Posted by on September 14, 2020 8:03 am
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FDD Talk 2020: Planet Fitness Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

FDD Talk 2020: Planet Fitness Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

America's Most Lucrative Franchises of the Year

Planet Fitness Exterior Photo by Urban Partners Group

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 2020 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 2020 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 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
  • Section V – Presentation and analysis of Planet Fitness’ financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
  • 2019 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, 2019
  • 2019 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, 2019
  • 2019 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, 2019
  • 2019 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, 2019
  • 2019 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, 2019

Section I – Background Information

21 Things You Need to Know About the Planet Fitness Franchise

Reaches 2,000th Store Milestone

1.  In early January 2020, Planet Fitness announced that it had opened its 2,000th location at the end of December 2019 in Colorado Springs, Colorado. The company also opened its 2,001st store at the same time, bringing its 2019 total store openings to a record 261.

2.  Chris Rondeau, CEO of Planet Fitness, said, “I am proud to announce this milestone, which demonstrates how our judgement free, affordable approach to fitness continues to resonate with consumers and the tremendous work being done every day across our system by our franchisees, their team members on the front lines, and our corporate employees. 2019 has been a milestone year of growth for us; with more Planet Fitness locations opened than in any year in our history, and I believe we are just getting started. Beyond our own benchmarks for success, when compared to the industry, our growth is incredible and we continue to see an opportunity to double our domestic store count over time and bring fitness to even more people’s backyards.”

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3.  Rondeau continued, “This milestone wouldn’t be possible without the passion and determination of our experienced franchisees who are bullish on aggressive, thoughtful expansion in both new and existing markets. I am excited about the growth opportunities that lie ahead, and together we continue to fulfill our shared mission of bringing non-intimidating, affordable, and accessible fitness to all.”

4.  A leader in the fitness industry and franchising, Planet Fitness was named to Fortune magazine’s 2019 100 Fastest-Growing Companies list and Forbes’ 2019 list of America’s Best Franchises. Additionally, the company placed ninth on Entrepreneur’s 2019 Fastest Growing Franchises list and seventh on Entrepreneur’s 2019 Franchise 500 list.

Partners with iFit to Bring New Streaming Workouts to Homes

5.  In mid-April 2020, Planet Fitness announced a partnership with iFit, the leader in streaming home workouts and the pioneer in interactive connected fitness technology with more than 275 patents. As leaders in both the in-club and at-home connected fitness industries, Planet Fitness and iFit have united to create new in-home workouts for people of all fitness levels and interests that are fun, motivating, and judgement free.

6.  The collaboration launched with a series of new streaming workouts to help keep everyone moving while they’re at home, available exclusively on the Planet Fitness app, to be used with minimal or no equipment. The 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.

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7.  The partnership begins by bringing some of iFit’s most popular trainers to the Planet Fitness family. Ashley Paulson, Jonnie Gale, and Dr. Zac Marion apply their unique styles to create exclusive new workouts for Planet Fitness that are accessible for all fitness levels.

8.  According to Chris Rondeau, CEO of Planet Fitness, “Times are uncertain and people’s daily routines have changed, but prioritizing your health is more important now than ever before. We want everyone to know that we’re here for them, as their long-term partner in wellness, and we’re bringing our Judgement Free Zone to them. iFit has a strong heritage of innovation in connected fitness and home exercise, and is the ideal partner to help strengthen and enhance our digital offerings. We look forward to providing new ways for people to stay active while they’re at home, continuing to provide unmatched value, and expanding on this exciting partnership with iFit in the future.”

9.  Scott Watterson, iFit’s chairman and CEO, added, “As the leader in streaming fitness technology, iFit is thrilled to partner with Planet Fitness, the industry leader in the in-club fitness space. We commend them for championing health and wellness, and introducing so many people across the country to fitness for the first time by making it affordable and accessible for all. Today, iFit is beloved by millions of people around the world for providing motivating, inspiring and interactive workouts. We’re confident that even more people will benefit and enjoy iFit workouts at home now, and when they’re able to get back to their normal fitness routine.”

10.  Through this collaboration with iFit, the new series of workouts created by iFit and Planet Fitness are available exclusively through the Planet Fitness app and include bodyweight cardio workouts, bodyweight strength workouts, and dumbbell strength workouts. Each workout has a beginner and intermediate level to help people progress through their fitness journey and keep everyone moving from the comfort of their home.

11.  The partnership announcement is an exciting expansion of Planet Fitness’ recently launched “United We Move” campaign, which began with free live daily “Home Work-Ins” available for everyone on Planet Fitness’ Facebook page. The live workouts aim to motivate and inspire, and feature Planet Fitness certified trainers and special guests such as “The Biggest Loser” coach and fitness trainer Erica Lugo and NASCAR driver Joey Logano. These workouts remain on Facebook and are available on the Planet Fitness YouTube channel once the broadcast is over.

