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Source: 2020 Planet Fitness Franchise Disclosure Document

Planet Fitness Background

Planet Fitness 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.

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.

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 locations around the U.S. as well as Canada and the Dominican Republic.

Planet Fitness Franchise Costs to Open a Gym

It costs roughly $1,000,000 to $4,000,000 to open a planet fitness franchise. They main variables include whether you buy or finance the equipement and leasehold improvements.

Initial Franchise Fee: $20,000

If you sign an Area Development Agreement, you must commit to opening one or more Planet Fitness locations, and you will pay an Area Development Fee of $10,000 per planned location at the time you sign the Area Development Agreement. This Area Development Fee is in addition to the Initial Franchise Fee for each location that you pay at the time you sign each Franchise Agreement.

Leasehold Improvements: $650,000 to $1,600,000

The estimated initial investment does not include costs to lease or purchase real estate beyond the initial lease deposit and typical leasehold improvements. Planet Fitness does not require you to purchase real estate.

Planet Fitness businesses typically are located in strip centers, malls, and freestanding locations. Typically, you will need to lease a building of approximately 15,000 to 25,000 square feet and pay the cost of site work and/or leasehold improvements.

Your leasehold improvement costs may be less if your landlord provides you with a tenant improvement allowance.

Fitness Equipment: $27,000 to $878,000

You must acquire the fitness equipment and other non-fitness equipment (such as televisions, tanning beds, trusses, lockers, interior signage, flooring, fans, and the like) for your location through the approved supplier of Planet Fitness.

You may purchase or finance the equipment. If you finance it, you are responsible for obtaining financing. If you finance it, Planet Fitness estimates that the cost to make down payments on financed required fitness equipment for a new location generally ranges between $27,000 and $263,000.

If you choose to purchase rather than finance the required equipment for your location, the cost to purchase the equipment will generally range between $274,000 and $878,000. These estimates, however, may vary and do not reflect the Equipment Discount.

Non-Fitness Equipment: $32,000 to $606,000

Planet Fitness estimates that your cost to make down payments on non-fitness equipment generally ranges between $32,000 and $182,000, with the total estimated cost to purchase the non-fitness equipment ranging between $318,000 and $606,000.

The amount of your down payment on financed equipment, as well as the purchase price of the equipment (should you choose not to finance), may vary depending on the size of your location and your financing terms.

Pre-Sale/Grand Opening Marketing: $20,000 to $30,000

The stated amount is an estimate of the amount you are required to spend on pre-sale/grand opening marketing before opening. The remaining pre-sale/grand opening marketing expenditure is included in the “Additional Funds” category.

The pre-sale/grand opening marketing period typically begins no less than 45 days immediately before the date that you intend to commence regular operations at your Planet Fitness location, and it may be as long as 180 days after you commence regular operations (“Pre-Sale/Grand Opening Marketing Period”).

Planet Fitness may not require you to spend more than $120,000 on pre-sale/grand opening marketing, absent a material delay in the commencement of regular operations.

Planet Fitness will determine the amount of the Pre-Sale/Grand Opening Marketing Expense and the length and start date of the Pre-Sale/Grand Opening Marketing Period based upon the location of the Planet Fitness business, demographics, and other factors.

Pre-sale marketing expenses will include a variety of marketing, public relations programs, media, and advertising materials that Planet Fitness approves.

You will conduct your pre-opening marketing efforts both online and from a temporary facility located at or near the site of your future Planet Fitness location.

Planet Fitness must approve the proposed physical location of your pre-opening marketing temporary facility. The temporary facility must be clean and in good repair, provide you with good visibility to the public, conform to the franchise’s network security requirements, and display the marks in the form and manner Planet Fitness specifies.

Possible temporary facilities include, among other things, small retail space or a trailer that is used solely for pre-sale marketing efforts and satisfies the above criteria. Your temporary facility for pre-opening marketing cannot be your home or a residence of any kind.

Exterior Signs: $11,000 to $41,000

Real Estate Lease Deposits: $0 to $87,000

The amount of your deposit is heavily dependent on your negotiations with your landlord.

Other Costs Estimates for a Planet Fitness Franchise

  • Additional Funds for Six Months: $181,000 to $701,000
  • Site Selection Costs: $1,000 to $10,000
  • Construction Development Plan Review Fee: $0 to $4,000
  • Other Deposits: $0 to $46,500
  • Professional Fees: $2,000 to $25,000
  • Your Out-of-Pocket Initial Training Expenses: $1,500 to $6,500
  • Licenses/Bonds: $100 to $5,000
  • Computer System, Point of Sale System, and Other Supplies: $12,000 to $28,000
  • Insurance: $10,000 to $25,000

Additional Items to Consider

This estimate includes expenses before opening your Planet Fitness location and marketing and certain startup expenses for the first 6 months after you commence regular operations. The expenses include your estimated pre-sale/grand opening marketing expense during this period. You will incur additional expenses after the initial period.

These figures are estimates based on Planet Fitness’ and its affiliates’ experience in operating Planet Fitness locations, and 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.

