15
July
2010

Planet Fitness, Inc. – Making Wellness Affordable and Accessible

Planet Fitness, Inc., the fastest-growing fitness club in the world, is making wellness Affordable and Accessible. Every entrepreneur can expand their market by applying the Planet Fitness formula to their own wellness product or service.

In just a few short years, Planet Fitness has grown to 350 franchised locations, $500 million annual sales, and 2.3 million active members—with 2,000 locations and 10 million members just around the corner. Here’s how they are doing it!

The Wellness Revolution has come a long way since I first began following wellness in the 1990s. Industry sales have risen from $200 billion in 2002 to approximately $700 billion today, and are on target to reach my 2002 projection of a $1 trillion wellness industry in 2012.

However, one of the trends that I projected in 2002 is not happening at the pace I would have hoped. Wellness is not rapidly becoming more affordable and accessible to the mass market.

Wellness products and services have not become more affordable because most wellness providers haven’t seen the need to lower their prices. Why fix something that isn’t broken? The demand for wellness has soared, mostly from existing customers. Aging, upscale baby boomers keep buying more new wellness products and services. Billion-dollar wellness brands like SILK! soymilk and Nutralite vitamins have thrived right through the toughest economic times in recent history.

Equally sad, wellness has not become more accessible to the mass market. Not only is wellness still expensive, healthier foods and better exercise options are generally only available in middle-to-upscale neighborhoods and/or with a chic lifestyle. Many ordinary consumers feel intimidated by the wellness movement. This is causing the U.S. to continue to bifurcate into a “have” and “have not” wellness society.

In 1845, Benjamin Disraeli, the future prime minister of England, warned of the danger of his country disintegrating into “two nations divided by great want as though they were dwellers in different zones or inhabitants of different planets.”

While Disraeli was speaking about economics, this bifurcation is now true in the United States based on wellness. Today, in the United States we have largely replaced race, gender and country of origin discrimination with a new type of discrimination based on your health, and particularly your waistline.

The total numbers are staggering. Although obesity has risen to the number one issue in the media and is even the subject of popular television shows, the percentage of overweight Americans has continued to rise. The percentage of Americans currently overweight or obese has risen from 61% in 2002 to 68% in 2008—that’s 21 million (7%) more Americans not living their lives to their fullest potential due to a lack of wellness.

Fortunately, there are bright spots in the wellness industry dedicated to making wellness more affordable, and more accessible, to the 206 million (68%) overweight Americans who so desperately need wellness. One of these bright spots is Planet Fitness, Inc., the fastest growing fitness club chain in the world.

Planet Fitness – Making Wellness Affordable at $10/month

The first thing you notice about Planet Fitness is the price: $10 a month. While other fitness clubs typically charge $30 to $80 a month for membership, anyone can join Planet Fitness for $10 a month. At that’s a true $10—no contracts (cancel anytime without charge), no gimmicks, and not a loss-leader to get you in the door to sell you something else. The price is $10/month with no contract at all locations—including downtown Manhattan and Los Angeles.

I was skeptical when I first heard about Planet Fitness. They had invited me to speak at their annual convention of franchisees. How could they run a profitable business at $10/month when their competitors charged 3 to 8 times as much?

I quickly learned that Planet Fitness had re-engineered hundreds of processes and costs related to managing a fitness club franchise location, and in doing so has probably re-engineered the future of the retail franchise industry itself.

For example, one re-engineered item is how each Planet Fitness store franchisee collects and processes revenue. Customers are required to have a checking account, debit card, or credit card—revenues are collected via EFT (Electronic Funds Transfer) daily by the home office and instantly credited to the franchisees sub-accounts on a website. This not only saves millions in bank fees and shrinkage, it frees the franchisees from hiring expensive bookkeepers and accountants. Planet Fitness told me that its average monthly overhead per location is $15,000 below the industry average, partly due to its innovative financial controls.

With headquarters managing the cash and applying sophisticated marketing and management tools to each franchisee’s business, franchisees end up concentrating on their customers versus their back office. When’s the last time you asked to see the manager of your gym and found him out on the selling floor or working with members, versus back in his office looking at numbers?

