Gym franchise runs on being a ‘marketing machine’

After shares of Planet Fitness neared record highs following the gym franchise’s second-quarter earnings report, CEO Chris Rondeau shared the factors contributing to his company’s growth.

“If you think about our business model and our marketing, it’s a marketing machine,” Rondeau told “Mad Money” host Jim Cramer on Thursday. “So every incremental member that joins, 9 percent of that dues goes to marketing, fueling the next join.”

Planet Fitness came public in 2015 when it was 7 million members strong. Since then, the low-cost gym chain has grown to 10 million members, thanks in part to its streamlined business model, Rondeau said.

“[We have] a very refined operating model. Not a lot of the fluff, the pools and the basketball courts and a lot of heavy payroll. We don’t have the daycare and the juice bars and so on,” the CEO said.

Instead, each franchise, which serves roughly 7,000 members on average, has “a lot of equipment, [is] open 24 hours a day at most sites, very fixed cost business model, so every incremental member, once you break even, is incremental profit, right to the bottom line,” Rondeau told Cramer.

The CEO also touted the company culture. On the day of its initial public offering, Planet Fitness famously took over the New York Stock Exchange, handing out shirts printed with its motto, “Judgment-Free Zone.”

Rondeau called the overall style of Planet Fitness “conducive to the first-timer or casual gym user,” a possible explanation for the chain’s pull with millennials, who account for 49 percent of its membership.

And, just like Netflix CEO Reed Hastings characterized competition in an increasingly millennial world, the CEO said his biggest competitor was not another company, but the hours in a day.

“Honestly, I always answer that as the movie theaters and restaurants,” Rondeau told Cramer.

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