Total Costs to Open a Planet Fitness Franchise: $968,100 to $4,113,000

Planet Fitness does not permit franchisees to borrow more than 80% of the initial investment for their Planet Fitness business.

The total investment necessary to begin operation of a single Planet Fitness business ranges from $968,100 to $3,072,000 if you finance your equipment.

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 actually collect.

Internet Membership and Balance Payment Administration Fee

set according to Planet Fitness’ Methods of Operations, presently $5 per membership application or balance payment Planet Fitness processes for your franchise location

• Paid to Planet Fitness for the administration of customer memberships and providing balance payment options for your location based on information submitted to Planet Fitness via the Internet.

Refresher Training Workshops: $500 to $1,500 (will vary under the circumstances)

Payable for any refresher training courses for previously-trained managers that Planet Fitness may require, or operational training for new managers as you may request.

The cost of refresher training varies based on the number of people trained and the length of the training.

Per Diem Fee: $100 to $1,000 (will vary under the circumstances)

You must pay Per Diem Fees in connection with additional or special operational training for your managers that you request.

The amount of the Per Diem Fee varies based on the number of people trained, and the length and location of the training.

You are also responsible for travel, food, and lodging expenses for Planet Fitness’ personnel.

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

You must maintain your equipment according to Planet Fitness brand standards. 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 $600,000

You must maintain the franchise premises according to Planet Fitness brand standards. 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.

Pre-Sale/Grand Opening Marketing Plan: will vary under the circumstances, but no more than $120,000

If you fail to execute the Pre-Sale/Grand Opening Marketing Plan, Planet Fitness may execute it on your behalf and at your expense.

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

Local Advertising Fee (“LAF”)

greater of $15,000 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, 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.

Auditing Costs: Planet Fitness’ actual costs, which may range from $3,000 to $15,000

You must reimburse Planet Fitness for its auditing costs if it has to audit you because you fail timely to provide it with required reports or if the audit discloses an understatement in any report of 2% or more.

Franchise Agreement Transfer Fee: $10,000

plus Planet Fitness’ reasonable out-of-pocket expenses, including external legal and administrative costs it incurs in connection with the transfer

If the transferee is (a) one of your existing owners, (b) a family member of one of your existing owners and the transfer is of a non-controlling interest in you, (c) an entity controlled by one of your existing owners for estate planning purposes, or (d) a third party, but the transfer is of a 5% or smaller ownership interest in you, Planet Fitness does not charge a transfer fee, but you must reimburse it for any outside legal and administrative costs.

Area Development Agreement Transfer Fee: $5,000

per location to be developed, plus Planet Fitness’ reasonable out-of-pocket expenses, including external legal and administrative costs it incurs in connection with the transfer

Paid to Planet Fitness if you want to transfer the development rights.

If the transferee is (a) one of your existing owners, (b) a family member of one of your existing owners and the transfer is of a non-controlling interest in you, (c) an entity controlled by one of your existing owners for estate planning purposes, or (d) a third party, but the transfer is of a 5% or smaller ownership interest in you, Planet Fitness does not charge a transfer fee, but you must reimburse it for any outside legal and administrative costs.

Relocation Fee: $5,000

Paid to Planet Fitness if you want to move the location of your franchise.

Construction Development Plan Review Fee: $4,000

Interest: 18%

annualized or the highest contract rate of interest permitted by law, whichever is lower

Successor Franchise Fee: equal to 50% of the then-current Initial Franchise Fee, subject to a maximum fee of $40,000

You only pay this fee if you want to renew your franchise and Planet Fitness agrees to grant a successor franchise

Costs and Attorney’s Fees: actual costs; will vary under the circumstances
You’ll reimburse Planet Fitness for accounting, attorneys’, arbitrators’, and related fees and costs incurred by it.

Inspection & Compliance Reimbursement: actual costs

Due Date: Upon demand.

You will reimburse Planet Fitness for its actual costs if, after an inspection of your Planet Fitness business, it determines (in its business judgment) that additional follow-up inspections or assessments are required, or if it determines you have not materially complied with the Franchise Agreement.

Other Fees:

Planet Fitness may require you to reimburse it for its reasonable expenses, including the costs of travel, lodging, and food incurred in site evaluation for each visit it makes at your request. Planet Fitness estimates its reasonable expenses related to site selection will range from $1,000 to $10,000. If Planet Fitness requires you to pay these expenses, the amounts are nonrefundable.

You currently must purchase fitness equipment from Planet Fitness’ affiliate PF Equipment before opening your location. If you finance the purchase of that equipment, Planet Fitness estimates the cost of a down payment typically to be 10-30% of the total amount financed; the down payment typically ranges between $31,000 and $257,000. Planet Fitness estimates the cost to purchase equipment before opening will range from $312,000 and $857,000. The equipment finance and purchase costs are nonrefundable.

Planet Fitness’ affiliates may sell and Planet Fitness may franchise a company-owned Planet Fitness location. In these transactions, Planet Fitness will negotiate with the prospective franchisee to reach mutually acceptable terms of a sale agreement and any lease or sublease of the real estate. Depending on the circumstances, the financial and other terms may vary from the standard terms of the Franchise Agreement.

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