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What Planet Fitness' Performance after One Year as a Public Company Means to You

What Planet Fitness' Performance after One Year as a Public Company Means to You

Planet Fitness CEO Chris Rondeau was interviewed on CNBC last week about the company's performance in its first year as a public company. (Screen capture of interview.)

Last week was a big week for Planet Fitness, Newington, New Hampshire. On Aug. 17, the company celebrated its first full year trading as a public company on the New York Stock Exchange (NYSE). The company's performance on the NYSE has improved since March after taking a dive in the first half of this year.

That may be one reason that Chris Rondeau, CEO of Planet Fitness, has been making the rounds during this anniversary. He rang the NYSE bell on Aug. 17, he appeared on CNBC, and he did an interview with MarketWatch.

Highlights from those events:

  • If watching someone ring a bell is your thing, you can watch Rondeau ring the bell to open the NYSE on Aug. 17 by going here.
  • However, it's a little more exciting to watch this Rondeau interview on CNBC where he responded to a question about whether people were indicating they would pay more for a Planet Fitness membership than the typically charged $10. Rondeau answered by saying: "If I can provide the right value and service and be able to stay at $10 per month, then why not open the doors to more people. We have a study we just did that just over 40 percent of one million members who joined our clubs were first time gym goers. They never joined a gym before. We are opening the market much larger than our competition. Where they are all fighting for the 20 percent gym members, we are going after the 80 percent that doesn't have a gym membership."
  • In his interview with Market Watch, Rondeau said that the main competitors to Planet Fitness are restaurants and entertainment options, but the article didn't delve into what Rondeau meant by that. However, it noted that Dorvin Lively, the CFO for Planet Fitness, said in the company's second quarter earnings call that when a member leaves Planet Fitness, they don't move onto another gym. "If they decide to not stick to it, they're going to go back to the couch," Lively was quoted as saying.
  • Also in that interview, Rondeau shared that 90 percent of new Planet Fitness clubs are opened by existing franchisees, and that in addition to its openings in Canada and Dominican Republic, Planet Fitness plans expansion in Chile, Colombia and Mexico.

For me, one of the most striking tidbits from these interviews is that even as the cost of living and operating a club continues to increase, Planet Fitness seems content to stay with a $10 per month model for its basic membership and $19.99 for its Black Card membership. In the second quarter financial call that the company had with analysts earlier this month, executives noted that at some clubs, the Black Card membership makes up 60 percent or more of the memberships. Still, how long can their franchisees truly sustain these prices? Costs for rent, electricity, water, gas, equipment, marketing, salaries (especially with changes in the Fair Labor Standards Act related to exempt employees)—they all increase with time. What is maintaining a $10 and $19.99 per month dues price doing to margins for these franchisees? How many of you have been able to hold your membership dues steady for several years? Likely not most of you, which means that the price differential between your club and any competing Planet Fitness clubs will continue to grow if these franchisees truly hold to these dues prices. If you are not differentiating your club by marketing its uniqueness in some way, you better start doing so now.

The other striking piece of news is that even though Planet Fitness has long said that its members are typically newbies to exercise, the study that Rondeau referenced validated that by showing that 40 percent of Planet Fitness members are new to exercise.

In the second quarter financial call, Rondeau said the following about this statistic from this survey:

"This powerful statistic demonstrates that our affordable non-intimidating fitness offering and brand positioning are resonating with the broad consumer audience. Our mission is to make fitness more accessible and bringing health and wellness to the majority of our population. It’s extremely rewarding to learn we’re attracting new consumers to the fitness industry and growing the overall market size."

Can you say the same about your club? Are you reaching those new gym goers? Is price the main barrier to so many people joining a health club, or has the Planet Fitness marketing campaign about no lunk heads worked to make Planet Fitness seem like the friendlier alternative over your club? If so, what lessons can you learn from marketing by Planet Fitness, or how can you create marketing that attracts new exercisers while being true to your mid-priced or high-end brand?

Another element related to this is that Lively mentioned that when people leave Planet Fitness, they don't go to another gym—they go back to their couch. So the idea that Planet Fitness could be a feeder system to clubs with more amenities and services may not be true—although Lively did not mention whether his statement was based on the Planet Fitness survey or an assumption. But the result is that Planet Fitness may be the only representation of a gym that many people get, so the rest of the industry better hope that their experience is a good one or you may never have a chance to attract these members to your club.

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