This Franchise Chatter Guide on Planet Fitness and Anytime Fitness was written by Brian Bixler.
This year, when Forbes magazine and FRANdata put together an inaugural list of “best and worst” franchises, two fitness companies in particular made the “best” cut: Anytime Fitness was rated No. 5 in the $150,001 to $500,000 investment category, while Planet Fitness landed at No. 3 in the over $500,000 investment category.
Forbes’ list also included RetroFitness in the latter category and Curves earned the dubious distinction of being one of the “worst” franchises. The high rankings of Anytime and Planet Fitness, however, illustrate the neck-and-neck competition between those brands to be No. 1 while winning over the hearts and dollars of new franchisees and members.
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Aside from the disparity in their initial investment amounts, there are fundamental differences in how the two brands operate and market themselves; yet, there are also many similarities. So which one is a more sound investment for a potential franchisee?
The answer depends on what type of business the new owner wants to run with each successful brand offering its own distinct advantages for owner/operators.
Founded in 2002 by Chuck Runyon, Dave Mortensen and Jeff Klinger, Anytime Fitness is currently based in Hastings, Minn., and has experienced explosive growth during the last decade by stressing convenience to its members. The founders were experienced in health club management prior to founding Anytime Fitness and while Klinger has left the company for other pursuits, Runyon and Mortensen continue to run the franchise, which is continually upgrading technology that plays a large part in membership acquisition and retention.
Anytime Fitness runs 24-hour facilities that members can access 365 days a year with a keycard. The business model is a streamlined version of the big-box gyms, offering the basics in a more intimate environment for those interested in getting fit.
Planet Fitness has been around since 1992 when it was co-founded by brothers Michael and Marc Grondahl. Based in Newington, N.H., the company began franchising in 2003. After acquiring a struggling, conventional big-box gym, Michael Grondahl developed a new business model that focused on providing casual and first-time gym users an affordable basic membership of just $10 per month, while concentrating on essential equipment and amenities and paring down those that were marginally used, such as a juice bar and pool.
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While the low-cost business model is still the essence of the brand, the gym has also trademarked the “No Judgment Zone,” which means serious bodybuilders and gym bunnies need not apply. The policy is intended to create an intimidation-free atmosphere for beginners.
In the course of a decade, Anytime Fitness has grown to some 2,500 units, a feat that took Subway more than 20 years to accomplish and McDonald’s more than 30. There are gym locations in all 50 U.S. states and global expansion has seen units open in some 20 countries, including Canada, Mexico, Australia, New Zealand, United Kingdom, Grand Caymen, Poland, the Netherlands, Spain, Qatar, India, Chile, Japan and Singapore.
The company added 338 stores in the last year alone and as it expands in Europe and Southeast Asia, it plans to add another 1,500-plus units over the next five years. At the end of 2013, just 17 Anytime Fitness stores were company-owned with the rest operated by franchisees. The company has also passed the 2 million-member milestone.
Planet Fitness has some 830 locations in the United States with the greatest concentrations in the Northeast, Texas, Florida and the Carolinas. The company prides itself on giving people value with brand-name cardio and strength equipment as well as fitness instruction. About 54 Planet Fitness gyms are corporate-owned with the remainder independently owned and operated by franchisees.
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The company’s longtime operations guy, Chris Rondeau, is the chief executive officer, while brothers Marc and Mike Grondahl serve as chairman of the board of directors and board member, respectively. They retain ownership in the company.
Citing data from the International Health, Racquet and Sportsclub Association’s 2013 Global Report, a company release issued when Planet Fitness hit the 5 million-member mark earlier this year reported that it owns a 10 percent market share of the more than 50 million health club members in the United States.
According to the company’s Franchise Disclosure Document, the total investment necessary to begin operation of an Anytime Fitness center is between $78,700 and $371,175. That includes an initial franchise fee of $32,500 for a new franchisee, as well as the cost of certain items that most franchisees purchase from affiliates before they begin operating. Those items range in total cost from $4,866 to $32,068.
For an Anytime Fitness Express center (i.e. one located in an area having less than 5,000 people living within a 5 mile radius of the center), the initial investment should range from $55,350 to $199,525 for a new franchisee with an $18,000 initial franchise fee plus additional items ranging in cost between $4,566 and $27,268.
Anytime Fitness is perceived as an affordable investment for franchisees and is often noted for its flat-fee royalty of $499 per month.
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The total investment necessary to begin operation of a single Planet Fitness facility ranges from $824,200 to $2,881,500, which includes financing equipment, according to its FDD. The amount also covers the initial franchise fee of $10,000 that must be paid to the franchisor or its affiliate.
Franchisees who opt to purchase their own equipment pay a total initial investment from $1,219,500 to $3,725,000, including the $10,000 initial franchise fee.
The company also has Area Development Agreements in which the franchisee agrees to open a minimum of five units.
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Both Anytime Fitness and Planet Fitness have landed on some prestigious lists like this year’s Forbes “best” compilation and Franchise Chatter’s own list of best fitness franchises, but Anytime Fitness snagged the big prize when it was named the No. 1 franchise on the Entrepreneur Franchise 500 list for 2014.
