In this FDD Talk 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 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Planet Fitness franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Planet Fitness outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Planet Fitness’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average EFT revenue for the bottom third, middle third, and upper third of franchised and corporate Planet Fitness clubs (combined) that have been open and operating for at least 12 months as of December 31, 2020

• 2020 average EFT revenue for the bottom third, middle third, and upper third of franchised Planet Fitness clubs that have been open and operating for at least 12 months as of December 31, 2020

• 2020 average EFT revenue for the bottom third, middle third, and upper third of corporate Planet Fitness clubs that have been open and operating for at least 12 months as of December 31, 2020

• 2020 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 upper third of corporate Planet Fitness clubs that have been open and operating for at least 12 months as of December 31, 2020

• 2020 average net revenue per square foot, average EBITDA per square foot, and average number of square feet for the bottom third, middle third, and upper third of corporate Planet Fitness clubs that have been open and operating for at least 12 months as of December 31, 2020

Section I – Background Information

19 Things You Need to Know About the Planet Fitness Franchise

Promotes Bill Bode to Chief Operations Officer

1.  In mid-December 2020, Planet Fitness announced that Bill Bode had been promoted to chief operations officer. Bode previously served as senior vice president of franchise operations upon joining the company in 2016. He will continue to serve on Planet Fitness’ leadership team reporting directly to Chief Executive Officer Chris Rondeau.

2.  CEO Chris Rondeau said, “Four years ago, Bill brought his extensive experience in franchising and operations to Planet Fitness, strengthening and elevating our leadership team, as we continued to expand the brand across the country and internationally. During his tenure at Planet Fitness, he has been instrumental in ensuring the highest level of operational excellence throughout our stores and providing an exceptional level of support to our franchisees. His leadership and deep understanding of our business have made him an invaluable asset, and I look forward to further success with him in this new role.”

3.  Effective immediately, Bode will continue to be responsible for leading the franchise operations team, and will also oversee the corporate club operations and vendor management departments. The role spans Planet Fitness’ global operations. Bode said, “At Planet Fitness, we have a strong and experienced group of franchisees and I am proud of the exceptional member experience we have collectively accomplished together over the past four years. We are in a strong leadership position in our industry and I am eager to take on the increased responsibility as Chief Operations Officer to continue to drive our strategic, long-term initiatives forward. I look forward to working with the broader leadership team and to deliver on the many opportunities that lie ahead for this business.”

4.  Bode is a franchise industry veteran with over 35 years of experience. Prior to this appointment, he served as senior vice president of franchise operations, where he focused on building brand equity for both the franchisor and franchisee sides of the business. Previously, Bode worked at Dunkin’ Brands where he held various senior leadership positions, most recently serving as the regional vice president of Dunkin’ Donuts Northeast where he was responsible for overseeing the operations of over 2,600 restaurants. Throughout his tenure at Dunkin’ Brands, Bode also held responsibility for U.S. brand compliance and business development, store development, marketing, and franchising.

Strengthens Partnership with iFIT

5.  In early May 2021, Planet Fitness announced a minority investment in iFIT, a leading global health and fitness technology company that develops and sells interactive software, content, and equipment. This investment builds upon Planet Fitness and iFIT’s existing collaboration announced in April 2020, in which Planet Fitness partnered with iFIT to accelerate Planet Fitness’ digital offerings with expanded and enhanced content.

6.  Scott Watterson, founder, chairman and CEO of iFIT, said, “We are excited to welcome Planet Fitness as an iFIT investor and expand our existing partnership. Chris and the Planet Fitness team are leaders in brick and mortar fitness and share iFIT’s mission: to make interactive fitness accessible for all. This investment and Planet Fitness’ continued partnership will accelerate iFIT’s decades-long legacy of innovating immersive, engaging fitness experiences for everyone, everywhere. We look forward to furthering our work with Planet Fitness and innovating together to bring the best training experience to our members wherever they choose to work out.”