Since becoming familiar with Planet Fitness, each time I enter a Subway restaurant or any other franchised business, I keep thinking of how much work they probably have to do in bookkeeping and re-stocking after each transaction—and how much they could save if each franchisee had its complete financials and parts of its operations managed by corporate headquarters via technology.

Franchising began in the middle ages as a way to expand your business to far away locations. It was greatly improved upon by franchise pioneers like Albert Singer (Singer Sewing Machines, 1851), Colonel Harland Sanders (Kentucky Fried Chicken, 1930), and Ray Kroc (McDonald’s, 1954). But, little has changed the past few decades in retail franchising, especially in the traditional fitness club franchise business which began in the 1950s with Jack LaLanne and Vic Tanny.

Since 2001, a web-based revolution in real-time communication and online marketing techniques has made overnight billionaires of the founders of Facebook, MySpace, and Google. Few of these innovations and techniques, however, have migrated to the traditional franchise business model that dominates the American retail landscape. Great fortunes today await those retail entrepreneurs, like the owners of Planet Fitness franchises, who get there first. According to the company’s website, the average Planet Fitness franchisee earns $546,000/year in profit versus an industry average of about $110,000/year.

 Planet Fitness – Making Wellness Accessible by Making First-Time Wellness Customers Comfortable

In a 2008 cover story in Club Business International magazine, I explained,

“Health clubs have done a good job of building out distribution—but they’ve done a terrible job of turning those who need their services the most into customers. They’re preaching to the choir—sitting back and waiting for prospects to walk through the door. Operators need to reach out to individuals who never in their life have stepped foot inside a club and make them feel welcome. Just look at the outreach that some of the mega-churches are doing—offering prime parking and seating to first-time visitors; they make them feel very welcome. Clubs need to create new demand—particularly given the current obesity crisis.  –  Paul Zane Pilzer, Club Business International, May 2008

Planet Fitness has done an outstanding  job creating new wellness customers by:

  1. Creating a Judgment Free Zone
  2. Driving away undesirable customers
  3. Best Business Practices
  1. The Judgment Free Zone – The second thing you notice about Planet Fitness (after the price) are the large signs in each location proclaiming “Judgment Free Zone” or JFZ. This is what separates Planet Fitness from other gyms. Everything from the training of personnel to the equipment itself is tailored to make the first-time gym user feel extremely comfortable. They have to—since members sign no contracts and are free to quit anytime. Managers conduct free classes every morning showing members how to use the equipment, and instructional videos pervade the gym.
  2. Driving away undesirable customers – In order to make first-time gym members feel most comfortable, Planet Fitness makes a special attempt to drive away bodybuilders, power lifters and other extreme fitness enthusiasts—the traditional customers of most gyms. Planet Fitness does this by limiting the available weight amounts and having a “Lunk Alarm” siren with a spinning light that sounds when a customer drops a weight, does unapproved lifts, or judges someone else. The company has had lawsuits from former customers whose memberships were terminated after continually setting off the Lunk Alarm. Funny videos abound on YouTube of the Lunk Alarm going off. A lunk is someone who is “slamming his weights, wearing a body building tank top, and drinking out of a gallon water jug.”
  3. Best Business Practices – Most American consumers have had a bad experience with the business practices of a fitness club. It’s obvious why—the algorithm for success at some gyms is to sign up as many members as possible under long-term contracts, and then hope they never show up at the gym. The Planet Fitness model is exactly the opposite: Customers pay $10/month with no contract and can cancel anytime. This makes the goal of each Planet Fitness manager to make sure that: (a) customers continually use the gym; (b) members always have a comfortable experience; and (c) concerns are always resolved to the customer’s satisfaction.

Ever since Ponce De Leon discovered Florida while searching for the Fountain of Youth, the efficacy of wellness products and services has been in doubt by most consumers. Now that technology has finally yielded real efficacious wellness solutions like diet supplementation and exercise, it’s important that all wellness suppliers adopt fair, honest best business practices. It’s hard enough to teach consumers the true benefits of wellness without having dubious business practices such as asking customers for a financial commitment that is not tied to their results.

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