Planet Fitness Business Model

Fitness plays a pivotal role in promoting both physical and mental well-being, making it crucial for individuals to feel accepted and respected when they step into a gym or fitness center, regardless of their current fitness level.

The primary objective of any fitness facility should be to establish an environment where people of all fitness backgrounds can comfortably engage in their workouts at their own pace, supported in their endeavors, and free from any intimidation caused by aggressive sales tactics or fellow members who disrupt their fitness experience.

This feeling of intimidation, commonly known as “gymtimidation,” is often experienced by individuals who are new to regular exercise routines and are unfamiliar with using free weights or gym machines.

Creating an inclusive and non-intimidating atmosphere is essential for encouraging individuals to embrace fitness as a lifelong pursuit and promoting a positive relationship with exercise.

Recognizing this common behavior, Planet Fitness established a chain of fitness clubs that offers its members a non-intimidating and supportive atmosphere at an affordable price. Understanding how Planet Fitness operates and generates revenue is vital for those interested in strategic insights. So, what is the business model of Planet Fitness?

So what is it?

Founded almost three decades ago, Planet Fitness is an American franchisor and operator of fitness centers headquartered in Hampton, New Hampshire. With an impressive network of 2,300 clubs, it stands as one of the largest fitness club franchises in terms of both membership and locations.

  • In fact, Planet Fitness is a prominent force in the industry, recognized as one of the leading and fastest-growing franchisors and operators of fitness centers in the United States. As of 2021, it boasts an extensive member base, with approximately 15 million individuals actively benefiting from the services and facilities offered by Planet Fitness. This substantial membership base is a testament to the popularity and appeal of the brand among fitness enthusiasts nationwide;
  • Planet Fitness is driven by a mission to enhance the lives of individuals by providing a top-quality fitness experience. Central to their approach is the creation of a welcoming and non-intimidating environment known as the Judgement Free Zone. This unique atmosphere encourages people of all fitness levels to feel comfortable, accepted, and supported as they pursue their health and wellness goals;
  • While Planet Fitness competes within the traditional health club market, its reach extends beyond that scope. The company competes more broadly for consumer discretionary spending related to leisure, sports, entertainment, and various non-fitness activities. By offering an inclusive and affordable fitness solution, Planet Fitness aims to capture a share of the market by providing an enjoyable and accessible option for individuals looking to prioritize their well-being.

Through their focus on creating a supportive environment and their ability to compete across various segments, Planet Fitness strives to be a comprehensive solution for individuals seeking an enriching fitness experience.

By catering to a wide range of interests and preferences, Planet Fitness endeavors to make a positive impact on people’s lives, both inside and outside the gym.

Fitness club locations

Planet Fitness locations are characterized by their bright and clean environments, spanning an average of 20,500 square feet. These spacious facilities are carefully designed to accommodate a diverse range of workout needs.

Inside, members will find an extensive selection of high-quality cardio machines, circuit equipment, and weight-training apparatus. All of the equipment is branded with Planet Fitness’s signature purple and yellow colors, creating a cohesive and visually appealing atmosphere.

In addition to the well-equipped facilities, Planet Fitness employs friendly staff trainers who are available to assist and guide members. One of the standout features of the Planet Fitness experience is their commitment to providing unlimited free fitness instruction.

Members have the opportunity to participate in small group sessions led by qualified trainers, who offer guidance, support, and personalized workout instruction. This program ensures that members receive proper guidance and instruction, regardless of their fitness level or prior experience.

The combination of a well-maintained facility, top-notch equipment, and knowledgeable staff trainers enables Planet Fitness to create a welcoming and supportive environment for individuals of all fitness backgrounds.

Whether members are looking to improve cardiovascular health, build strength, or enhance overall well-being, they can rely on Planet Fitness to provide the resources and assistance needed to achieve their fitness goals.

  • To make their fitness experience accessible to a wide audience, Planet Fitness offers a standard membership priced at only $10 per month. This attractive value proposition is designed to appeal to a broad population, including occasional gym-goers and the approximately 80% of people aged 15 and above in the United States and Canada who do not currently belong to a gym. This pricing strategy particularly targets individuals who find traditional fitness clubs intimidating and costly;
  • Planet Fitness and its franchisees place great importance on preserving a sense of community within their establishments. They aim to create an environment where individuals don’t need to be fit before joining and where progress toward achieving their fitness goals, regardless of size, is supported and celebrated by staff and fellow members alike.

Planet Fitness operates under a franchise business model, which involves collaborating with entrepreneurs who have in-depth knowledge of their local markets to establish new stores. Many franchise operators manage multiple Planet Fitness units, reflecting the success and scalability of the brand.

When selecting potential franchisees, Planet Fitness carefully assesses various factors. These include the candidate’s prior experience in franchising or managing multi-unit businesses, their proven ability to handle profit and loss operations, their financial history, and their access to capital and financing.

By evaluating these criteria, Planet Fitness ensures that its franchise partners possess the necessary qualifications and resources to effectively run and grow their fitness clubs within their respective markets.

How Planet Fitness generates revenue through its value proposition

Planet Fitness endeavors to bring fitness opportunities to a large demographic that has historically been underserved. The member experience at Planet Fitness revolves around three key elements:

Welcoming, non-intimidating environment

Planet Fitness is committed to creating a Judgement Free Zone where members can exercise without feeling judged or intimidated. This dedication to a supportive environment ensures that individuals of all fitness levels feel comfortable and encouraged to pursue their fitness goals.

To maintain this atmosphere, Planet Fitness strategically selects its equipment offerings. The focus is on providing a wide range of cardiovascular machines and light strength training equipment, while limiting the availability of heavy free weights.