7.  The current partnership between both brands has created new iFIT trainer-led workouts that stream on the Planet Fitness mobile app for people of all fitness levels and interests that are fun, motivating, and judgment free. The exclusive content brings iFIT’s most popular trainers to the Planet Fitness family, with workouts for beginner and intermediate levels to help people progress through their fitness journey.

8.  Many of these workouts are available for free – to both Planet Fitness members and non-members – and span a broad range of fitness and wellness categories, including at-home cardio, at-home strength training, stretching, and more. These iFIT trainer-led workouts have been some of the most popular to-date, and together with the workout library already available on the Planet Fitness app, more than 500 workouts are available for free.

Appoints New Chief Digital Officer

9.  In early June 2021, Planet Fitness announced that Sherrill Kaplan had been appointed chief digital officer. Kaplan joins the brand leading the company’s digital vision and strategy, including the continuous evolution of its mobile app, with a focus on consumer engagement, loyalty, and a differentiated omni-channel experience to accelerate Planet Fitness’ growth and success. She will report directly to Chris Rondeau, chief executive officer.

10.  CEO Chris Rondeau said, “Sherrill has a strong track record of leading digital acceleration efforts and enhancing consumer experiences for well-known consumer brands across various industries. This appointment and newly created leadership role, demonstrates our continued commitment to digital innovation and is a key part of our bricks with clicks growth strategy. Sherrill’s unique background that spans digital marketing, innovation, e-commerce, branding, and customer loyalty, will make her an instrumental addition to our team as we continue to enhance our digital offerings and engage with our members inside and outside our four walls.”

11.  Prior to the announcement, Kaplan served as global marketing operations advisor for Advent International, a global private equity firm. Previously, she served as head of marketing and sales for Zipcar, the world’s leading car-sharing network, where she was a key member of the executive leadership team responsible for demand and revenue generation and all marketing functions.

12.  Prior to that, she served as the vice president of digital marketing and innovation at Dunkin’ Brands where she was responsible for developing and marketing Dunkin’s digital platforms, including the DD Mobile app and the DD Perks loyalty program. Earlier in her career, Kaplan held several digital and marketing leadership roles at global brands including American Express and Citi, Inc.

13.  She serves as an independent member of the Fiesta Restaurant Group board of directors, as well as the Massachusetts Innovation & Technology Exchange (MITX). Kaplan holds a B.S. from Boston University and an M.B.A. from the University of Denver, Daniels College of Business.

14.  Kaplan said, “As Planet Fitness continues to lead the fitness industry, I am thrilled to join the Company at such an exciting time. I’ve long admired Planet Fitness’ mission to introduce more people to fitness, enhance their lives, and ultimately create a healthier world. Planet Fitness has an unrivaled value proposition which has only been enhanced by their recent digital offerings. I look forward to building upon this momentum and leading the next generation of digital innovation.”

Company History

15.  Planet Fitness traces its history to 1992 when Marc and Michael Grondahl bought a struggling Gold’s Gym in Dover, New Hampshire. A year later, they closed that original location and started a new gym called Coastal Fitness. The Grondahls hired Chris Rondeau, the future CEO of the company, to work the gym’s front desk. Eventually, Rondeau was brought in as a partner in the company.

16.  Rondeau and the Grondahls wanted to change the gym industry by offering a place to work out that was inclusive and “non-intimidating.” In 1994, the company changed its name to Planet Fitness and a few years later, the brand unveiled its “Judgement Free Zone” philosophy.

17.  Over the next few years, Planet Fitness continued to grow and franchising started in 2003, with the first franchise location opened in Florida. Planet Fitness continued its expansion around the United States over the next decade, while touting its Judgement Free Zone ideals.

18.  In the fall of 2013, TSG Consumer Partners, LLC became an equity partner in the Planet Fitness franchise. At that time, Michael Grondahl stepped down from the company and Rondeau stepped in as CEO. Today, there are Planet Fitness gyms all across the United States and internationally in Canada, Dominican Republic, Panama, Mexico, and Australia.

