Planet Fitness reported better-than-expected earnings and revenue for the third quarter and raised its guidance for the year.
The gym chain also announced changes to its franchise agreement and business structure to boost growth and profitability.
The company earned 59 cents per share, adjusted, on revenue of $277.6 million, beating analysts’ estimates of 55 cents per share and $268.2 million, respectively. It now expects 14% revenue growth for the year, up from 12% previously.
New and existing franchise owners received updated agreement details in mid-October that included key changes to the business structure, including:
- an increased franchise agreement from 10 years to 12 years to eliminate the initial $20,000 franchise fees.
- shortening grace periods for franchisees from 12 to six months.
- reequip periods extended to free up capital and reduce store spending.
Interim CEO Craig Benson, who took over after the sudden exit of former CEO Chris Rondeau in September, said the company is adjusting its store-level return model to reduce capital investments and extend the franchise agreement from 10 to 12 years. The company also confirmed it is testing price increases for its basic membership in some markets.
Planet Fitness shares rose sharply after the earnings release, but are still down more than 20% year to date.
Planet Fitness (PFIP LLC) is an American franchisor and operator of fitness centers based in Hampton, New Hampshire.
The company reports that it has around 2,400 clubs, making it one of the largest fitness club franchises by number of members and locations. The franchise has locations in the United States, Canada, Dominican Republic, Panama, Mexico, and Australia.
It markets itself as a “Judgement Free Zone” that caters to novice and casual gym users, and has faced both praise and criticism for its atmosphere.