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Fitness is essential to physical and mental health, and every member should feel accepted and respected when they walk into a gym or fitness center, regardless of their fitness level.
In 2019, a study by the New York Post of 2,000 Americans looked at people’s fitness routines and habits and found that as many as 50 percent feel that working out among other people in a gym environment is daunting.
Any fitness center should be where people of all fitness levels can feel comfortable working out at their own pace, supported in their efforts, and not intimidated by pushy salespeople or other members who may ruin their fitness experience.
Experts even have the term “gymtimidation” to describe how individuals can feel pressured when they try to use free weights or machines at the gym, especially when they first start exercising regularly.
Planet Fitness understood this behavior and started a chain of fitness clubs to provide its members with a non-intimidating and supportive environment at an affordable price. Learning how Planet Fitness works and makes money is essential for strategy enthusiasts. What is Planet Fitness’s business model?
What is Planet Fitness? How does Planet Fitness work?
Planet Fitness started almost three decades ago and is an American franchisor and operator of fitness centers based in Hampton, New Hampshire. The company reports that it has 2254 clubs, making it one of the largest fitness club franchises by the number of members and locations.
Planet Fitness is one of the largest and fastest-growing franchisors and operators of fitness centers in the United States by the number of members and locations. Planet Fitness has 15.2 million members as of 2021.
Planet Fitness’ mission is to enhance people’s lives by providing a high-quality fitness experience in a Planet Fitnesslcoming, non-intimidating environment, which Planet Fitness calls the Judgement Free Zone.
As per its annual report, Planet Fitness has an addressable market significantly larger than the traditional health club industry. Planet Fitness views its addressable market as approximately 250 million people, representing the U.S. population over 14.
Planet Fitness competes broadly for consumer discretionary spending related to leisure, sports, entertainment, and other non-fitness activities in addition to the traditional health club market.
Planet Fitness’ bright, clean stores are typically 20,000 square feet, with a large selection of high-quality, purple, and yellow Planet Fitness-branded cardio, circuit- and weight-training equipment, and friendly staff trainers. They offer unlimited free fitness instruction to all members in small groups through the PE@PF program.
Planet Fitness offers this differentiated fitness experience at only $10 per month for its standard membership. This attractive value position is designed to appeal to a broad population, including occasional gym users and approximately 80% of the U.S. and Canadian people over age14 who do not belong to a gym, particularly those who find the traditional fitness club setting intimidating expensive.
Planet Fitness and its franchisees fiercely protect its community atmosphere—a place where one does not need to be fit before joining and where progress toward achieving his/her fitness goals (big or small) is supported and applauded by its staff and fellow members.
Planet Fitness works on a Franchise business model to develop new Planet Fitness stores, leveraging entrepreneurs’ ownership with specific local market expertise. As of December 31, 2021, there were 2,142 franchised Planet Fitness stores operated by approximately 120 franchisee groups.
The majority of the existing franchise- operators are multi-unit operators. When considering a potential franchisee, Planet Fitness generally evaluates the potential franchisee’s prior experience in franchising or other multi-unit businesses, history in managing profit and loss operations, financial history, and available capital and financing.
How does Planet Fitness make money? What is the business model of Planet Fitness?
Planet Fitness aims to bring fitness to a large, previously underserved population segment. Three critical elements drive its member experience:
Welcoming, non-intimidating environment: Planet Fitness works on an ideology of having a Judgement Free Zone where members can experience a non-intimidating and supportive environment, allowing them to feel comfortable as they work toward their fitness goals and encouraging others to do the same.
By outfitting the stores with more cardiovascular and light strength equipment and a limited offering of heavy free weights, Planet Fitness discourages what it calls “Lunk” behavior, such as dropping weights and grunting, which can be intimidating to new and occasional gym users.
Distinct store experience: Planet Fitness stores are typically large and do not offer amenities such as group exercise classes, pools, daycare centers, and juice bars. Hence it has more space for the equipment and has not felt the need to impose time limits on cardio machines.
Affordable Services: At affordable prices, Planet Fitness offers unlimited access to one Planet Fitness location and unlimited free fitness instruction to all members in small groups through its PE@PF program. To its premium members, Planet Fitness offers access to exclusive areas in its stores that provide amenities such as water massage beds, massage chairs, tanning equipment, etc.
Planet Fitness’ marketing strategy is anchored by its vital brand differentiator—the Judgement Free Zone at an affordable price. Planet Fitness employs memorable and creative advertising, which drives membership sales and showcases its brand philosophy, humor, and innovation in the industry.
The heart of Planet Fitness’ marketing strategy is to reinforce the “feel good” mental and physical benefits of exercise and create a welcoming in-store environment for its members.
All franchisee-owned stores are supported by Planet Fitness’ dedicated franchisee marketing team, which provides guidance, tracking, measurement, and advice on best practices. Franchisees spend their marketing dollars on promotional activities like direct mail, outdoor (including billboards), television, radio, and digital advertisements, and local partnerships and sponsorships.
For the last several years, Planet Fitness has been sponsoring “Dick Clark’s New Year’s Rockin’ Eve with Ryan Seacrest.” It has been the sole presenting sponsor of theTimes Square New Year’s Eve celebration, allowing the brand to be featured prominently in TV broadcasts covering Times Square during the celebration.
How does Planet Fitness make money: the revenue model
Planet Fitness generated $587 Mn in 2021. Planet Fitness makes money from three primary sources:
Franchise segment revenue: Franchise segment revenue relates to services Planet Fitness provides to support its franchisees and includes royalty revenue, NAF revenue, franchise fees, placement revenue, other fees, and commission income associated with its franchisee-owned stores. Franchise segment revenue contributed $290 Mn (50%) to the total revenue of Planet Fitness in 2021.
Corporate-owned store segment revenue: Includes monthly membership dues, enrollment fees, annual fees, and prepaid fees paid by members, as well as retail sales. This source of income contributed $167 Mn (28%) to the total revenue of Planet Fitness in 2021.
Equipment segment revenue: Includes equipment revenue for new franchisee-owned stores and replacement equipment for existing franchisee-owned stores in both the U.S. and Canada. Franchisee-owned stores must replace their equipment every five to seven years. This source of revenue comprised $129 Mn (22%) of Planet Fitness’ total revenue in 2021.