic, Sandberg said he was fulfilling 5,000 to 7,000 orders weekly and noted that lead times for print-on-demand shirts had increased from two to five days to almost two weeks because of worker shortages.

On March 1, 2021, the Michigan Attorney General's office issued a cease and desist to the company, accusing it of unfair trade practices in violation of the Michigan Consumer Protection Act.

The letter stated that several consumers had placed orders and were charged for items they did not receive, while others received products but were unhappy with the quality of apparel and were unsuccessful in contacting the business for a refund.

The letter also noted that an investigator from the Attorney General's office spoke by phone with Sandberg, who said he was aware of the quality issues and that some consumers were not receiving their orders.

"You attributed issues with your company's customer service to a ‘switchover’ in the third party customer service provider. You tied many of the issues your business is experiencing to COVID-19 and cutting back on staffing at the beginning of the pandemic," the Attorney General's office wrote in the letter. "Although you admitted that the issues surrounding Fitness Tees exist and not all are remedied, you also stated that you had to continue taking orders to pay for the business expenses. Fitness Tees is still accepting orders when previous orders remain unfulfilled."

A spokesperson for the attorney general's office told Crain's Grand Rapids Business that it resolved the matter with the company in March 2021 via an Assurance of Voluntary Compliance, which required the company to make payments to its dissatisfied customers, the Michigan Office of Attorney General and the Better Business Bureau of Western Michigan, which initiated the complaint.