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All You Need to Know about Planet Fitness’s IPO

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Planet Fitness IPO

All You Need to Know about Planet Fitness’s IPO

June 29 2015, 07.05am GMT

STOCK.com

On Monday, Planet Fitness, Inc. will go public. The company will traded on the New York Stock Exchange under the symbol ‘PLNT’.

In case you don’t already know, Planet Fitness is well known for offering standard gym memberships for only $10 a month. Also, they are a chain of gyms which has over seven million members and is considered to be one of the fast growing health club franchises in the U.S. today.

The majority of the company is owned by TSG Consumer Partners and they will be issuing Class A common stock.

So what should you know about Planet Fitness before it goes public on Monday?

Planet Fitness is brand specific and it also uses specific phrases which are unique to this gym chain. For example, these include a variety of motivational phrases such as “You Belong”, “No Gymtimidation” and “Judgment Free Zone”.  Added to this, if you visit a variety of branches of Planet Fitness, you will notice that the gym equipment is also branded and each gym is decorated the same in yellow and purple.

Added to this, Planet Fitness boasts of low membership costs. Their standard membership cost is only $10 per month. Clients also have the option of taking out the higher tier membership for $19.99 a month. This includes a Planet Fitness Black Card which is directed at attracting first time gym users as well as those that only train occasionally.

It has often been said that the $10 membership deal is simply a way for Planet Fitness to attract members and that now the company is working on moving these members to the Black Card membership which climbed to 38 percent in 2010 and to 55 percent last year.

The majority of the members at Planet Fitness are female and the member base consists of both and low and high income earners.

When it comes to financial matters, Planet Fitness is currently in debt. As of the end of March this year, the company had debt of $506.4 million. As a result of interest payments on this debt, Planet Fitness has made it clear that these costs could negatively impact its finances and its growth.

To put it into perspective, in the last quarter, Planet Fitness reported $76.9 million in revenue, compare to the $57.6 million in revenue reported a year earlier.

A key component of Planet Fitness is its franchise owners. There are 976 stores in the U.S. as well as in Canada and Puerto Rico. The majority of these stores, 919 to be exact, are franchised. Fifty seven of the stores are also corporate-owned.

Planet Fitness relies a lot on the franchised-store owners to drive growth of the company and it has also stated that these owners have committed to opening more than 1,000 new stores. With these franchises, Planet Fitness sees an opportunity for the company to grow rapidly and to gain a “substantial portion” of its capital from royalties which is paid by the franchisees. This includes a percentage of the membership fees and dues.

While Planet Fitness does not advertise these services, the company does offer indoor tanning services at most of its branches. The problem could arise for Planet Fitness if these tanning booths get more negative publicity and opinions as this would then bring about a decline in the Planet Fitness Black Card memberships. Added to this, if further regulatory action is taken by government agencies, the company could be liable to pay some hefty fines.

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