Monday, November 24, 2008

It's A Planet Fitness World

Judgment Free Zone Grows NH Franchise Into $48 Million Juggernaut
"[Planet Fitness] revenues increased 472 percent between 2004 and 2007 to $48.5 million in an industry that generated $18.5 billion in revenues last year. This year, the company expects revenues to reach near $100 million and net profit to hit $30 million. That growth landed it on Inc. Magazine’s annual list of the 5,000 fastest growing private businesses in the United States (732 overall and first among health clubs). So what's the secret? Low fees and a low tolerance for gym rat behavior. Planet Fitness's monthly fees range from $10 to $19.99 and, unlike many gyms, does not require a contract for regular members Mos. Planet Fitness also enforces a ‘Judgment Free Zone’ that prohibits grunting and dropping weights so their main clientele first-time and occasional gym users can feel comfortable working out. The company grew from five corporate clubs in NH in 2003 to 240 Planet Fitness franchises in 30 states (including 11 in NH), with 410 additional signed agreements. The club's members total 1.1 million people. In November 2006, the company acquired World Gym, a ‘muscle-head gym’ that is the antithesis of Planet Fitness, and its nearly 300 clubs, for about $10 million. Two years later, company executives are looking to sell all World Gym assets. ‘We were more excited about them than they were about us,’ says Mike Grondahl. Grondahl says the lesson was simple: ‘Never buy a competing brand.’ Instead, company founders are investing in successful Planet Fitness franchisees, a move that both helps individual franchises grow and provides the founders with an economic stake in that success. Mike Grondahl describes Planet Fitness as the ‘Wal-Mart’ of the fitness industry. Until recently, others hated them for their business model and their successes. Now, he says, ‘they accept us in the industry, but very reluctantly, like eating crushed glass.’ Unlike most other health clubs, Planet Fitness has no group exercise, no child care and no sales people. Clubs have cardio and lifting equipment in an open floor plan to allow minimal staff to keep watch over the club. When the New York Times wrote a front-page story about a former member being kicked out of a New York gym for grunting last year, Rondeau said it was the best advertising ever. ‘I wish it would happen again,’ he says of that story. ‘It just screamed everything we stood for.’ Planet Fitness clubs have an average member retention rate of 66 percent, below the 73 percent average for the 5,700 health and fitness facilities that belong to International Health Racquet and Sports Club Association, a trade association in Boston. Despite that lower retention rate, Planet Fitness's fee structure and offerings exposes them to a wider potential membership pool than most health clubs, Rondeau says. ‘People try to copy us but they can't,’ Grondahl says of their success. ‘It's a lot more complicated than it looks from the outside.’”

Business NH Magazine


Anonymous said...

My husband is an absolute fanatic when it comes to FITNESS; he's always looking for the latest stuff to hit the markets. So for this Christmas I thought I would do a bit of research and try to find a gift that he would appreciate. So I’ve decided to scour the Internet for some inspiration and came across gizoo who do a power tower punch bag for £16 so I think i'm going to snap that up for him.

Amtex said...

Such a low retention rate, even with super cheap memberships and new clubs?? That sounds like a business model headed for big, big trouble. You can not be the "Walmart of the fitness industry". Walmart has huge advantages over competitors in what it pays for goods. Planet Fitness still must pay rent, equipment leases, salaries on par with what its competitors pay. These are the main expenses so there is no Walmart type competitive advantage.