After four years of climbing the list, Planet Fitness failed to make the Franchise 500 at all this year, but industry watchers said having a fitness company in the top spot bodes well for the entire industry.
Both companies landed on the Inc. 5000 list for 2014 and Planet Fitness took the higher position, landing at No. 2863 compared to Anytime at No. 3058.
Meanwhile, each brand lays claim to the title of “fastest-growing health club franchise” when it wants to flex its marketing muscle. Anytime cites its exponential unit growth, while Planet Fitness says its membership growth—it has more than twice the number of members that Anytime has—makes it the fastest-growing.
New Sources of Capital
As one of the benefits of its global expansion, Anytime Fitness has a reciprocity program that allows members to visit any of its locations globally. But with a PF Black Card membership, Planet Fitness members also receive premium membership privileges, including access to all clubs in the Planet Fitness chain, the ability to bring a guest at no additional charge, as well as the use of massage chairs, HydroMassage beds, Total Body enhancement booths, tanning and 50 percent off all cooler drinks, among other benefits. Many of the Planet Fitness clubs are also open 24 hours like Anytime locations.
Moreover, both brands have forged partnerships with investment firms recently, which have resulted in capital infusions that could be instrumental in recruiting new franchisees. Planet Fitness partnered with strategic equity firm TSG Consumer Partners LLC in early 2013. At the time the announcement was made, the company said the partnership would enable Planet Fitness to further build its national brand, expand locations and support its franchisees. Other TSG corporate partners include Yard House restaurants, Cutex, Smashbox Cosmetics and Glacéau Vitaminwater.
Anytime Fitness announced earlier this year that an affiliate of private equity firm Roark Capital Group acquired a minority stake in the fitness chain. The terms were not disclosed, but Runyon said the deal would help accelerate U.S. and global expansion of the brand. Roark is the preeminent private equity firm in franchising with a portfolio of brands that includes Auntie Anne’s, Carvel Ice Cream, Cinnabon, FASTSIGNS, Massage Envy, McAlister’s Deli, Moe’s Southwest Grill, Schlotzsky’s, Wingstop and others.
Meet the Press
Among other similarities, each company has also received its share of favorable publicity because of corporate practices. Anytime is all about a culture that encourages franchisees to find balance between work and play in their lives. It is often described as a franchisee-friendly culture in which the company’s founders still play a very personal role in bringing new recruits on board.
Once they sign an agreement, the new franchisees are introduced quickly to the company’s keys to success, which it sums up as the four p’s: people, profit, play and purpose. Return on investment at the company isn’t just about the money. The culture espouses a philosophy that incorporates the so-called ROEI—the return on emotional investment—which is provided by a franchise that allows owner/operators to spend more time living their lives.
RELATED: Fitness Files: Anytime Fitness Co-Founder Dave Mortensen Says the Company Strives to Change Lives of Its Members and Franchisees
Inking a Deal
Anytime Fitness has also received a great deal of attention by reimbursing costs for any member that gets a tattoo of the company’s running man logo and shares his or her story of why they decided to ink themselves with the image. In fact, as construction begins on Anytime’s new 80,000-square-foot headquarters in Woodbury, Minn., plans call for a tattoo parlor to be housed in the building. Company officials estimate more than 2,000 people around the world now have the firm’s logo tattooed on their bodies, including passionate franchisees. The company is also known for providing tattoo services at conferences it holds for owner/operators.
Pigging Out on Pizza
Meanwhile, Planet Fitness has its own gimmick that attracts media attention. As a member-appreciation gesture, Planet Fitness provides free pizza on the first Monday of every month, and free bagels on the second Tuesday of every month, saying that even those who work out to stay fit deserve to take a break now and then. Potential franchisees might also consider the brand awareness generated by the company’s official status as a partner with the NBC reality show “The Biggest Loser,” in which contestants work out on Planet Fitness equipment with Planet Fitness instructors.
On the other hand, Planet Fitness has attracted a fair share of negative publicity because of its no-judgment policy. There have even been reports of some members being escorted from Planet Fitness premises basically for showing too much prowess and muscle at the gym. Typical gym rats who are serious about training and weightlifting have been referred to by a company spokeswoman as “lunkheads” who are encouraged to pursue their fitness regimens elsewhere. That’s why each Planet Fitness gym is equipped with a yellow and purple “lunk alarm” to discourage behaviors such as grunting and dropping weights.
According to a November 2013 report by IBISWorld market research firm, the $26 billion fitness industry of gym, health and fitness clubs in the U.S. will continue to benefit from health-conscious baby boomers signing up for club memberships as well as an increase in per capita disposable income in the coming years. Revenues are expected to grow at a rate of 2.9 percent, reaching nearly $30 billion by 2018.
Plus, health club memberships increased from 47.7 million to an estimated 52.6 million during the five-year period from 2008 to 2013. Those numbers will continue to rise as consumers pursue healthier lifestyles and discretionary incomes grow, the IBISWorld report projects. Given the long-term prospects for the sector, the race to be No. 1 for Anytime Fitness and Planet Fitness might just be starting.