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Planet Fitness Franchise Cost Worth The Profit? (2022)

Written by: Dylan Tymkiw
Last Updated: April 19, 2022
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This article is based on its most recent FDD.

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Planet Fitness franchise was founded in 1992 by Marc and Michael Grondahl in Dover, New Hampshire. The Grondahls had acquired a struggling Gold’s Gym franchise and closed it in 1993. They opened a new gym called Coastal Fitness and the Grondahls hired current CEO Chris Rondeau, who was still in college at the time, to run the gym’s front desk. The Grondahls changed the gym’s name to Planet Fitness in 1994.

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From the start, Planet Fitness was an inclusive, non-intimidating gym and in 1997, Planet Fitness officially unveiled its “Judgement Free Zone” philosophy. The “Judgement Free Zone” was started to help first-time gym users feel more comfortable starting their fitness journey.

 

Planet Fitness Franchise

 

Planet Fitness Franchise

After a few years of growth, Planet Fitness started franchising in 2003 with the first franchised gym opened in Florida. Planet Fitness’ growth continued over the next decade and in 2013, TSG Consumer Partners, LLC became an equity partner in the Planet Fitness franchise. At that time, Michael Grondahl stepped down as CEO and Chris Rondeau took his place and has held the position since.

Today, there are Planet Fitness franchise locations around the U.S. as well as Canada and the Dominican Republic.

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Planet Fitness Franchise Cost

It costs between $936,600 and $4,558,000 to open a Planet Fitness franchise. The main variables include whether you buy or finance the equipment and leasehold improvements.

 

Additional cost breakdown:

Estimated Initial Investment

Type of ExpenditureAmountMethod of PaymentWhen DueTo Whom Payment is to be Made
Initial Franchise Fee$20,000Lump sumWhen you sign the Franchise AgreementPlanet Fitness
Site Selection Costs$1,000 – $10,000Lump sumAs incurredPlanet Fitness
Construction Development Plan Review Fee$0 – $4,000Lump sumUpon your submission of your Construction Development PlansPlanet Fitness
Leasehold Improvements$575,000 – $1,941,000VariesBefore openingApproved suppliers or per specifications
Fitness Equipment$43,000 – $953,000VariesVariesYour Lender; Approved Suppliers; Their Affiliate
Non-Fitness Equipment$61,000 – $721,000VariesVariesYour Lender; Approved Suppliers; Their Affiliate
Pre-Sale/Grand Opening Marketing$40,000 – $60,000VariesMonthly, as incurredPaid to various media companies and other third parties to promote the opening of your business
Exterior Signs$11,000 – $36,000VariesBefore openingApproved suppliers or per specifications
Computer System, Point of Sale System, and other Supplies$6,000 – $20,000VariesVariesApproved suppliers or per specifications
Insurance$5,000 – $25,000Lump sum payment of first year premium for one locationBefore openingInsurance companies
Real Estate Lease Deposits$0 – $87,000Lump sumWhen you sign your leaseLandlord
Other Deposits$0 – $46,500Lump sumWhen you engage the serviceUtilities, banks/credit card companies, leased equipment vendors, alarm company, telephone company
Professional Fees$2,000 – $25,000VariesVariesAccountants, lawyers, etc.
Your Out-of-Pocket Initial Training Expenses$1,500 – $6,500VariesVariesAirfare, ground transportation, meals, lodging, etc.
Licenses/Bonds$100 – $5,000Lump sum on applicationBefore openingGovernment agencies and bonding companies
Additional Funds – six months$171,000 – $598,000VariesVariesPayroll, debt services, ongoing pre-sale/grand opening marketing, and cash to cover miscellaneous day-to-day expenses
Total$936,600 – $4,558,000(Excludes the cost of purchasing or leasing real estate)

These figures are estimates based on Planet Fitness’ and its affiliates’ experience in operating locations. Your experience may vary depending on whether you finance tenant improvements, your location, and other factors. You may need additional operating capital, or you may need it for a longer period of time.

