Planet Fitness is one of America’s largest fitness companies. They are a chain of discount gyms that have small subscription fees. The average monthly cost of gym membership in America, according to Planet Fitness’s annual filing, is $61; with some mid-level and higher-tier gyms such as Equinox, Gold’s, Lifetime Fitness, Crunch, and LA Fitness having rates ranging anywhere between $300 and $2200 per year. Here is the topic- How does Planet Fitness make money?
At Planet Fitness, however, subscriptions cost as low as $10. So it gives you an idea of just how small their prices are over there, compared to industry equivalents. But, of course, this price attracts loads of people who eventually may not even use the gym but will continue to pay the subscription fee monthly.
And this is a scenario that Planet Fitness loves to see playing out – numerous clients paying subscription fees but not turning up to enjoy the benefits of the money spent. For those that even show up, they do not do it quite frequently. It is not uncommon to see people turning up to work out twice a week or less, compared to daily or five times in a week like most fitness would usually do.
For any other business, people refusing to turn up might be a disaster, but for most gyms, not so much. Picture a restaurant, bank, or even a store for a moment: people not turning up would mean bankruptcy and eventually having to fold up. But this is not so, obviously, with Planet Fitness.
Considering this and the low subscription fee charged, the question now is: how does Planet Fitness make its money? This article will explain how Planet Fitness’ model translates into a sustainable business that seems just to keep growing.
So how exactly do they make their money?
Planet Fitness began in Denver in 1992 but has evolved into this vast franchising company with over 2000 locations across 50 states and in various other places around the world – including Australia, Canada, and countries in Latin America.
They got more people to subscribe by offering low subscription rates
So the plan at Planet Fitness is to increase subscriptions by making the pricing super friendly. And then, by also targeting the massive number of people without gym subscriptions, the possibilities seem limitless for them. In the words of Chris Rondeau, the CEO of Planet Fitness, “we are going after 80% of the population that doesn’t have a gym subscription.” It is about both American and Canadian populations.
With a population of over 333 million people in America and just a little over 38 million in Canada, the company seems to be on to something if they target about 80% of that number which is well over 296 million individuals. Of course, it is doubtful that they will convert all these persons to customers. But so far, they seem to be making some progress in that regard.
According to National Public Radio, the number of their subscriptions estimate to be around 6,500 per location. Records on the company’s website show that they have over 15 million subscribers, and they are increasing at a steady rate. With this remarkable number of subscriptions across their 2000+ venues, one gets the idea of how Planet Fitness manages to stay well afloat.
Marketing and clientele
But price reduction is not the totality of Planet Fitness’ business model. They are also quite methodical in their approach to branding and marketing. For instance, they are specific in how they market their gyms as inclusive, friendly places where everyone can come to, no matter their body type, exercise history, or an absolute lack of it.
A judgment-free zone
By establishing a ‘judgment-free zone’ policy, they have positioned themselves as the ideal place for regular people; Average Joes who just want to try to keep fit without judgmental glances or the mental discomfort of working out in an area full of hunky, super-fit bodybuilders and other obsessive, gym rat types.
The judgment-free zone policy is put in place to ensure that acts such as dropping weights, grunting loudly, making noises, and other similar raucous actions you would associate with gyms do not happen at Planet Fitness.
These types of actions can intimidate some people and keep some away however, this goes against Planet Fitness’ business model, so it is clear why they would forbid it.
Remember, Planet Fitness intends to attract every random person who wants to stay healthy and not necessarily those who hope to become ripped or super buff like Olympic weight lifters.
The judgment-free policy also operates to the effect that even potential employees at the gym are not judged based on their appearance during the hiring process. That’s how inclusive and welcoming they always want to be!
Part of this is also the creation of a Lunk Alarm at their locations. A Lunk is a not-so-endearing word that describes a tank-top wearing, huge weights-lifting, gym obsessed person; the type you would typically associate with extreme bodybuilding.
At Planet Fitness, the Lunk Alarm goes off when anyone in the building does any loud grunting, dropping weights, away however payment other similar acts mentioned above. Links are not welcome in the judgment-free zones of Planet Fitness all over the world.
How much do people pay at Planet Fitness?
At Planet Fitness, the subscriptions on offer divide into different categories based on projected commitment levels and customers’ desire to access multiple locations.
For example: to gain access to only one club, customers can pay an annual fee of $29 or a monthly $15. It is for the ‘no commitment’ category. According to the Gym Membership Fees website, there is also an initiation fee of $20 to be paid.
The customer is willing to commit for 12 months, the monthly fee is $10, and the annual fee is $29. Therefore, an initiation fee of $29, expect.
To get the Planet Fitness Black Card which grants access to all their clubs, the annual fee is $39 while the monthly fee is $19.99. There is no initiation fee to be paid for subscribers to this package, and other perks include tanning beds, unlimited guest privileges, which means you can bring someone along without having to pay extra; half-price, more relaxed drinks, unlimited access to massage chairs, and a discount on some of the merchandise on sale at the gym.
The rates on offer at Planet Fitness are astoundingly cheap compared to what found at other gym franchises like, say, Equinox. But even more, it is the open arms with which they welcome any and everyone that keeps them going. Customers at Planet Fitness range from fourteen years of age to over 70.
Planet Fitness also makes money off the sale of merchandise
In addition to getting millions in subscription fees, Planet Fitness makes some more money from merchandising and selling items at their stores.
Items on sale include but are not limited to gym wear for men and women, t-shirts and tank tops for everyday use; hats, accessories such as sunshades and glasses, and bags, amongst other stuff.
How about offering personal training to augment their earnings?
Although it is a common practice at other fitness companies, Planet Fitness doesn’t sell personal training. And this makes sense, considering that their business model is to target casual gym users instead of highly motivated ones who are into serious bodybuilding.
Planet Fitness can expand at such a speedy rate majorly as a result of becoming a franchise.
Franchising happens when a particular business allows other businesses to trade or do business using its name. Essentially, Business A grants Business B [and maybe others] the right to sell products or offer services in its name. Business B is the franchisee, and it pays for this privilege to Business A, known as the franchisor or parent company. Typically, franchising agreements also include the duty to pay specific percentages of profits to the parent company.
So this is what Planet Fitness has done. At the time they were becoming a franchise in 2003, they were only in about five locations. Fast forward to 2021, and they have well over 2000 locations with growth plans for a whole lot more.
They are now recognized as one of the best franchises in America, with Forbes Magazine even giving recognition to this fact.
Planet Fitness’ business model, which sees them target the majority of the population, clearly works for them.
Because many people are more likely to be out of shape or very inexperienced at their introduction to the gym, the process can be pretty daunting if they have to begin or learn the ropes at most other gym locations. The kind of people you will typically find at these other locations are those with bulging biceps and the incredible. Tonedfolks, who are furiously going at it, huffing and puffing, cussing out, and clanging gym instruments noisily. It, frankly, can cause ‘gymtimidation.’ Gymtimidation is the fear of going to the gym as a way of avoiding your painful inadequacies.
So by providing that no-judgment zone for this type of people, Planet Fitness seems to have hacked the market to such significant gains. Their membership growing beyond 15.5 million attests to this.
The meager prices are also perfect for drawing in their target audience. And even though a lot of these people will never use their subscriptions, the price is low enough that they can keep paying up in the hope that they will eventually get the motivation to go and try to get get in shape.
Again, this works perfectly for Planet Fitness’ revenue generation because as soon as members subscribe, they rarely ever cancel, even if they hardly ever show up!