Entrepreneur’s Franchise 500

19.  Planet Fitness ranked No. 8 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Planet Fitness franchise costs, based on Item 7 of the company’s 2021 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Planet Fitness’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  1,421
• Outlets at the End of the Year:  1,617
• Net Change:  +196

2019

• Outlets at the Start of the Year:  1,617
• Outlets at the End of the Year:  1,838
• Net Change:  +221

2020

• Outlets at the Start of the Year:  1,838
• Outlets at the End of the Year:  1,949
• Net Change:  +111

Company-Owned

2018

• Outlets at the Start of the Year:  60
• Outlets at the End of the Year:  74
• Net Change:  +14

2019

• Outlets at the Start of the Year:  74
• Outlets at the End of the Year:  96
• Net Change:  +22

2020

• Outlets at the Start of the Year:  96
• Outlets at the End of the Year:  101
• Net Change:  +5

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

Part 1 – EFT Revenue

• The following chart shows Annual EFT Revenue for Planet Fitness’ corporate-owned and franchised clubs in the United States (including 12 in Puerto Rico) for those clubs open and operating (including temporary closures due to the COVID-19 pandemic) during the 12-month period ended December 31, 2020.

• For the fiscal year ended December 31, 2020, 122 franchised clubs and 5 company-owned clubs in the United States were excluded, either because they opened after January 1, 2020, and therefore were not open the entire year or because they closed permanently during the year. Planet Fitness included clubs that temporarily closed due to the COVID-19 pandemic. All of the clubs that permanently closed operated for more than 12 months before closing.

• The clubs were segregated into three groups, or thirds, based on Annual EFT Revenue (i.e., Bottom Third, Middle Third, and Upper Third).

• Annual EFT Revenue is revenue on recurring monthly and annual membership fees that are collected from club members. This does not include any prepaid membership fees, revenue from retail sales or other sources of revenue, and it excludes returns and taxes.

Corporate and Franchised

• In thousands and rounded; represents electronic funds presented for draft for the 12 months of calendar year 2020.

Bottom Third (646 Clubs)

• Average Annual EFT Revenue:  $740
• Median Annual EFT Revenue:  $777
• High Annual EFT Revenue:  $981
• Low Annual EFT Revenue:  $165

Middle Third (647 Clubs)

• Average Annual EFT Revenue:  $1,169
• Median Annual EFT Revenue:  $1,173
• High Annual EFT Revenue:  $1,363
• Low Annual EFT Revenue:  $982

Upper Third (647 Clubs)

• Average Annual EFT Revenue:  $1,704
• Median Annual EFT Revenue:  $1,635
• High Annual EFT Revenue:  $3,087
• Low Annual EFT Revenue:  $1,364

• Of the 646 clubs in the Bottom Third, 370 (or 57%) met or exceeded the total Average Annual EFT Revenue in the table above.

• Of the 647 clubs in the Middle Third, 325 (or 50%) met or exceeded the total Average Annual EFT Revenue in the table above.

• Of the 647 clubs in the Upper Third, 252 (or 39%) met or exceeded the total Average Annual EFT Revenue in the table above.

Franchised Only

• In thousands and rounded; represents electronic funds presented for draft for the 12 months of calendar year 2020.

Bottom Third (614 Clubs)

• Average Annual EFT Revenue:  $739
• Median Annual EFT Revenue:  $777
• High Annual EFT Revenue:  $982
• Low Annual EFT Revenue:  $165

Middle Third (615 Clubs)

• Average Annual EFT Revenue:  $1,170
• Median Annual EFT Revenue:  $1,174
• High Annual EFT Revenue:  $1,367
• Low Annual EFT Revenue:  $982

Upper Third (615 Clubs)

• Average Annual EFT Revenue:  $1,706
• Median Annual EFT Revenue:  $1,632
• High Annual EFT Revenue:  $3,087
• Low Annual EFT Revenue:  $1,367

• Of the 614 clubs in the Bottom Third, 354 (or 58%) met or exceeded the total Average Annual EFT Revenue in the table above.

• Of the 615 clubs in the Middle Third, 312 (or 51%) met or exceeded the total Average Annual EFT Revenue in the table above.