 

Planet Fitness Franchise

 

Planet Fitness Important Ongoing Fees

Planet Fitness Royalty Fee: 7%

Of the total gross monthly and annual membership fees payable to you via EFT Dues Draft. Due Date: Paid monthly and annually.

Your Royalty payment is currently based on the total gross monthly and annual membership fees for the Planet Fitness business that are due and payable to you each month and annually, as applicable, by or on behalf of your members through authorized EFT withdrawals (the “EFT Dues Draft”), regardless of the amount of membership fees you collect.

 

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Re-Equip Costs: $274,000 to $878,000

You must maintain your equipment according to Planet Fitness brand standards. For example, this includes replacing your cardio equipment every 5 years and replacing your non-cardio equipment every 7 years.

Planet Fitness estimates the total costs to re-equip your facility with both cardio equipment and all other exercise equipment will range from $314,000 to $922,000 every 5 to 7 years.

Your actual costs may be higher or lower depending on the size of your Planet Fitness business, the volume, and usage of your members, or changes in the market.

 

Remodel Costs: $70,000 to $800,000

You must maintain the franchise premises according to Planet Fitness brand standards. Therefore, this may include substantial remodeling of your premises as frequently as every 5 years

With the exception of signage, Planet Fitness will not require substantial remodeling more often than every 5 years during the term of the Franchise Agreement.

Planet Fitness estimates the costs to upgrade and/or remodel your facility will range from $70,000 to $600,000 every 5 years.

Your actual costs may be higher or lower depending on the size and location of your Planet Fitness business.

 

National Advertising Fund Fee: 2% of the gross monthly and annual membership fees 15.

 

Planet Fitness Franchise

 

Local Advertising Fee (“LAF”)

Greater of $60,000 or 7% of the total gross monthly membership fees payable to you via EFT in a quarter, and the greater of $5,000 or 3% of the total gross monthly membership fees payable to you via EFT in a month

Due Date: Expended according to Planet Fitness’ Methods of Operations as per your advertising budget.

Paid by you to advertisers or Planet Fitness if it elects to collect from you.

If you own and operate multiple Planet Fitness businesses in the same market area and LAF spending for them is combined. Then, you will be in compliance with the LAF requirement if you spend an amount that satisfies the LAF obligations for all of the Planet Fitness businesses in the aggregate.

How Much Do Planet Fitness Franchise Owners Make?

FRANCHISED ONLY20192020
BOTTOM
THIRD
MIDDLE
THIRD
UPPER
THIRD
BOTTOM
THIRD
MIDDLE
THIRD
UPPER
THIRD
Average Annual EFT Revenue-$1,174$1,741$2,497$739$1,170$1,706
Median Annual EFT Revenue-$1,219$1,731$2,379$777$1,174$1,632
High Annual EFT Revenue-$1,511$1,999$5,769$982$1,367$3,087
Low Annual EFT Revenue-$288$1,512$1,999$165$982$1,367
Number of Clubs541542541614615615

-In thousands and rounded; represents electronic funds presented for draft for the 12 months of calendar year 2019 and 2020, respectively.

2020 Planet Fitness Franchise Median Revenue: $1,174,000

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The highest Planet Fitness franchise made over 3 million dollars in revenue whereas the lowest earning one made $165,000. These numbers indicate that potential earnings can vary significantly and it depends on factors such as locations and how well the business is run.

Initial investment (midpoint)% Profit margin of median franchise salesEstimated Profits Time to recoup investments
$ 3,217,80010%$ 117,40029 years
15%$ 176,10020 years
20%$ 234,80015 years

1- Based on a midpoint investment of $3,217,800 with estimated profits of $117,400 at a 10% profit margin it would take about 29 years to recoup your investment.

2- Based on a midpoint investment of $3,217,800 with estimated profits of $176,100 at a 15% profit margin it would take about 20 years to recoup your investment.

3- Based on a midpoint investment of $3,217,800 with estimated profits of $234,800 at a 20% profit margin it would take about 15 years to recoup your investment.

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Is Planet Fitness Franchise Profit worth the Cost?

After a few years in the business, when you go to sell your franchise based on the median multiple of .67 and net sales of 2020 of $1,174,000 it would sell for about $786,580. This is only 24% of the midpoint initial investment.

