In this FDD Talk 2015 post, you’ll learn the following:
- Section I – Background information on the Planet Fitness franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Planet Fitness franchise, based on Item 7 of the company’s 2015 FDD
- Section III – Presentation and analysis of Planet Fitness’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
- 2014 average gross EFT revenue for the bottom third, middle third, and top third of franchised Planet Fitness clubs that have been open and operating for at least 12 months as of December 31, 2014
- 2014 average gross EFT revenue for the bottom third, middle third, and top third of corporate Planet Fitness clubs that have been open and operating for at least 12 months as of December 31, 2014
- 2014 average gross EFT revenue for the bottom third, middle third, and top third of franchised and corporate Planet Fitness clubs (combined) that have been open and operating for at least 12 months as of December 31, 2014
- 2014 average membership sales (EFT); other membership sales; total net revenue; payroll costs; marketing expenses; royalties; utilities; supplies and maintenance; miscellaneous expenses; rent; total operating expenses; and earnings before interest, taxes, depreciation, and amortization (EBITDA) for the bottom third, middle third, and top third of corporate Planet Fitness clubs that have been open and operating for at least 12 months as of December 31, 2014
- 2014 average net revenue per square foot, average EBITDA per square foot, and average number of square feet for the bottom third, middle third, and top third of corporate Planet Fitness clubs that have been open and operating for at least 12 months as of December 31, 2014
Section I – Background Information
Planet Fitness opened its second location in Canada in April 2015 in Brampton, Ontario. The opening follows Planet Fitness’s first international location in Toronto, Ontario, in December 2014. Both are corporate facilities, but the company is actively marketing the brand to franchise groups in Canada.
Planet Fitness began in 1992 in Dover, New Hampshire. The company has more than 900 locations and targets people who have not been health-club members or who have only occasionally used a gym. Planet Fitness is a national brand partner of the NBC television show “The Biggest Loser.”
Some Question ‘Judgement Free Zone’
Planet Fitness, which prides itself on its “Judgement Free Zone,” distances itself from the stereotypical gym setting and says people should not be “Gymtimidated” by “Lunky” behavior. The clubs have “Lunk” alarms that go off when a member grunts, drops weights, or judges someone. The business model focuses on making people comfortable even if they are not thin or ripped or otherwise athletic.
However, Planet Fitness has been criticized for what some people consider forms of judgment, including its dress code, which bans jeans, sandals and spaghetti-strap tank tops. Individual franchises can set additional restrictions on dress codes.
Tarainia McDaniel sued Planet Fitness in March 2014, under the New Mexico Human Rights Act and the Unfair Practices Act, stating that she was not allowed to enter an Albuquerque Planet Fitness club because she was wearing a head covering, which was part of her Muslim faith. Planet Fitness later clarified that it allowed head coverings for religious reasons.
The case, which stemmed from a 2011 incident, was to go to trial in August 2014, but it was settled for a confidential amount, McDaniel’s lawyer, Rachel Higgins, told the Albuquerque Journal. Higgins told the Journal that Planet Fitness no longer prohibits head coverings for any reason
In March 2015, a Michigan woman’s membership was revoked when she complained to her local Planet Fitness club’s staff and corporate headquarters and warned other members about a transgender woman who appeared to be physically male and was using the women’s locker room at a local Planet Fitness club. The company cited “inappropriate and disruptive treatment” in revoking Yvette Cormier’s membership. Cormier has sued Planet Fitness, asking for $25,000.
Celebrating Milestones Large and Small
In October 2014, Planet Fitness began an online community to give members a welcoming environment to celebrate their fitness milestones. Through “Planet of Triumphs,” members can celebrate their accomplishments, from joining the gym to losing hundreds of pounds. Participants create an online profile and can share their stories and connect with other people. Weekly prizes are awarded, along with a grand prize that gives the winner a walk-on role in one of the company’s television commercials.
Five Million Members Celebrated
In March 2014, Planet Fitness reached a milestone of five million members. The health club franchise has a 10 percent market share of the 50 million health club members in the United States.
Planet Fitness celebrated with an online sweepstakes featuring daily $500 prizes and five grand prizes with a “five” theme: a Mazda5, a five-day cruise, a five-day trip to Hawaii, a 50-inch smart TV, and a five-year Planet Fitness Black Card membership. The company also gave five surprise awards of $1,000 and a free one-year membership to random members.
PF Equips Gym in Redesign of Ronald McDonald House
Planet Fitness in October 2014 announced that it would donate all equipment for a new gym for the redesign of the Ronald McDonald House in Long Island, New York. The facility houses families of seriously ill children while the kids receive medical treatment.
Section II – Estimated Costs
- Please click here for detailed estimates of Planet Fitness franchise costs, based on Item 7 of the company’s 2015 FDD (updated).