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Requires Face Masks at All Locations as Gyms Begin to Reopen

12.  At the end of July 2020, Planet Fitness announced that members and guests will be required to wear a mask at all times (does not apply while actively working out, and in accordance with local restrictions) while inside all open stores, beginning August 1. Currently, all Planet Fitness employees are required to wear masks.

13.  Chris Rondeau, CEO of Planet Fitness, said, “As we continue to face the COVID-19 pandemic, amid an ongoing global health crisis, wellness has never been as essential to our collective community as it is today. Gyms are part of the solution and a key element of the healthcare delivery system, providing much needed access for people to exercise and stay healthy. Given our leadership position within the industry, we believe it’s our responsibility to further protect our members, employees, and communities so that we can all safely focus on our health, which is more important now than ever before.”

14.  According to the International Health, Racquet & Sportsclub Association (IHRSA), safety and sanitization policies implemented at gyms that have been allowed to reopen have been extremely effective. In addition to the updated mask requirement, Planet Fitness has already taken several additional steps to strengthen its existing cleanliness policies and procedures to help keep members, guests, and employees safe. These include enhanced cleanliness and sanitization policies and procedures, extensive training for employees, physical distancing measures in its spacious and well-ventilated stores, and reducing physical touch points with touchless check-in.

15.  Earlier in the month, Planet Fitness also launched a Crowd Meter feature on its free mobile app to allow members to check club capacity before coming into the gym.

16.  “I believe that as people return to their daily activities, they need to be able to safely access gyms and fitness centers with confidence, and reestablish their norms and routines,” said Dr. Ian Norton, health emergency response expert, founder of Respond Global, and former head of Emergency Medical Team response with the World Health Organization. “While COVID-19 is a serious public health issue, so too is the epidemic of obesity and chronic disease killing 1.7 million Americans every year. Fitness contributes to lowering rates of non-communicable disease related to sedentary lifestyles and obesity, and improves mental health, physical health and overall well-being,” said Dr. Norton.

Company History

17.  Planet Fitness was founded in 1992 by Marc and Michael Grondahl in Dover, New Hampshire. The Grondahls had acquired a struggling Gold’s Gym franchise and closed it in 1993. They opened a new gym called Coastal Fitness and the Grondahls hired current CEO Chris Rondeau, who was still in college at the time, to run the gym’s front desk. The Grondahls changed the gym’s name to Planet Fitness in 1994.

18.  From the start, Planet Fitness was an inclusive, non-intimidating gym and in 1997, Planet Fitness officially unveiled its “Judgement Free Zone” philosophy. The “Judgement Free Zone” was started to help first-time gym users feel more comfortable starting their fitness journey.

19.  After a few years of growth, Planet Fitness started franchising in 2003 with the first franchised gym opened in Florida. Planet Fitness’ growth continued over the next decade and in 2013, TSG Consumer Partners, LLC became an equity partner in the Planet Fitness franchise. At that time, Michael Grondahl stepped down as CEO and Chris Rondeau took his place and has held the position since.

20.  Today, there are Planet Fitness locations around the U.S. as well as Canada and the Dominican Republic.

Entrepreneur’s Franchise 500

21.  Planet Fitness ranked No. 7 on Entrepreneur’s 2020 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 2020 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 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

  • Outlets at the Start of the Year:  1,233
  • Outlets at the End of the Year:  1,421
  • Net Change:  +188

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

Company-Owned

2017

  • Outlets at the Start of the Year:  56
  • Outlets at the End of the Year:  60
  • Net Change:  +4

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

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

Part 1 – EFT Revenue

  • The following chart shows Average Annual Gross EFT revenue for Planet Fitness’ corporate and franchised clubs in the United States (including 12 in Puerto Rico) that have been open and operating for at least 12 months as of December 31, 2019.
  • 217 franchised clubs in the United States were excluded, either because they closed during a portion of the year or because they opened after January 1, 2019, and therefore were not open the entire year. All of the clubs that closed operated for more than 12 months before closing.
  • 6 company-owned clubs were excluded because they opened during the year and therefore were not open the entire year.
  • In addition, 14 clubs the company acquired from franchisees during the year were included as franchised clubs because they were operated as franchise clubs for a portion of the year.
  • The clubs were segregated into three groups, or thirds, based on annual gross EFT revenue (i.e., Bottom Third, Middle Third, and Upper Third).
  • Gross EFT revenue is revenue on recurring monthly and annual membership fees that are automatically 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; represents electronic funds presented for draft for the 12 months of calendar year 2019.

Bottom Third (566 Clubs)

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Published at Mon, 14 Sep 2020 05:00:29 +0000

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