Planet Fitness CEO Talks Franchise Strategy, Price Increase & GLP-1s
The “Judgement Free Zone” fitness franchise is determined to battle inflation while eyeing long-term growth of 4,000 store opportunities
Planet Fitness interim CEO Craig Benson has been steadfast in addressing inflationary pressures and a challenging economic landscape since taking the helm of the high-value, low-price (HVLP) fitness franchise after the abrupt departure of former CEO Chris Rondeau last September.
Following a successful Q3 2023, Benson, a Planet Fitness board member and franchisee, and CFO Tom Fitzgerald shed light on the brand’s new franchise growth strategy during this month’s ICR Conference 2024.
New Franchise Growth Model
Benson said the fitness franchise has been “overwhelmed” by the number of Planet Fitness franchisees interested in the new growth model, which includes extending the Area Development Agreement (ADA) from ten years to twelve, relaxing the remodel requirements from ten to twelve years, and adjusting the re-equips to six to seven years from five to seven years.
“It doesn’t sound like a lot, but these are big capital investments,” Benson said.
As for how quickly the new growth model can impact development in 2024-2026, Benson seemed to urge patience.
“It changed,” he said. “It used to be six to nine months to do a club. It’s now 12 to 14 for a number of reasons.” Among the reasons, he cited bureaucracy at the local level to get permits and difficulty finding retail space.
“Inflation has changed a lot,” Benson added. “And in new construction especially — inflation has been hard. In addition, interest rates have gone up, so borrowing to satisfy the higher demands for cost and building is a double whammy.”
He indicated that Planet Fitness is looking to partner with “bigger landlords” to become privy to opportunities.
“We need to find space, especially, and part of the new growth model is using our scale,” Benson said.
Fitzgerald added that “2024 is probably more of a transition year” for Planet Fitness, although he noted that overall, the team has “made a meaningful stride” without significantly impacting P&L.
Exploring a Price Increase
Although the Planet Fitness Black Card has seen price increases over the years, now settling at $24.99 a month, the basic-entry White Card has remained at $10/month for the past 30 years — another area Planet Fitness is looking to adjust.
“$10 is not what it used to be 30 years ago, so we’re now experimenting with different price levels with the entry-level classic (White) card,” said Benson.
Planet Fitness is currently testing three White Card price points ($12.99/$15/$14.99/month) in 100 clubs, each with a matching control group. One test was implemented in New York last month, with new members signing up for a White Card at $14.99/month.
“Our pricing is different because our pricing isn’t one and done, our pricing is ongoing,” Benson noted. “So you join and hopefully stay for a long period of time — so it’s not just getting people to join…The trick is also getting them to stay.”
A Hit with Gen Z
Planet Fitness is closing in on 20 million members, with its low-cost, high-value fitness franchise winning over scores of Gen Z and millennial fitness enthusiasts who have found a cost-conscious and inclusive gym environment.
“We’re not necessarily trying to steal members from other concepts because only about 20% of the US belongs to a gym,” Fitzgerald said. “We’re really trying to get the 80% who don’t belong to a gym to start their journey.”
Millennial membership numbers have increased steadily as young consumers are exposed to more advertisements and as Planet Fitness builds more stores, he added.
The continued momentum with Gen Z has the “Judgement Free Zone” fitness franchise confident in its long-term growth.
“We feel strongly that the number will be north of 4,000 store opportunities in the US,” Fitzgerald said.
The Ozempic Effect
Benson also touched on the rising popularity of weight-loss drugs, noting that he sees the burgeoning market working to the benefit of Planet Fitness.
“I find people that are on these drugs are more cognizant of what they eat, and they’re also more cognizant of what they do for exercise,” Benson said.
While other fitness operators are churning out add-ons (some of which are related to weight-loss medication) Benson underscores the simplicity of the Planet Fitness model.
“You can’t be great at everything, and you have to focus on the things that you can be good at and really exploit the heck out of them,” he said. “That’s the model Planet has had for a really long time, and we don’t plan on changing that. Complexity adds challenges.”
