Come as You Are
When Chris Rondeau, the CEO of Planet Fitness, was young, all of the kids in his neighborhood were selling lemonade.
In fact, Rondeau even took that route for a little while, but soon became disappointed with the results. So, he decided to try something different. “I said, ‘I bet I could sell a whole heck of a lot more Coke and cookies … so I turned the lemonade stand in for a Coke and cookies stand, and I sold a lot more.”
Like its CEO, Planet Fitness is no stranger to doing things differently. Founded in 1992 in Dover, New Hampshire by Michael and Marc Grondahl, the company’s origin story is not unlike many other fitness businesses in the industry. The first location featured group exercise classes, heavy free weights, a juice bar and daycare, for roughly $30 per month. Although it had all the trappings of a typical gym, it was struggling to remain profitable.
“Quite honestly we weren’t making any money,” recalled Rondeau. “The problem is it was just so rural — the town of Dover is about 20,000 people. So honestly, a little bit out of desperation, we thought to ourselves, how do we go after the bigger piece of the pie — the 85 percent of the U.S. population that doesn’t have a gym membership, and encourage them to give fitness a try and to workout?”
The answer to this question turned out to be changing Planet Fitness’ business model. Throughout the 90s the organization dropped its prices, streamlined operations, condensed offerings and emphasized creating a welcoming, non-intimidating environment known as The Judgement Free Zone to make first timers or casual gym-goers feel welcome. As a result, the company began seeing traction, gradually extending its reach further into the 85 percent of non-exercisers.
Essentially, Planet Fitness figured out how to replace lemonade for Coke and cookies to turn a profit.
Today, Planet Fitness’ more than 1,100 locations are a far cry from the concept the first gym was originally founded upon. There are no childcare facilities, no juice bars and no group exercise classes. Instead, Planet Fitness gyms feature a more simple approach to fitness, offering basic strength and cardio equipment and free fitness training.
This approach has attracted over 8.3 million members to Planet Fitness gyms in 47 states and the District of Columbia, making it one of the largest and fastest-growing franchisors and operators of fitness centers in the U.S., in addition to having locations in the Dominican Republic, Puerto Rico and Canada.
According to Rondeau, the environment within Planet Fitness gyms, which favors positivity, is paramount to its success. “Everyone knows [we’re] $10 a month, but for me it’s the atmosphere component that really makes it work,” said Rondeau. “It’s about people being able to come as they are. You don’t have to be in shape to join here, you don’t have to have a $200 outfit on. You come as you are, you’re going to feel comfortable and you’re going to be around like-minded people.”
This attitude is reflected in every aspect of Planet Fitness’ facilities, from the equipment to the inspirational quotes on the walls encouraging members to keep going, no matter how hard the obstacles. “Intimidating” behavior, such as dropping weights or grunting, is kept in check by the “Lunk Alarm,” which Rondeau said is Planet Fitness’ lighthearted way to keep the atmosphere positive.
According to Rondeau, they learned the importance of atmosphere back in the early days of the business. Then, it was commonplace to see powerful bodybuilders working out alongside newcomers to fitness — some of whom had never lifted a weight before.
“What we quickly realized is the tension in the air was unbearable,” Rondeau recalled. “The intimidation that was developing based on the heavy athletes and extreme weight lifters and the first timers — the look of fear in their eyes — it was just evident that it wasn’t going to work. It was like putting all the animals in the same cage at the zoo.”
Planet Fitness’ members certainly make up a different demographic than what might be found in some gym businesses. And, just like Planet Fitness’ business model is different, so are its franchisees, many of whom have never owned a gym prior to opening a Planet Fitness franchise.
Franchising began in 2003, and the company has since cultivated a tight group of owners, most of whom have more than one location. In fact, in 2015 Planet Fitness opened 209 new clubs, more than 90 percent of which were opened by existing franchisees.
According to Brian Belmont, the executive vice president of franchise operations and development, the feeling of community within Planet Fitness gyms extends to the owners. “The franchisees are independent business owners, but there’s definitely a feeling of family in our system, a feeling of cohesiveness,” he said. “We like to get together a lot, work on our business, benchmark our business and spend time together.”
The Planet Fitness family — made up of owners and members — is growing. As of March 2016, Planet Fitness franchisees had signed agreements to open more than 1,000 additional Planet Fitness locations over the next five years.
For many owners, the lure of a Planet Fitness franchise is its streamlined approach. A typical location needs just 12 to 15 employees to be fully-staffed, and the majority of cash flow is constrained to electronic funds transfers (where 95 percent of Planet Fitness’ revenue comes from).
“A lot of what we’re seeing now with the franchisees is that they’re coming to us from the quick-service restaurant category, [because] they’re looking at the ease of operations,” said Rondeau. “If you think about a donut shop or a hamburger shop, they have to keep track of inventory, make sure the orders come in, there are food service issues, they have a supply chain, they have a lot of cash over the counter. If you look at our business model, you really don’t have inventory. So they just love the streamlined approach of being able to build their stores faster compared to fast-food restaurant concepts.”
Another draw for franchisees is the company’s name recognition, due in part to the National Ad Fund (NAF), which kicked off in 2010. Two percent of a franchisee’s revenue dollars goes into the fund, which is the source of brand-awareness campaigns like The Biggest Loser sponsorship and national advertisements.
“The NAF allows us to do stuff that is just truly remarkable,” said Rondeau. “And now with 1,100 stores participating and contributing that 2 percent [of revenue], we’re doing things that the industry has never seen done before.”
In August 2015, Planet Fitness’ outside-the-box way of doing things culminated in it becoming one of the few fitness chains to be publicly traded, joining the likes of Town Sports International (NASDAQ:CLUB) and Life Time Fitness (which turned private in June 2015). Planet Fitness (NYSE:PLNT) priced its initial public offering (IPO) at $16 a share. And when all was said and done, the IPO raised $216 million for the company (13.5 million shares were sold).
After more than 20 years of working for the company, Rondeau said the IPO was the natural next step. “For any entrepreneur, that’s the cherry on top if you can build a business that can be publicly traded,” he said. “For the company it was the right next turn of events.”
With the IPO in the rearview mirror, Rondeau said the focus now is on continued growth both in the U.S. and internationally. He predicted the potential for 4,000 Planet Fitness gyms system wide in the future.
No matter where the franchise goes, a focus on creating a comfortable place for first-time and casual exercisers will be paramount. “We’re really creating a safe haven, if you will, for people to actually give fitness a try for the first time and hopefully make them lifers,” said Rondeau. “We’re fulfilling a service to the population — I think that’s really what we’re out to do here.”
If that mission ever becomes hard to achieve, you can bet Rondeau will once again find a way to trade a lemonade stand in for one selling Coke and cookies. “No job is too small or too big that I shouldn’t be involved in, roll my sleeves up and play a part in,” said Rondeau. “It’s how I got to be where I am today.”