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#7 on the Franchise 500: Planet Fitness Plans to Dominate the Fitness World

The #7 company on our Franchise 500 list has learned exactly what its customers want -- and how to deliver.

This story appears in the January 2019 issue of Entrepreneur. Subscribe »

Started : 2003
Total units: 1,646
Cost to open: $969.6K–$4.2M

Courtesy of Planet Fitness

Recently, low-cost-gym Planet Fitness has begun flexing a new muscle: data-driven strategic partnerships. The company knows a ton about its members -- ages, income levels, and more -- and tasked its first chief commercial officer to find ways to leverage that information. "How can we use our 12 million members to give them more value for their membership, whether they're in the gym or not?" says CEO Chris Rondeau.

The company stresses that it never sells membership data for purposes but could translate its insights into partnerships with weight-loss companies, coffee chains, hotel giants, and more. It already has a partnership with Reebok and tested a member-discount program with Audible. Rondeau hopes the strategy will "drive and stickiness with [members] getting benefits outside our four walls."

Related: 10 Keys to a Healthier Lifestyle in 2019

The partnerships could also add to what is already robust growth for Planet Fitness, which made its name as the place where your New Year's workout resolution won't break your bank account. The "no-judgment zone" is home to the $10-a-month membership, plus free wi-fi. And as the low-cost-gym market thrives, Planet Fitness is leaping ahead. Its third quarter 2018 revenue surpassed $136 million, a year-over-year increase of 40 percent, which helped boost its Franchise 500 ranking to #7 this year -- up from #21 last year.

Size and scale were also instrumental in its climb. Membership swelled to 12.2 million as of September 2018, a 65 percent jump from December 2015, and it has 1,000 new franchises in the pipeline. To keep growth steady, it employs a chief development officer to work with landlords and retailers and keep track of upcoming real estate opportunities for future gym locations. That's become especially important as big-box retailers and mall lease holders downsize, enabling Planet Fitness to plan ahead as much as three years before a space goes vacant.

Related: Why Fitness Franchises Are Booming

All this comes on top of favorable economics: Rondeau says 95 percent of franchise revenue comes from membership costs, which means cash flow is not as affected by seasonal fluctuations as it is in other industries. Gyms don't have much incoming inventory to track, and only two to five employees are needed to operate a gym at any one time. Plus, it doesn't hurt that the average franchisee's profit margin is about 39 percent, according to the company.

To see our complete Franchisee 500 rankings, please click here, or view more stories here.

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