Back in the '90s, when American franchise Planet Fitness slashed the price of its monthly gym memberships from $35 to $10, it was revolutionary. "People said, you guys are crazy," recalls CEO Chris Rondeau, 41, who joined the company a year after it was founded in Dover, New Hampshire in 1992, and helped develop its no frills approach to fitness centres. "The thought in the whole industry then was that you couldn't have a gym without aerobics or a pool or daycare."
Membership is still $10 a month – the same price it will be for Canadians when Planet Fitness opens its first international location this December at the Galleria Shopping Centre in Toronto. While the first two clubs will be corporate-owned (so they can be tweaked as needed for the Canadian market), franchising will follow. The company has 10 franchise groups interested in committing to 150 locations in eight provinces across Canada and is hoping for more.
Known for its 'judgement free zone' to appeal to first-time and occasional gym users – and its sometimes controversial 'no lunks' policy meant to discourage grunting by serious bodybuilders or power lifters – Planet Fitness has grown aggressively, opening 149 new locations in the last year alone. Currently, the privately-owned company that partnered with TSG Consumer Partners LLC in 2012, has 855 locations in the United States and Puerto Rico, of which 54 are corporate, with system wide annual revenues of over $1-billion. About 150 employees at corporate headquarters in Newington, New Hampshire, service the franchisees along with their millions of club members.
Why bring Planet Fitness to Canada?
Our initial studies in Canada show a lot of similarities to the U.S. plus the fact that 81 per cent of the population doesn't have a health club membership. The leading reasons for that are intimidation, affordability and pushy salespeople and we don't have any of those. It's all about general fitness and the first-time gym user. That's important because if you look at the industry, it typically caters to fit people getting fitter as opposed to first-time people. Our personal trainers are free to get people acclimated to the equipment.
Canada has been a disappointing market for some companies such as Target. What makes you optimistic?
I see Canada as a lot like the United States was in the 1990s and early 2000s. Health clubs were very expensive, in the $50 a month range, without a lot of different options. It hasn't been fragmented here yet. There's a niche waiting for us, which is what we experienced in the U.S. when we created this model. All of a sudden, there was this huge pool of people who didn't have that option before to work out. So what I really see is that this price point, coupled with our atmosphere, is the missing piece in Canada that's going to drive volume.
What's your culture like?
Very strong. The 'judgement free zone' is really true to everyone's heart. That's the most important in my eyes because once you believe in it, you'll always do the right thing for the customer. Keeping the atmosphere low key and inviting is important.
We've grown so fast because our franchisees are passionate about the brand. Out of the 149 stores opened last year, 94 per cent were opened by existing franchisees. They're happy with the brand so are parlaying their revenues back into it. This year is trending to be the same.
How do you choose your franchisees?
After the financial requirements, we do personal interviews to make sure they understand the culture. It's all about culture. If they start questioning the 'judgement free zone' or why we don't have heavy free weights, aquatics or spinning classes, you can already see that they're not really buying into the average Jane or Joe who wants to work out two or three days a week. They're trying to go for that extreme athlete and that's just not us.
What's important is when they talk about experiences in their families and with people they know – people who have struggled with working out or losing weight or with their self esteem. You can get to see if they understand the reason for the 'judgement free zone'. If they can see that need for a safe haven, they get the culture, they get why we're doing what we do.
How has being the gym partner of the NBC reality show, The Biggest Loser, for the fourth year now, helped the company grow?
There are more first-time gym users out there than we ever imagined. It's really turned the needle up. By bringing that group in – which is extremely overweight and de-conditioned – it's opened the door for others to say, I can really do this too and this is the place to do it. I've seen that a lot.
How else do you get the word out?
A lot of marketing. Besides The Biggest Loser, we do TV, radio, billboards, a lot of direct mail. Word-of-mouth within our member base is enormous. Our biggest lead generation is friends. If they're happy, they tell their friends about it.
What's the biggest challenge so far in bringing your franchise to Canada?
The unknown, wondering if we're going to uncover something we were't aware of here. I don't feel as much of that here as I would going to other countries. It's coming up with the right partners to franchise with, and having thoughtful controlled strategic growth – not too fast or too slow.
What ongoing support do you give franchisees?
It starts from the day they come onboard. We do all the site selection help – traffic counts, population, demographics. We do the lease negotiation on the square footage and help design every facility. I still see every single facility design. After that, we have complete training, ongoing operations, customer support and marketing for as long as they're with us.
I think that's the difference between a successful franchise and an unsuccessful franchise. A franchise has to work for all three people: the franchisor, the franchisee and ultimately work for the member.
What problems have you encountered?
Growth slowed down in 2008-09 but the bi-product of that was great real estate opportunities. Because the franchises are growing so fast, our main challenge now is corporately keeping up and servicing them as they should be. When we started seeing this in 2012, we decided that it was the right time to bring in private equity. We brought in TSG Consumer Partners out of San Francisco who helped us organize more depth to our corporate office. They're about building infrastructure for growth as opposed to keeping it lean. We've nearly tripled our corporate office support, from executives all the way down. Franchisees appreciate it which is great. We're staying a private company focused on growth and becoming international for the first time.
How has Planet Fitness evolved since its early days?
It's been a ride. In New Hampshire, we were in some very rural towns. We had two stores over in Rochester where the five-mile radius is only 50,000 people. Plus the town we were in only had 22,000 and there were a few other clubs. Back then, only 12 per cent of the U.S. population belonged to a health club. We had the heavy weights along with all the normal club stuff and were fighting for that 12 per cent. So we thought, rather than just going after splitting the pie, why not come up with a new model that goes after the 88 per cent to come work out at the club.
So we started tinkering with the rates and the volume started driving in. We were getting the first time gym users to come in but also more of the bodybuilders, power lifters, triathletes and extreme athletes too. Putting them all in the same room didn't quite work. So we started questioning the services we were providing. Cardio was the biggest thing in the gym – always was and always will be. So we stacked our clubs up with cardio and stripped down all the aerobics, daycares and juice bars which made more room for cardio and circuit training. Then it really started moving. We started getting all these first timers coming in without the clash of personalities.
After a lot of refinement, we started franchising in 2003, which is when we saw a model that we had developed in a rural town work in places like Orlando, Florida and New York City that had big populations. So then our focus became franchising which allowed us to grow much faster. Now have about 200 groups of franchisees– entrepreneurs who are on the ground working it day to day. They're passionate as opposed to it just being one corporate office trying to put their hands on all these markets everywhere, and not understanding the people there.
How do you pick your neighbourhoods?
We can work almost anywhere. We're on Wall Street right across form the bull and we're in Anchorage. We're in lower and higher demographic areas. All ethnicities. Humans are humans. We want to be convenient, not off the beaten path. We want to be where retail and grocery stores are so you don't have to go out of your way to get to us. We'll run them 24/7 where we can, fully staffed.
What's your advice to franchisees?
Follow the model. A lot of our franchisees are not from the fitness industry. They're ex-doctors, airline pilots, high tech people – people who've retired but don't want to sit at home. That's great because they take our playbook and run with it. They do what the playbook says as opposed to the people that have come from the gym business who always try to gravitate back and want to bring in aerobics and the other stuff. You have to really put yourself in the mind of the consumer and understand what they look for to be able to sell it and run it.