• Of the 615 clubs in the Upper Third, 240 (or 39%) met or exceeded the total Average Annual EFT Revenue in the table above.

Corporate Only

• In thousands and rounded; represents electronic funds presented for draft for the 12 months of calendar year 2020.

Bottom Third (32 Clubs)

• Average Annual EFT Revenue:  $768
• Median Annual EFT Revenue:  $791
• High Annual EFT Revenue:  $973
• Low Annual EFT Revenue:  $440

Middle Third (32 Clubs)

• Average Annual EFT Revenue:  $1,144
• Median Annual EFT Revenue:  $1,157
• High Annual EFT Revenue:  $1,306
• Low Annual EFT Revenue:  $976

Upper Third (32 Clubs)

• Average Annual EFT Revenue:  $1,656
• Median Annual EFT Revenue:  $1,675
• High Annual EFT Revenue:  $2,051
• Low Annual EFT Revenue:  $1,313

• Of the 32 clubs in the Bottom Third, 17 (or 53%) met or exceeded the total Average Annual EFT Revenue in the table above.

• Of the 32 clubs in the Middle Third, 18 (or 56%) met or exceeded the total Average Annual EFT Revenue in the table above.

• Of the 32 clubs in the Upper Third, 17 (or 53%) met or exceeded the total Average Annual EFT Revenue in the table above.

Part 2 – Revenue and Operations Statement

• Below are Revenue and Operations Statements for Planet Fitness’ US-based corporate-owned Planet Fitness clubs for the calendar year ended December 31, 2020. Planet Fitness has segregated these clubs by annual net revenue into three groups, or thirds, from lowest to highest. The table provides the Revenue and Operations Statement that represents the average results of the clubs within each third.

• Except for certain local marketing expenses which are imputed as described below, these results are derived from Planet Fitness’ books and records, which are maintained in accordance with U.S. generally accepted accounting principles.

• Planet Fitness has not included any franchisee expense information in the following table because the company does not receive complete expense information from its franchisees.

• At December 31, 2020, there were 96 US-based corporate-owned Planet Fitness clubs owned and operating (including temporary closures due to the COVID-19 pandemic) for the 12-month period ended December 31, 2020.

• Revenue – The principal source of revenue for a Planet Fitness club is membership fees. Monthly and annual membership fees are usually paid through electronic transfer of funds (EFT). A fitness facility will also earn additional revenue through enrollment fees, prepaid memberships, beverage sales, sale of tanning goggles and lotions, Planet Fitness apparel, and headphones.

• Costs and Expenses – The expense information included in the Revenue and Operations Statement reflects the costs and expenses of the corporate locations included in the statement plus an amount equal to the royalty the location would have paid if it were a franchised club. You may incur other expenses.

• Note that costs to replace equipment and remodel the premises are not included as expenses, but rather are accounted for as depreciating assets.

• Marketing – The marketing expenses listed below reflect the average of actual amounts these corporate-owned clubs contributed to the National Advertising Fund (NAF) and the average amounts these corporate-owned clubs were imputed to have spent on local advertising based on the 2020 requirements of the Franchise Agreement.

• Royalties Expenses – Royalty is 7% of gross EFT revenue. The amounts in the tables below are the averages of the actual royalties paid by the clubs in each third.

• Utilities – Utility costs varied significantly depending on the size and location of the club.

• Supplies and Maintenance – The supplies and maintenance amounts listed below reflect the average of actual amounts these corporate-owned clubs spent on cleaning supplies, club supplies, and repairs and maintenance.

• Miscellaneous – Miscellaneous expense includes cost of goods sold, POS fees, insurance, billing charge, bank and credit card charges, equipment rental, office expense, sales and use tax, and other miscellaneous expenses.

• Insurance costs vary on a club-by-club basis. The insurance costs noted in the statement below are based on bulk buy pricing for multiple clubs.

• Bank and credit card charges will vary based on the banking institution used and type of club membership draft. Drafting membership fees from credit cards will result in higher fees than membership fees drafted from bank accounts.

