Planet Fitness Hits 1,500 Clubs with 1,000 More Club Agreements Signed

Planet Fitness CEO Chris Rondeau
Photo courtesy Planet Fitness., Planet Fitness CEO Chris Rondeau said that his company is differentiated from other low-priced competitors because it attracts casual and first-time club members rather than rotating in members of other clubs.

Planet Fitness, Hampton, New Hampshire, has reached a 1,500-club milestone and now also can claim a presence in all 50 states, the company announced.

The 1,500th location opened at the end of 2017 in Durham, North Carolina, and the opening of the company's first location in Hawaii, the only state in which it previously did not have a location, occurred in Honolulu early this year.

Planet Fitness has agreements to open another 1,000 locations across the country, and half of those will open in the next three years, Planet Fitness CEO Chris Rondeau said during a Jan. 4 appearance on CNBC's "Mad Money" with Jim Cramer.

Rondeau's appearance on the show came on the same day that Sears and Kmart announced the closing of 103 stores, part of a trend of retail stores shuttering as online shopping grows. Cramer and Rondeau spoke about how this trend was an opportunity for Planet Fitness as real estate developers look for businesses that drive traffic on a consistent basis to fill those empty spaces. Many Planet Fitness locations have 5,000 workouts per week, most of those on Tuesdays and Wednesdays, which are off days for many retail locations, Rondeau said.

Real estate developers and even retailers that want to downsize their physical space are contacting Planet Fitness about opportunities, some even doing so for leases that are up in two to three years, Rondeau said.

"So our pipeline is starting to build even better now," he said.

A company spokesperson was not able to share how many of the Planet Fitness clubs that opened in 2017 or how many planned to open in 2018 are in former retail stores.  

Planet Fitness' scale is a competitive advantage since most of its low-priced competitors have around 150 clubs or less, Rondeau said.

"We've been opening about 200 [clubs] per year for the past couple of years here and plan to do so in the upcoming years," he said.

Most of the brand's competitors are built on an old model, he said.

"They are not catering to the first timer, casual gym user," Rondeau said. "They are going after the Gold's Gym guy. So I just let them fight over those."

Rondeau touted Planet Fitness as the place that welcomes casual gym goers as well as people who have never before belonged to a health club, noting that a survey of its new members found that 43 percent of them had never before belonged to a gym.

On a Jan. 5 segment of "The Street," Rondeau talked about consolidation of the health club industry. He said that the approximately 36,000 health clubs in the country have a lot of small, regional mom and pop club operators that over time will likely be consolidated. Consolidation makes sense for the industry, he added, for brands and for the satisfaction of customers who can use multiple locations of their club. Still, he said Planet Fitness could hit 4,000 clubs without consolidation.

On Jan. 2, Planet Fitness corporate acquired a franchise group of six clubs in Suffolk County, New York, for an undisclosed amount after that franchisee, John Mahoney, retired.

"As we've said before, we'll pursue franchise store acquisitions when it makes economic and geographic sense for Planet Fitness, Inc.," Rondeau said in a media release about the purchase. "The acquisition of the six franchised stores on eastern Long Island is a great strategic fit as the western half of the market is currently comprised of company owned stores. We are committed to our asset-light business model and we continue to explore options for returning a portion of our cash to shareholders."

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