I'm currently enrolled in real estate classes and hate it.
As many of you know, upon my retirement from the gym ownership scene, I deployed my latest venture, The Gym Real Estate Company, to help gym owners lease and buy buildings.
However, real estate licenses are a state-to-state process, and unfortunately for my state (NC), the process is complete trash for someone solely interested in Commercial Real Estate (CRE).
I was excited to get back into a learning experience and was chomping at the bit to learn more about CRE.
But unfortunately, 99% of the 165-hour curriculum is geared towards Residential Real Estate, something I have zero interest in.
At the genesis of this journey, I was excited, optimistic, and ready to kick ass.
Now I'm a bit jaded and frustrated, forced to muster the motivation to attend more boring AF four-hour night classes.
But this is how entrepreneurship goes sometimes.
We can't be foolish enough to believe that our journey will be exactly what we want without undesirable requirements.
Doing anything that creates the opportunity for financial success comes with a lot of shit-eating.
I've had to remind myself of this throughout this entire process and is something I hope you too can acknowledge as you continue down your entrepreneurial path.
Remember, the ends justify the means.
If the final realization of your hard work is worth it, then STFU and keep moving.
Xoxo,
Stu
Planet Fitness Continues To Prove Naysayers Wrong
A full breakdown as to how they keep raking in more money...
Last week, Planet Fitness announced the near-future acquisition of Sunshine Fitness, a leading owner and operator of more than 100 Planet Fitness clubs in the Southeast United States and one of its best-performing franchisees in the system.
The transaction valued at $800 million will result in Planet Fitness owning more than 200 corporate stores, or approximately 10 percent of their total system.
Growing its corporate-owned stores by 114 will continue to allow Planet Fitness to retain its asset-light business model - an essential part of its shareholder value proposition.
Planet Fitness CEO Chris Rondeau said in the announcement. "Owning corporate stores is an important part of our strategy, as it gives us both relevancy and credibility when making decisions that impact the entire system. Additionally, joining our corporate team is a management team that has built some of the highest store-level profit-generating locations in our system, which will enhance our corporate store leadership and capabilities."
Currently, Planet Fitness is one of the largest and fastest-growing franchises with 2,254 locations and 15.2 million members.
MY TAKE
"If you charge a low amount, your service will be perceived as low value!"
"Cheap gyms will never survive long term."
You've probably heard claims like these from fitness gurus or even your colleagues in the industry. Hell, maybe you have adopted these opinions as well.
The problem with these statements is they are overgeneralized and flat-out wrong.
Those who have a firm grasp of how the fitness business works realize that cheaper gym models can and do work- and Planet Fitness is a prime example.
Say what you will about their cheesy brand design, obnoxious deadlift "lunk alarms," or their annual Times Square NYE marketing strategy; still, Planet Fitness is a great business model, and IMO one that is here to stay.
Let's look at two aspects of their brand and business model that they are executing better than anyone else...
The Anti-Golds Gym
At a time when Gold's Gym was the most popular large-scale gym on the fitness scene, in came Planet Fitness in 1993 to shake things up. Consumers heavily associated Gold's Gym with bodybuilding and intimidation. So, smartly, Planet Fitness sought to differentiate itself from its competitor by creating its anti-thesis - a judgment-free zone and fitness safe haven.
Planet Fitness' playful branding and 'lurk alarms' helped the company tap into a new demographic of globo-gym fitness goers who wanted to work out but previously felt intimidated by the muscle-tank juice heads the existing globo-gyms catered to.
The Math Works
Next, the math just works, plain and simple.
The Planet Fitness business model is referred to as HVLP - high value, low price.
Now, I am sure there are many of you reading this that disagree that Planet Fitness, or really any globo-gym, provides ‘high value’, but instead of using this piece to try and change your mind, let's instead look at HVLP as high volume, low price, because it works just as well.
Their HVLP business model works well for two reasons; minimal footprint and client acquisition.
First, by leasing tiny footprints within retail locations, they can target tier-three markets with lower commercial real estate rents than tier two markets.
Secondly, they can acquire more clients than they can service, and guess what, the clients aren't complaining.
Planet Fitness capitalizes on human nature, knowing that a large number of people who sign up for a globo-gym membership will not use it.
So Stu, that means the model is based on people not using the membership, right?
Correct, they rely on members not to show up and not get fitter to achieve profitability.
And if you got into the fitness industry to change people's lives through fitness and the concept of capitalizing on individuals not using their membership chaps your dick, let's zoom out and look at this from a business perspective.
True or False: The vast majority of humans don't like to work out.
True.
True or False: As humans, the vast majority ebb and flow in their dedication to bettering themselves.
True.
With these two truths in mind, Planet Fitness provides memberships that target the vast majority of people who don't really like to work out, by creating a safe, motivating space with minimal intimidation, and who occasionally desire to better themselves but often fall short, by lowering the barrier to entry with a meager monthly rate of $10/month.
Still, the members and only the members choose not to use their memberships. And at only $10/month, Planet Fitness time-and-time-again keeps members on subscription with the "Well, I'm totally going to go next month..." mindset.
So, I personally have no issue with Planet Fitness enacting a strategy based on proven human actions and behavior. How can you blame Planet Fitness for providing a service and the facility at a crazy low rate, even though they know that human nature will lean towards "I'm too lazy. I don't want to go. I'd rather sit on the couch."?
That's not Planet Fitness' fault. It is just smart business.
What Micrgym Owners Can Take Away
Obviously, the HVLP model will not work for a microgym. So, I'm not advocating that any microgym owner switches to a high volume, low price model.
That would be the quickest way to go out of business.
However, it is essential to understand the mechanics behind fitness industry players, such as Planet Fitness, because they are not going anywhere, and we will see more come into the market, that I am sure.
If your local market has a lot of HVLP type locations, think about how easy it would be to market against them - or even better still, how you can convert their members later on.
Remember kids; there are two avatars in our industry:
1. Starter Fitness -people looking to get started with fitness.
2. Evolve My Fitness - people looking to evolve their current fitness.
Since Planet Fitness falls into the starter fitness category, look at them as an excellent source of starter fitness leads to which you can then eventually convert their members to your microgym when it's time for them to evolve their fitness.
Just because you scoff at a fitness business model because you wouldn't enjoy it personally doesn't mean there aren't valuable lessons to be learned.
HVLP gyms are here to stay for years to come because they are financially viable and successfully serve a specific role to a specific avatar.
Can your microgym say the same?
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