how does planet fitness make money

How does planet fitness make money?

There’s no denying the fact that: the fitness industry is booming.

With the rise of the work-from-home culture and sedentary work life, the gym sector has grown in popularity among people of all ages.

Now, gyms are no longer only for “junkies”, owing to the multiple affordable fitness centers available.

And when it comes to an affordable fitness center, how can one not think of Planet Fitness!

What is planet fitness and what does it offer?

Planet Fitness is a chain of fitness clubs, started by Marc and Michael Grondahl in Dover, New Hampshire back in 1992.

In 2022, with over 2000 clubs, it has become world’s largest chains of fitness franchise in terms of members and locations (and one of the best gyms for a new gym-goer)

They are super famous for their low-cost, cheap gym subscription prices, which is 1/6th of the typical American gym subscription fee! (Woah!)

That itself is appealing enough to entice a large number of members, isn’t it?

Here you’ll find a diverse crowd — from standard stereotypical gym-goers to people of every age group, and fitness level.

Apart from the low-cost membership of $10/month, they offer a squeaky clean atmosphere with tons of treadmills and all of the traditional equipment that one needs to get going.

They offer a Black card membership that allows you to join and use any Planet Fitness gym from anywhere in the world, making it a viable option for working people.

They give you the option of hiring a personal trainer for an additional charge. So a planet fitness member can have personal training sessions, making their fitness classes more customized and personalized.

They also provide all their ******members to enjoy unlimited access to their home club — means the club to which you applied for membership. Here you can speak with a staff member at the front desk and get assistance with all of your membership-related queries.

Their affordable membership system, easy-to-connect fitness clubs has kept them in the news and their unbreakable revenue model has definitely made them a household name since the 90’s.

How does planet fitness make money?

Planet Fitness has a strong, robust revenue/business plan that allows them to generate recurring revenue all year.

Their well-thought membership plans along with cheery-on-the-cake amenities make them a powerful fitness facility that is well-liked by everybody.

Their revenue model makes money in 5 ways

  1. Membership fees
  2. Royalty fees
  3. Selling equipment to franchisees
  4. Merchandizing
  5. Strong clientele

Membership fees

Planet Fitness works on a membership basis, with each gym member paying a fixed monthly, quarterly, bi-annually, or annual fee.

The truth behind these models is, they bank on the fact that most individuals just take a planet fitness membership and do not show up. And because the fees are so minimal, they don’t care about canceling the membership either.

How do we know that? Each Planet Fitness location has 7500 members, yet the building can roughly hold 350 people at a time. Even they know that most people won’t be attending the gym regularly.

This was also pointed out in one of the Planet Money podcast episodes, where they stated that “half of the Planet Fitness members don’t ever go to their gyms”

And Planet Fitness leverages this fact.

(Source: The Washington Post)

Also, if every member went to the gym, the gym would need to be more equipped, and the subscription prices would undoubtedly be much more than $10/mo!

Royalty fees

The fees paid by the franchisee to use something created by someone else are referred to as royalty fees.

In addition to the initial franchise fee, gym franchises must pay the franchisor a certain percentage of their sales on a monthly basis.

The fee for the Planet Fitness franchise is $10,000 for a 10-year renewable agreement, where the total investment ranges from $700,000 to $3.8 Million.

As per the latest reports, franchisees own and operate more than 95% of Planet Fitness gyms, and each of the franchises has signed a franchise agreement to pay an ongoing 5% royalty fee for all sales to Planet Fitness. That’s accounts for a huge amount!

Also Read: How Does Discord Make Money?

Selling equipment to franchisee

A great revenue stream for Planet Fitness is by selling gym equipment directly to the franchise owner.

They purchase the equipment in bulk, which costs them far less than the market price. They then sell it to the Planet Fitness franchisee, making it cost-effective for them as well as maintaining a margin large enough to add that extra revenue to their pockets.

Merchandise

Planet fitness has more to it than just machines. Apart from making billions from their monthly and yearly memberships, they also sell a whole host of merchandise for men and women.

They have tons of merchandise to choose from — not just limited to men’s and women’s gym gear, t-shirts, and tank tops for everyday usage. They offer hats, accessories such as sunshades and glasses, and bags, amongst other stuff.

Strong clientele

Planet Fitness has been rather transparent and analytical in its entire branding and marketing, making it a welcoming environment for people of various ages, health types, and fitness levels.

They have promoted their clubs as having a friendly environment where you are not judged, discriminated against, or bullied based on your fitness level — making it a go-to option for every novice gym goer.

What makes planet fitness successful?

Planet Fitness has been an ever-expanding fitness brand with a clean, steady growth for the last 20+ years.

But how and why are they breaking the charts?

