Planet Fitness changed its fortunes by kicking out all the powerlifters, offering free pizza and bagels, changing the gym’s hours to 24/7/365, and offering a $10 per month membership.
The story of Planet Fitness began in 1992 when Michael and Marc Grondahl purchased a struggling Gold’s Gym in Dover, New Hampshire.
Rather than continuing with the bodybuilding-focused approach, the Grondahl brothers decided to make fitness more accessible to a broader audience.
They introduced aerobics classes, child daycare services, state-of-the-art equipment, and year-long payment plans.
This model initially showed promise, but new challenges arose as it expanded to more locations.
The Grondahl brothers boldly moved to address these challenges with their fourth gym in Portsmouth, New Hampshire.
They removed heavy weights and transformed the gym into a “Judgement Free Zone,” creating a more welcoming environment for beginners and eliminating the intimidating atmosphere often associated with traditional gyms.
They also did away with group classes, juice bars, and childcare facilities, focusing solely on providing a wide range of equipment.
Additionally, they made the gym accessible 24/7/365, catering to the needs and schedules of their members.
However, the most significant game-changer was the price. By removing the unnecessary frills typically associated with gym memberships, such as group classes and fancy amenities, Planet Fitness could offer a membership fee of just $10 per month.
This price point was a fraction of what other gyms charged, making it incredibly affordable for the majority of Americans who did not have a gym membership.
Remarkably, this $10 monthly fee has remained unchanged for 25 years, creating a strong value proposition for potential members.
Planet Fitness was able to sustain this low price point through strategic business decisions.
Firstly, they negotiated affordable lease agreements with struggling retail locations, taking advantage of vacant spaces left by companies like Toys “R” Us and Circuit City.
Secondly, they intentionally targeted the 80% of Americans who did not have a gym membership, offering an affordable option that appealed to a broad audience.
This low price made it easier to attract new members and ensured that cancellations remained minimal.
Furthermore, Planet Fitness employed overselling tactics to maximise their gym space utilisation.
While the average Planet Fitness location is 20,000 square feet, they enrol approximately 7,500 members, knowing that 60% will not visit the gym within a 30-day period.
By overselling memberships, they collect additional fees each month and optimize their revenue.
Moreover, they upsell a significant portion of the members who do use the gym, convincing them to pay $25 per month for a premium package that includes access to all locations.
The franchise model played a pivotal role in scaling Planet Fitness’s success. Out of the 2,500 gym locations, the company only owns around 200, with the rest owned and operated by franchisees.
Franchisees pay setup costs ranging from $1.5 million to $5 million, providing Planet Fitness with a steady revenue stream in the form of gym membership royalties, national marketing fees, and sales of PF-branded equipment.
The company’s equipment sales alone generated $227 million in revenue last year.
The financial results speak for themselves. In 2022, Planet Fitness reported revenue of $936.8 million, marking a significant 60% year-over-year increase.
Their franchise model allowed them to open 158 new gyms in the same year, while the steady $10 monthly membership rate resulted in an over 11% increase in same-store sales compared to 2021.