Planet Fitness’s IPO shows the incredible rise of budget fitness

That’s a whole lot of $10 a month memberships.
That’s a whole lot of $10 a month memberships.
Image: AP/Gerry Broome
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For every extreme fitness trend that comes along, an equal and opposite trend is bound to follow. Such is the case with American gyms. Fitness junkies willing to pay for intense workouts and spa-like experiences have flocked to high-end chains like Equinox. Meanwhile, Planet Fitness has gone the opposite route, pitching itself as extremely accessible and accepting. The company calls its gyms ”Judgement Free Zones,” and potentially intimidating behavior like grunting or dropping heavy weights is discouraged with a wall alarm that staff can set off. Prices are low ($10 a month) because the gyms are bare bones: no group classes, no juice bars.

The strategy appears to be working. The company filed for an IPO on June 22, disclosing that it has exploded in size, more than doubling its store count, revenue, and member numbers in the past five years.

Though it was founded more than 20 years ago, growth has accelerated substantially in the last few years, following the company’s buyout by private equity firm TSG for $479.3 million. Last year, the company’s total revenue from its stores and franchise fees was $279.8 million:

That data run through March, but it’s worth noting that the company opened its one-thousandth gym in June. According to the prospectus, franchises have signed deals to open more than 1,000 new gyms over the next 7 years, with 300 coming in the next 3. Its eventual goal is to run as many as 4,000 stores in the US alone (the majority of its gyms are US-based, with a few in Canada).

Its membership count is growing to fill its proliferating stores. The number for 2015, updated through March:

Of course, it faces many challenges: imitators, potentially unreliable franchisees (who own more than 90% of its stores), low profit margins on a per-store basis than high-end gyms, and a large debt load.

The company’s revenue (pdf) lags competitors like LA Fitness, 24 Hour Fitness, and Equinox, even though it has far surpassed them in members and store count. The company would argue that an IPO will help mitigate its debt, as will signing on a slightly higher-tier clientele that’s willing to pay for a few extra amenities.