front of the bedroom mirror, taking Pilates classes in the living

room on Facebook live, and long runs in the park wearing a mask.

By early April 2020, almost all of the 40,000+ health clubs in the

U.S. shut down.

1 out of every 5 Americans needed to find a new place to sweat.

Since the start of the pandemic, U.S.

gyms have lost more than $10 billion dollars in revenue as of August

1st, 2020.

And according to the International Health, Racquet and Sports Club

Association, without additional federal funds, about 25% of clubs

could close permanently.

In the meantime, Peloton's sales have surged as people convert their

apartments and houses into home gyms.

Covid-19 has thrown the gym industry into a tailspin, wreaking havoc

on some of the biggest names in fitness, including Gold's Gym and 24

Hour Fitness. Planet Fitness has also had to shut its doors for

months. But unlike its rivals, the company is poised to sprint past

the competition once the pandemic ends.

Planet Fitness is the purple and yellow gym, where a basic monthly

membership runs $10 bucks a month and the staff gives away free pizza

and bagels. "You know, I really feel that a situation like this,

people really realize how important fitness is in health and

wellness, and there are studies that show all the time that working

out does build your immune system.

You know, I think Planet Fitness, because of our economics our strong

franchise system, we're well-positioned to weather the storm."

Planet Fitness reported 53 consecutive quarters of positive same-store

sales growth before Covid-19 hit in March 2020.

But analysts say, without the rollout of a vaccine, it could be until

the end of 2021 before the company reaches pre-pandemic levels of

profitability. So despite the dire situation in the gym industry, can

Planet Fitness actually come out ahead?

And what does social distancing mean for the future of working out?

Planet Fitness's origins can be traced back to Dover, New Hampshire in

the early 1990s.

In 1993, brothers Michael and Mark Grondahl hired UNH student and

future CEO Chris Rondeau to work the front desk at their gym.

The club looked a lot like its competitors: stacks of free weights, a

juice bar and group exercise classes.

But the trio realized that to expand their clientele beyond the

limited pool of power lifters and Tae Bo enthusiasts, they would need

to go after the 80 to 85% of the population that didn't go to the

gym. They canceled classes, ditched oversize dumbbells, and shifted

resources to cardio and circuit training.

Planet Fitness was born.

"Back then, there was only 15% had a gym membership, today still only

20% have a gym membership.

So we said, well, maybe it's price.

So we started dropping prices that'd get people off the couch and

living out of desperation. We weren't going to make it anyway, so we

had to lose. So, we dropped the price and decided if we had a lot of

volume and really figured out the model of catering to first timers

and casual goers."

Planet Fitness is different than other gyms.

Its basic membership is $10 dollars a month, well below the industry

standard of $71 dollars.

It gives out free pizza and bagels once a month and has lunk alarms

as a reminder to power lifters who are grunting or dropping their

weights that they are intimidating their neighbors.

To keep costs low, Planet Fitness locations don't have perks like

pools and basketball courts, but the company spends big on

advertising, and that has helped membership soar.

As of June 2020, Planet Fitness had more than 15 million members at

its more than 2,000 locations, more than double the amount it had in

2015, making it one of the largest gyms in the U.S.

In the U.S., franchisees spend 2% of their monthly membership dues on

national advertising and 7% on local advertising.

From 2011 to 2019, Planet Fitness spent over $870 million dollars to

drive brand awareness, including sponsoring TV shows like "The

Biggest Loser" and "Dick Clark's New Year's Rockin' Eve with Ryan

Seacrest." As of 2019, 95% of Planet Fitness gyms were owned by

franchisees. "If you think about our our business model and our

marketing. A marketing machine is what I call it, okay?

So, every incremental member that joins, 9% of that dues goes to

marketing. Fueling the next join."

"And so the bigger they get, the more of a marketing force they

become. And so, it is going to be pretty difficult to compete with

that marketing bulk."

In addition to revenue it makes from corporate-owned gyms and

royalties from franchisees, Planet Fitness makes money selling all

those purple and yellow workout machines to its franchise partners.

In 2019, equipment sales made up 37% of the company's revenue, and

its banks on not a lot of people showing up to use them.

In 2019, Planet Fitness averaged over 7,000 members per gym.

That's a big number to fit in a 20,000 square foot space.

In fact, according to analysts, the average Planet Fitness gym member

visit only once or twice a week at most.

"Our average members use it about 5 to 6 times a month, believe it or

not. So they use it.

It's very it's kind of like their second or third priority.

They've got kids, they've got a second job, they've got yard work to

do. But they get it in when they can get it in.

So it's not that 7-day-a-week person; it's a very different

customer." To help bring in new members that were unlikely to become

gym rats, the company commissioned a 2019 study that said 61% of

Americans believe a "dad bod" is sexy.

"I think the biggest thing that they've done is they don't compete

directly, for the most part, with other gym chains for customers.

They acquire the majority of their customers from the couch, so to

speak. Meaning their customer is the non-gym goer.

They're able to be extremely profitable despite the fact that they're

only charging $10 or $20 dollars a month because they have so many

customers per club.

And that, I think, is really the key to the business model."

In August 2015, the gym operator debuted on the New York Stock

Exchange, and the stock soared 450% to $88 dollars by February 20th,

2020. As of October 26th, 2020 Planet Fitness had a market cap of $5.9

billion dollars. "On the idea of convenience, the way that Planet

Fitness is winning that war is that every year they're growing about

200 new units per year, which means they're getting closer and closer

to where we all work and live.