This approach aims to reduce the intimidation factor for newcomers and infrequent gym users who may be less familiar with weightlifting techniques. By prioritizing accessibility and inclusivity, Planet Fitness fosters an environment where everyone feels welcomed and empowered to improve their health and well-being.

Distinct store experience

Planet Fitness stores are intentionally designed to provide a spacious and non-intimidating environment for its members. Unlike traditional gyms, Planet Fitness locations do not include amenities such as group exercise classes, pools, daycare centers, or juice bars.

This design choice enables the company to offer a larger selection of equipment and focus on creating a comfortable workout space for individuals of all fitness levels.

Moreover, by eliminating amenities like pools and group classes, Planet Fitness avoids the need for time limits on cardio machines, allowing members to exercise at their own pace without feeling rushed. This approach aligns with their mission of providing a judgment-free zone where everyone can pursue their fitness goals.

Affordable services

Planet Fitness strives to provide affordable fitness options to its members. For a reasonable price, members gain unlimited access to a single Planet Fitness location. Additionally, the program offers free fitness instruction to all members in small groups.

Premium members enjoy exclusive access to designated areas within the stores, which provide amenities like water massage beds, massage chairs, and tanning equipment.

Marketing plays a vital role in Planet Fitness’ strategy. The company’s marketing efforts revolve around its unique brand differentiator, the Judgement Free Zone, offered at an affordable price.

Planet Fitness employs creative and memorable advertising campaigns that emphasize the mental and physical benefits of exercise while showcasing the brand’s philosophy, humor, and industry innovation. The objective is to create an inviting in-store environment and drive membership sales.

To support franchisee-owned stores, Planet Fitness has a dedicated franchisee marketing team that provides guidance, measurement, tracking, and advice on best practices.

Franchisees allocate their marketing budgets to activities such as direct mail, outdoor advertising (including billboards), television and radio commercials, digital advertisements, and local partnerships and sponsorships.

For several years, Planet Fitness has sponsored “Dick Clark’s New Year’s Rockin’ Eve with Ryan Seacrest” and served as the sole presenting sponsor of the Times Square New Year’s Eve celebration. This prominent involvement allows the brand to gain significant exposure during television broadcasts covering the Times Square festivities.

Revenue model

The revenue generated from franchise services underscores the strong partnership between Planet Fitness and its franchisees, as well as the effectiveness of their business model in driving growth and success.

Franchise segment revenue

The franchise segment revenue of Planet Fitness encompasses a range of services provided by the company to support its franchisees. This includes royalty revenue, which is a percentage of the franchisees’ sales that they pay to Planet Fitness as part of their agreement.

It also includes revenue from the National Advertising Fund (NAF), which is used to promote the Planet Fitness brand on a national scale.

Franchise fees are another component of this revenue segment and are charged to new franchisees when they join the network. Placement revenue is generated when Planet Fitness assists franchisees in securing suitable locations for their new stores. Other fees, such as training fees or technology fees, may also be included.

Commission income associated with franchisee-owned stores is another source of revenue within this segment. It is generated when franchisees utilize services or products provided by Planet Fitness, such as insurance or equipment purchases.

In 2021, the franchise segment revenue contributed approximately $300 million, representing around 50% of Planet Fitness’ total revenue. This highlights the significant role that franchise operations play in the company’s overall financial performance.

Corporate-owned store segment revenue

This segment comprises various sources of revenue, including monthly membership dues, enrollment fees, annual fees, prepaid fees paid by members, and retail sales. These revenue streams collectively contribute to the financial growth and sustainability of the organization.

Monthly membership dues refer to the regular payments made by members on a recurring basis, typically on a monthly schedule. Enrollment fees are one-time charges incurred when individuals join the membership program. Annual fees are annual charges paid by members to maintain their membership.

Prepaid fees are upfront payments made by members for future services or extended membership periods. Lastly, retail sales encompass revenue generated from the sale of products or services offered by the organization to its members.

Equipment segment revenue

This category of revenue encompasses the sale of equipment for new franchisee-owned stores as well as replacement equipment for existing franchisee-owned stores in both the United States and Canada.

When new franchisee-owned stores are established, they require a range of equipment to provide a comprehensive fitness experience to their members. Planet Fitness facilitates the sale of this equipment to franchisees, ensuring they have access to the necessary resources to launch their clubs successfully.

Additionally, existing franchisee-owned stores may need to replace their equipment over time due to wear and tear or technological advancements. To maintain the high quality and functionality of their facilities, franchisees typically replace their equipment every five to seven years.

This replacement cycle ensures that members continue to have access to modern and efficient fitness equipment. By offering equipment sales and replacement services, Planet Fitness supports the growth and maintenance of its franchisee-owned stores.

This revenue stream not only contributes to the financial success of the company but also ensures that franchisees can deliver an optimal fitness experience to their members. Furthermore, the sale of equipment reflects Planet Fitness’s commitment to providing a top-notch fitness environment.

By offering state-of-the-art equipment to franchisees, the company reinforces its dedication to creating an inviting and well-equipped space for individuals to pursue their fitness goals. These revenue streams collectively contribute to the overall financial success of Planet Fitness.

Conclusion

Planet Fitness has established a highly successful business model that focuses on providing affordable and inclusive fitness options to a wide range of individuals.

By offering a low-cost membership fee, a judgment-free environment, and a variety of amenities, Planet Fitness has managed to attract a large customer base and maintain a strong reputation in the fitness industry.

Through their strategic marketing campaigns, franchise model, and emphasis on customer satisfaction, Planet Fitness has positioned itself as a leader in the fitness market, making fitness accessible and enjoyable for millions of people worldwide.