Planet Fitness: No Judgements, No Lunks

by: Michael A. Roberto

Publication Date: October 10, 2019
Length: 24 pages
Product ID#: 5-842-367

Core Disciplines: Economics, Marketing/Sales, Strategy & Management

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Description

Planet Fitness, one of the largest health club chains in the world, developed a strategy that enabled it to achieve solid profits in a highly competitive industry. By 2018, the company operated more than 1,500 gyms, most of which were owned and operated by franchisees. In its 2017 annual report, Planet Fitness boasted of 44 consecutive quarters of same-store sales growth. By August 2018, the company’s stock price had risen by over 150% since its initial public offering in 2015, outpacing the S&P 500 index by a wide margin.

CEO Chris Rondeau expressed a desire to open 1,000 additional locations in the next five years, largely through franchising, and proclaimed a desire to eventually operate more than 4,000 locations in the United States. Some observers expressed skepticism about the company’s aggressive growth objectives. At the same time, fitness enthusiasts and serious athletes often mocked the company’s approach to fitness because it proudly proclaimed itself a “judgement-free zone” where people could exercise without feeling intimated by serious athletes and muscular bodybuilders. Could Planet Fitness sustain its competitive advantage while aiming to grow so rapidly? Could it succeed long term in an industry where many competitors had failed?

Teaching Objectives

After reading and discussing the material, students should:

  • Analyze how competitive positioning can help a firm achieve exceptional performance in a tough industry.
  • Use Porter's Five Forces Framework to analyze and explain why few firms achieve high profits in the health club industry.
  • Compare and contrast corporate ownership vs. franchising for organizations with multiple retail locations.
  • Distinguish the particular threats to sustaining competitive advantage for firms that rely on franchising.