And that's a key reason why people join a gym as well."

The fitness industry in the U.S.

is a $32 billion dollar market with more than 41,000 gyms and 64

million members. In addition to independent mom and pop clubs, gym

chains like L.A. Fitness, Lifetime Fitness, Snap Fitness and of

course, Planet Fitness, were forced to shut down most all their

locations in March 2020 to curb the spread of Covid-19.

"It's a cataclysmic event.

It's a major hurricane.

It's a major problem."

"I think longer term, what this has probably created, you know, the

silver lining behind all of it is horrible situation we're all in, is

that I think it will probably accelerate probably 10 years of

cleansing the industry in a matter of probably 12 months.

There's a lot of mom and pops up here; it's a very fragmented

industry. There's 41,000 gyms in the country.

If you take us and LA Fitness and 24 Hour Fitness, the big national

guys out, you still have 35 or 36,000 mom and pops.

Old club's have been around for 20 years, you know, lack of capex,

old equipment. So you know, I think it would really cleanse the

industry, and the cream will come to the top, and the good guys will

survive longer term."

55-year-old Gold's Gym filed for bankruptcy in May 2020 and said it

would shut down 3 company-owned gyms due to financial stress caused

by the coronavirus pandemic.

According to a statement, the move would not impact franchise gyms.

In July 2020, Germany's RSG group, a leader in the European fitness

space, was selected as the winning bidder for Gold's in a

court-approved auction for about $100 million dollars.

It's a similar story for 24 Hour Fitness, which filed for bankruptcy

in June 2020.

The company plans to use bankruptcy to eliminate debt and close clubs

that were either out of date or in close proximity with other 24 Hour

Fitness clubs. And Planet Fitness has faced major headwinds, too.

The company reported second quarter 2020 revenue decreased by 78%

from the year prior to $40 million dollars due to gym shutdowns.

According to analysts, Covid-19 may have accelerated a trend in

fitness that was already taking hold prior to the pandemic: working

out at home. "I think a lot of the bigger gyms were probably already

struggling to some degree.

I think this secular shift away from traditional gyms and towards

at-home fitness had already started."

In a survey published in June 2020 by TD Ameritrade, almost 60% of

Americans polled said once the pandemic ends, they would not renew

their gym membership. One of the main reasons?

Affordability. Respondents said that Americans who choose to live a

healthy lifestyle shell out an average of $177 a month on personal

trainers, fitness classes and gym memberships.

More than half the people surveyed said the pandemic helped them find

a cheaper way to live healthier.

As gyms shut down because of lockdown orders across the U.S., demand

for fitness equipment soared.

According to NPD Group, fitness equipment sales rose 130% in March

2020 compared to the prior year.

Sales of exercise bikes were up 170% and weight bench sales were up

259%. Suddenly, there was a shortage of dumbbells and kettlebells on

e-commerce sites. One company that was well-positioned in the at-home

workout space was exercise bike-maker Peloton.

The company has seen sales surge.

In the third quarter of 2020, Peloton had revenue of $520 million

dollars, more than 66% higher than a year earlier.

It also reported more than 170,000 paying digital members, up 64%

from the previous year. In September 2020, Peloton announced new

products, including a lower priced treadmill and a more expensive

bike option. The price of the original Peloton bike will drop by $350

dollars. Peloton hit a market value of $35 billion dollars in October

2020. And it's not just Peloton that is making inroads into home

fitness. In June 2020, yoga pants-maker Lululemon said it was

acquiring fitness company, MIRROR, for $500 million dollars.

MIRROR offers live classes in its wall mounted device, which retails

for $1500 dollars.

Subscribers pay $39 a month to stream classes.

Apple is planning to get in on the at-home workout boom as well.

In August 2020, it was reported Apple was working on an exercise

video subscription service for the iPhone and Apple TV that could

include activities like indoor running, cycling, rowing and strength

training. Planet Fitness thinks it may have a future in your living

room, too. The gym launched the Planet Fitness app in the summer of

2019. "We launched our app last summer, and we loaded in 500 workout

videos and exercises to do, whether you're in club or at home, and

saw some good traction with that. But literally the day we close our

gyms in March skyrocketed the consumption and really interesting, we

saw is: 24% of the consumption were non-members."

And because of its low monthly membership fees, analysts say Planet

Fitness is a natural fit for people who like to workout at home but

also want to occasionally hit the gym.

"Historically, there's been an 80% positive correlation with at-home

fitness sales and fitness club memberships, indicating that they both

rise together. And actually, people who work out of fitness clubs are

more likely to have at-home fitness.

That kind of makes sense, right?

Because you want to have that optionality."

With clubs reopening, Planet Fitness announced on August 1st, 2020,

masks would be required inside gyms except when members were actively

working out. The company suspended Pizza Mondays and Bagel Tuesdays,

started live streaming at-home workouts on the company's Facebook

page and blocked off equipment in gyms to create social distancing.

But even with all the precautions, is it safe to work out in the gym

during a pandemic? A study from Norway said it just might be.

The research started in May 2020 included 5 gyms in Oslo with over

3,700 members who did not have underlying medical conditions.

The results? No one at the gym got infected.

The study surmised that with good hygiene and social distancing

measures, there was no spread of Covid-19 in gyms.

Planet Fitness said that since May 1st 2020, with over 45 million

check-ins only a fraction of people have tested positive for

Covid-19. That's 1 in 354,000, and there's no evidence anyone