There are 4 major factors that contribute to the humongous success of the Planet fitness franchise:

  1. Low-cost membership — As the membership fees are so low, people feel less guilty about taking up the gym subscription and then not showing up. They have kept the amount so low that it barely impacts a person’s conciseness, which works to their advantage.
  2. Low overhead cost — Another key reason for Planet Fitness’ success is the low overhead costs; its equipment needs to be replaced only every 5 years — making it a relatively affordable model.
  3. Broad client base — Chris Rondeau, CEO of Planet Fitness said in an interview they are targeting 80% of the population that doesn’t own a gym subscription — that’s a clever audience choice. With a massive population in both USA and Canada, having an audience base so broad is itself a big win.
  4. Judgment-free zone — Their whole marketing strategy centers on a “comfortable, judgment-free workout environment,” which sets them apart from the lot. First-time gym-goers do not experience any anxiety or friction of thoughts before joining — which has been a game-changer for the company.

How much money does Planet Fitness make?

Planet Fitness operates many different membership plans to fit the needs of its members. Despite this wide variety, Planet Fitness still has the main revenue structure that is one of the most popular in the industry — $10/month.

With this intelligent structure, they have managed to build a billion-dollar company from scratch.

According to reports, in the first quarter of 2022, Planet Fitness has clocked a revenue of $186.7 Million, which is a sharp 66.9% increase compared to the first quarter of the prior year!

Let’s see how this huge number comes from a bare minimum monthly subscription rate:

At the end of the first quarter, their total memberships were somewhere around 16.2 Million.

With the membership fee being $10 each (taking the minimum rate into account), it counts to a whopping $162 Million a month, or 1.9 Billion a year!

The pandemic was undoubtedly a downturn for the fitness sector, and this impacted Planet Fitness and its numbers as well.

However, there has still been an increase in the growth graph of Planet Fitness revenue and Planet Fitness shares, showing how strong their franchise game is.

Here are a few quick stats about their revenue over the years:

  • Annual revenue for 2021 was $0.587B, a 44.37% increase from 2020.
  • Annual revenue for 2020 was $0.407B, a 40.97% decline from 2019.
  • Annual revenue for 2019 was $0.689B, a 20.23% increase from 2018.

[Check this out for a detailed revenue report])

Who are its major competitors?

People want to come out of their shells and meet new people who have the same health goals as them, in a comfortable, and friendly environment.

Planet Fitness serves as the solution to this problem — and they’re not alone.

You see, there are many competitors in this market who offer similar services to what Planet Fitness does, popularly known as the “big box gyms”.

Some of Planet Fitness’ close competitors include: Rite Aid, ClassPass, LA Fitness, Mountainside Fitness, Sunshine Fitness, Orangetheory Fitness, Cardinal Fitness, Crunch Fitness, and Anytime Fitness.

(Source: Comparably)

But personally, we feel for the number of machines available, the pricing at Planet Fitness is unbeatable. No one can top the price of $10/mo!

And this is one of the major factors why Planet Fitness lifts the trophy in a “standard gym-goers’ choice” award.

Apart from this, other standout tactics that Planet Fitness has are:

  • A 24-hour fitness schedule where a person does not feel constrained by time.
  • Planet Fitness black card members can visit the gym from any place.

History of Planet Fitness

With the aim of enhancing people’s lives with an affordable, high-quality fitness experience in a non-intimidating environment, the first Planet Fitness Inc was started by Michael and Marc Grondahl in Dover, New Hampshire in 1992.

They eventually shuttered their first site and brought in a third partner, Chris Rondeau, who is now the CEO of Planet Fitness.

They began attracting the attention of thousands of individuals due to their original concept and incredibly low pricing structure.

Their model of delivering a simple, low-cost exercise hub for everyone was robust enough to never fail.

With 5 years into the business, they launched their Judgement Free Zone concept to allow people to feel comfortable enrolling and beginning their fitness journey – a point that made them extremely famous among general public.

Fast forward to 2011, they opened their first location outside the continental United States in Carolina, Puerto Rico.

By the end of 2012, TSG acquired a majority stake in Planet Fitness and for about 5 years TSG consumer partners and Planet Fitness worked closely to develop the overall branding of Planet Fitness and improved their value proposition for both members and franchisees.

In 2017, they reached a new high of 10 million members, making them the largest fitness fam ever!

They currently have over 2000 franchise clubs and 16 million members, making them the largest and most successful fitness business in the world!

1. How many members does planet fitness have per location?

Planet Fitness is the largest fitness center/fitness franchise in the world and serves approximately 7,500 members in each location.

How much does planet fitness make a year?

As per the official reports released at the end of the first quarter of 2022, to reports, Planet Fitness has clocked a net income of $186.7 Million, which is a sharp 66.9% increase over the first quarter of 2021!
Over the last 3 years, they have seen a clean growth graph, making their franchise game stronger than ever.

What is Planet Fitness’s target market?

Planet Fitness CEO Chris Rondeau stated that the company (franchise) targets 80% of the population that does not have a gym membership.
They intend to attract an audience that is a little hesitant and unsure about gym subscriptions. But, with their low-cost membership structure, it’s they make it a no-brainer for them.

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