The median multiple franchises selling more than $5 million is 1.21. If you had 10 Planet Fitness franchises (about $11,740,000 in sales), assuming that every location has the same initial investment, selling would earn you around 44% of your initial investment.

The key to making your money back with a Planet Fitness franchise is opening multiple locations.

Also, you can profit from the development of your franchise real estate and then selling the real estate and building.

Planet Fitness Income Statement: (in thousands of dollars)

 For the year ended December 31,
20202019
Revenue:  
Royalty revenue$ 148,647$ 196,072
Franchise and other fees12,92817,607
Commission income and other revenues5102,118
Total revenue161,905215,797
   
Operating expenses:  
Management fees8,88133,982
Selling, general, and administrative479101
Amortization of intangible assets7,3677,367
Other gain(221)
Total operating expenses16,72741,229
Operating income145,178174,568
Interest income1458
Income before taxes145,192174,626
Provision for income taxes118226
Net income$ 145,074174,400

Planet Fitness is highly profitable. The company makes over 100 million dollars in 2019 and 2020. In 2020 income dropped compared to 2019, this was most likely due to the Covid-19 pandemic that was especially harsh on the fitness industry.

How many Planet Fitness have opened and closed?

Outlet typeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised Outlets20181,4211,617+196
20191,6171,838+221
20201,8381,949+111
Company-Owned20186074+14
20197496+22
202096101+5
Total Outlets20181,4811,691+210
20191,6911,934+243
20201,9342,050+116

Planet Fitness franchise is growing, and it is growing fast.

Before the pandemic, it was growing at a rate of approximately 200 units a year, which is impressive. Even after the pandemic hit, it continued to grow at a rate of over 100 units. This could be an indicator that franchisees are doing really well.

Planet Fitness Franchise Owner Quotes

Owner. The expert owns 14 Planet Fitness locations, spanning Northern California, Alaska, Washington, and Oregon. Expert has been in the industry for around 30 years and can speak at length to differences in fitness franchisors by amenities offered, price levels, and various other industry dynamics. The expert can speak to their experience owning Planet Fitness franchises and can speak to differentiating factors between Planet Fitness’s model and others.

When you compare it to a gym, I don’t know if you’ve gone to one or whatever, normally, they charge you anywhere from $40, $50, $60 a month, some $100. The thing is they’ll have full services, they’ll have aerobics, they may have 80 to 90 classes a week, you’ll have special programming. You have all that stuff going on. You’ll probably on a gym, it’ll be let’s just take 40,000 feet or even 30,000 feet. You are going to have at least 35 to 40 employees, a lot of them part time, et cetera. With a Planet Fitness, we’ve taken away all the extraneous items.

 

“So what happened to us was we ended up from 2019 to, I don’t know, I can’t even give a month, but after two years and then finally reopening this last year, we had lost in revenue a little, about 17%, 18%. We had lost about, which we were really surprised, we only lost about 12% of our members.”

It was only two things. It was the Omicron. It was also putting on mask back-on.And the second effect for us was just getting employees. 

 

“But the thing is normal gyms might do maybe $150,000, $125,000, in that range. By the way, Hayward has grown so much that it’s 24 hours, seven days a week. That one took me in the range of $250,000 to $300,000. We’ll have over $15,000.”

Conclusion

Planet Fitness is growing, and is growing fast. The current trend to be healthier will only accelerate its growth too. If you invest in Planet Fitness you can surely expect to make huge profits in the long run.

However, if your goal is to recoup your investment in a short period of time, then this is not for you. Recouping your investment with Planet Fitness can take you anywhere from 13 to 29 years depending on profitability, and selling it will not help you much either. 

We believe that this franchise is perfect for those that are passionate about fitness and are willing to put in the hours to make the business run smoothly. We also suggest that you speak to 3-5 Planet Fitness owners before opening one yourself.

If you think Planet Fitness is the right franchise for you, or you would like to explore other franchise opportunities, check out our listing page on the Vetted Biz website for thousands of franchises available for your investment. 

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