• Sales and use tax will vary based on the location of the club. Every state will have different rules applying to sales and use tax.

• Other miscellaneous expense includes pizza, bagels, filing fees, licenses, permits, gifts, travel/meals, postage, online join expense, and professional fees. Many of these costs can vary significantly depending on the location and the time spent looking for the best possible local cost on these items.

• Rent – Rent varies significantly depending on the size and location of the club.

• EBITDAR and EBITDA – EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) does not include any provision for income taxes or non-cash expenses such as depreciation or amortization. It also does not include any expense assumption related to the capital structure of the business entity or any reserve for future capital expenditures.

• The statement also does not factor in the initial franchise fee or other initial investment expenses, including expenses for a lease/purchase of equipment. Planet Fitness anticipates that every franchisee will fund their initial investment differently, and it therefore cannot make any assumptions on how you would account for these items.

• EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent) does not include rent expense.

Bottom Third (Average)

Revenue

• Membership Sales – EFT:  $735,103
• Other Membership Sales:  ($2,616)
• Net Revenue:  $732,486
• Net Revenue $/Sq.Ft.:  $43.30

Operating Costs and Expenses

• Payroll Related:  $239,088
• Marketing Expenses:  $53,326
• Royalties:  $53,859
• Utilities:  $44,923
• Supplies and Maintenance:  $45,880
• Miscellaneous:  $46,957
• Total Operating Costs and Expenses, Excluding Rent:  $484,033

EBITDAR:  $248,453

EBITDAR % of Net Revenue:  34%

EBITDAR $/Sq.Ft.:  $14.69

• Rent Expense:  $305,821
• Total Operating Costs and Expenses:  $789,854

EBITDA:  ($57,368)

EBITDA % of Net Revenue:  -8%

EBITDA $/Sq.Ft.:  -$3.39

Average of Sq.Ft.:  16,915

Middle Third (Average)

Revenue

• Membership Sales – EFT:  $1,169,191 (99.5%)
• Other Membership Sales:  $6,074 (0.5%)
• Net Revenue:  $1,175,266 (100.0%)
• Net Revenue $/Sq.Ft.:  $62,76

Operating Costs and Expenses

• Payroll Related:  $253,760 (21.6%)
• Marketing Expenses:  $80,822 (6.9%)
• Royalties:  $80,611 (6.9%)
• Utilities:  $47,152 (4.0%)
• Supplies and Maintenance:  $63,018 (5.4%)
• Miscellaneous:  $54,772 (4.7%)
• Total Operating Costs and Expenses, Excluding Rent:  $580,135 (49.4%)

EBITDAR:  $595,130 (50.6%)

EBITDAR % of Net Revenue:  51%

EBITDAR $/Sq.Ft.:  $31.78

• Rent Expense:  $322,591 (27.4%)
• Total Operating Costs and Expenses:  $902,726 (76.8%)

EBITDA:  $272,540 (23.2%)

EBITDA % of Net Revenue:  23%

EBITDA $/Sq.Ft.:  $14.55

Average of Sq.Ft.:  18,726

Upper Third (Average)

Revenue

• Membership Sales – EFT:  $1,676,178
• Other Membership Sales:  ($2,041)
• Net Revenue:  $1,674,137
• Net Revenue $/Sq.Ft.:  $78.66

Operating Costs and Expenses

• Payroll Related:  $284,080
• Marketing Expenses:  $114,347
• Royalties:  $115,246
• Utilities:  $62,705
• Supplies and Maintenance:  $81,464
• Miscellaneous:  $72,113
• Total Operating Costs and Expenses, Excluding Rent:  $729,955

EBITDAR:  $944,182

EBITDAR % of Net Revenue:  56%

EBITDAR $/Sq.Ft.:  $44.36

• Rent Expense:  $446,444
• Total Operating Costs and Expenses:  $1,176,399

EBITDA:  $497,738

EBITDA % of Net Revenue:  30%

EBITDA $/Sq.Ft.:  $23.39

Average of Sq.Ft.:  21,283

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