The Story Behind the Business
The creation of Planet Fitness originated from two brothers who shared a loathing for their jobs. According to an Open Forum interview with Marc Grondahl, he and his brother Mike Grondahl were three years out of college, both hating their real estate and accounting jobs when they saw a Gold’s Gym in Leominster, MA going out of business. They decided to buy the space and run the place, however, this decision ultimately resulted in eviction due to issues with the location and management.
Despite initial challenges, the Grondahl brothers decided to continue working in the fitness industry, opening a new gym called Coastal Fitness in 1993. It wasn’t until the following year that Coastal Fitness was renamed Planet Fitness, as it is known today.
What began as a single, family-owned location exploded into a key player in the fitness industry. When Planet Fitness began franchising in 2003, business boomed. With monthly membership dues at only $10, it’s hard to beat Planet Fitness pricing. Whereas other gyms and sports clubs may charge monthly fees upwards of $200, Planet Fitness is unique in its low pricing and streamlined system. Each Planet Fitness location runs 24-hours a day with 12 to 18 employees at each location. Unlike other gyms, the franchise does not offer group fitness classes or daycare. Instead, Planet Fitness caters to the casual gym-goer.
As of 2017, Planet Fitness holds approximately 10.5 million gym members, most of whom have never owned any gym membership in the past. Not to mention that the franchise’s total revenue was found to be $91.1 million, a nearly 10 percent increase from the previous year. The upwards trend has only continued in 2018.
Planet Fitness is a fun and collaborative business, Marc Grondahl told Open Forum. The company tries to involve staff in big decisions, encouraging them to contribute to company growth. In fact, most Planet Fitness franchisees do not come from a fitness industry background. The simple model works well with prospective franchisees of all backgrounds, given the small staff sizes.
Currently, with 1,500 locations, CEO Chris Rondeau has taken over the company’s operations. Early this year, the company opened its 1,500th location with the opening of its first branch in Hawaii, the last remaining state without a Planet Fitness.
Join the Judgement Free Zone
1. Broad Demographic Appeal
What sets Planet Fitness apart from other gyms is that it is a space for everyone. It’s not a fitness club that targets a specific group of workout fanatics. Planet Fitness targets 80 percent of the population that does not belong to a gym, which is appealing to most consumers who are at the start of their fitness journey or looking for a temporary change to their routine.
2. Smart, Growing Brand
Planet Fitness has created an effective business model that works for their franchisees and demographics of first-time gym users. The gym promotes their accepting workout space through merchandise consumers can purchase, a strong social media presence, and
3. Millions Joining the Judgement Free Zone
Planet Fitness has completely changed the way we understand fitness. The industry is more inclusive because of Planet Fitness’ message of acceptance. Many people struggle to join other gyms because they are afraid of being ridiculed, so Planet Fitness is the perfect place for everyone at any fitness level.
4. Corporate Support and Training
While Planet Fitness is not required explicitly to provide specific assistance to a franchisee, the company does make certain training promises. For one, Planet Fitness instructs the franchisee in all methods of operation. The company also ensures it will provide an initial training program as well as a list of start-up inventory and a pre-sale marketing plan. All salaried managers are also expected to undergo and successfully complete a training program.
Initial Franchise Fee: $20,000
Any prospective franchisee of Planet Fitness is expected to pay a nonrefundable Initial Franchise Fee of $20,000 upon signing a Franchise Agreement. Should the potential franchisee decide to participate in the Area Development Program, they are expected to pay the same fee per location.
Once all the various fees and costs are considered (see below) Planet Fitness estimates that the startup costs for a Planet Fitness franchise typically ranges from $1,084,600 to $3,154,000. Again, these estimates depend on many factors including the location, local economic conditions, favorability by local consumers, prevailing wage rates, etc.
Royalty Fee: 7.0%
The royalty fee is a percentage of the total gross monthly and annual membership fees. It is a payment due every month and at the end of each year.
Initial Investment and Costs: $1,084,600 – $3,154,000
|Name of Fee||Low||High|
|Initial Franchise Fee||$20,000||–|
|Site Selection Costs||$1,000||$10,000|
|Construction Development Plan Review Fee||$0||$4,000|
|Pre-Sale/Grand Opening Marketing||$20,000||$30,000|
|Computer System, Point of Sale System, and other Supplies||$12,000||$25,000|
|Real Estate Lease Deposits||$0||$87,000|
|Your Out-of-Pocket Initial Training Expenses||$1,500||$$6,500|
|Additional Funds-6 months||$264,000||$701,000|
Revenue Range: $513,000 – $5,554,000
The range determines how much the franchisee may make during the year. This is an estimate based on the highest and lowest annual gross Electronic Transfer of Funds (ETF) of 2018. Franchisees make their money from monthly membership fees, merchandise, and different membership cards.