Executive Summary / Key Takeaways

• The $10 to $15 Revolution: After 25 years at $10, Planet Fitness's Classic Card price increase to $15 represents a fundamental repricing of the low-cost fitness category, with management expecting low-to-mid-single-digit comp lift annually. This move, combined with a planned Black Card increase to $30 in 2026, signals a strategic pivot from pure volume growth to value extraction.

• Franchisee Economics at an Inflection Point: The enhanced economic model—reducing build costs, extending capital timelines, and eliminating fees—is moving new club IRRs back toward pre-pandemic levels. Franchisees are responding by "leaning in" on new formats and re-equips, with incumbent franchisees acquiring every available portfolio, demonstrating system-wide confidence.

• Asset-Light Model Accelerating: The sale of eight California corporate clubs in August 2025 and the planned refranchising of Spain operations show management's commitment to recycling capital and maintaining ~10% corporate ownership. This creates a capital-efficient growth engine with 160-170 new clubs expected in 2025.

• Membership Engine Remains Robust: Despite temporary attrition from online cancellation rollout, membership reached 20.7 million in Q3 2025, with Gen Z remaining the fastest-growing demographic. Same-club sales growth of 6.9% is driven 80% by rate increases, indicating pricing power is flowing through.

• Critical Execution Variables: The investment thesis hinges on whether the company can manage elevated attrition from click-to-cancel and the Black Card price increase while maintaining franchisee support. Management expects attrition to moderate after 12 weeks, but any deviation could pressure same-store sales guidance of ~6.5% for 2025.

Setting the Scene: The Low-Cost Fitness Colossus

Planet Fitness, founded in 1992 in Dover, New Hampshire, has evolved from a single gym into the dominant player in the U.S. budget fitness segment with 2,795 clubs across all 50 states and eight countries. The company operates through a deliberately asset-light model, with franchisees owning approximately 90% of the system. This structure generates revenue through three segments: Franchise royalties and fees, Corporate-owned club operations, and Equipment sales to franchisees. The "Judgement Free Zone" brand promise and $10-per-month entry point created a massive addressable market, positioning Planet Fitness as the accessible alternative to intimidating, high-cost gyms.

The industry landscape features roughly 31,000 gyms and clubs in the U.S., with Planet Fitness and its next-largest peer combining for slightly over 10% market share. This fragmentation creates a long runway for consolidation and growth. Consumer behavior has shifted dramatically, with 82% of U.S. consumers now prioritizing health and wellness, up from 50% in 2022. Gen Z's fitness consciousness makes them the fastest-growing demographic for Planet Fitness since 2021, with the company capturing nearly 10% of domestic Gen Z over age 14. This demographic tailwind is amplified by retail real estate dynamics—negative shopping center absorption, moderating rent growth, and store closures from bankruptcies are creating prime locations for club expansion at favorable terms.

Competitively, Planet Fitness occupies a unique position. Life Time Group targets affluent customers with premium amenities at $150+ monthly fees, while Xponential Fitness franchises boutique studios at $20-50 per class. Crunch Fitness and 24 Hour Fitness compete more directly in the $10-30 monthly range, but neither matches Planet Fitness's scale or brand recognition. The company has twice the unaided awareness of its next-closest gym peer, with an even larger gap among Gen Z. This brand equity translates into lower customer acquisition costs and higher retention, creating a self-reinforcing network effect as the company expands its geographic footprint.

Technology, Products, and Strategic Differentiation

The core moat extends beyond low prices into a carefully engineered member experience. Planet Fitness has reconfigured club layouts to expand strength equipment footprints and open functional training spaces, responding to consumer demand for more than just cardio machines. By year-end 2025, nearly 80% of system-wide clubs will have some version of this optimized format, with 95% of new franchisees choosing the newer designs. This increases member satisfaction and justifies higher price points without fundamentally altering the low-cost structure.

Digital capabilities represent a critical evolution. The national rollout of online cancellation functionality in May 2025, while temporarily elevating attrition rates, builds consumer confidence and ultimately lifts join conversion according to management's test data. The company is also piloting new Black Card spa amenities like dry cold plunge and red light technology, enhancing the premium tier's value proposition. These investments in member experience directly support the pricing strategy by demonstrating tangible value beyond basic access.

Marketing strategy has shifted to unlock national scale advantages. In August 2025, franchisees voted to shift one percentage point of marketing funding from local to national advertising, enabling more efficient spend and driving consideration among non-members. The "We are all strong on this planet" campaign emphasizes best-in-class equipment and community, resonating particularly with Gen Z. The High School Summer Pass program, which saw 3.7 million teens complete 19 million workouts in 2025 (up 30% year-over-year), builds brand loyalty early. While the program waives nearly $170 million in membership dues, mid-single-digit conversion rates create a pipeline of future paying members.

The enhanced franchisee economic model is perhaps the most important strategic development. By reducing build costs, extending capital investment timelines, and eliminating certain fees, Planet Fitness has made new club development more attractive. Management tracks recent openings against pre-pandemic IRR hurdles and reports they are "tracking right in line." This addresses the primary constraint on growth: franchisee willingness to invest. When incumbent franchisees acquire every portfolio that becomes available, it signals confidence in the system's long-term profitability.

Financial Performance & Segment Dynamics

Third quarter 2025 results validate the strategic pivot. Total revenue increased 13% to $330.3 million, with all three segments contributing. The Franchise segment grew 11% to $113.7 million, driven by a 7.1% increase in same-club sales and new club openings. Royalty revenue increased $7.5 million, with $4.4 million from same-club sales growth, $1.9 million from new clubs, and $1.2 million from higher annual fees. The average royalty rate held steady at 6.7%, indicating no structural pressure on franchisee economics despite the pricing changes.

Segment Adjusted EBITDA for Franchise jumped 13.2% to $82.4 million, expanding margins as the company leveraged fixed costs across a larger base. National Advertising Fund revenue grew 9.7% to $21.4 million, with the shift from local to national funding expected to improve marketing efficiency over time. This segment's performance is crucial because it generates the highest-margin revenue and reflects the health of the franchisee system.

Corporate-owned clubs delivered 7.6% revenue growth to $137.8 million, with same-club sales up 6.0% and new clubs contributing $4.4 million. The segment's Adjusted EBITDA rose 6.6% to $53.7 million. Spain's performance is particularly noteworthy—clubs are ramping like domestic locations despite being open only a year, validating international expansion potential. The planned refranchising of Spain will recycle capital while maintaining growth optionality.

The Equipment segment's 27.8% revenue surge to $78.8 million reveals franchisee confidence most clearly. Replacement equipment sales to existing clubs increased $12.3 million, while new club placements contributed $4.8 million. The company completed 27 new club placements versus 15 in the prior year period. With replacement equipment comprising 82% of segment revenue, this growth indicates franchisees are reinvesting in their existing clubs—a strong signal of system health and optimism about future returns.

System-wide same-club sales growth of 6.9% in Q3, following 8.2% in Q2 and 6.1% in Q1, demonstrates consistent momentum. The composition matters: approximately 80% of the Q3 increase came from rate growth, with only 20% from net membership growth. This ratio shows the pricing strategy is working, but also reveals the risk—if rate increases outpace perceived value, membership growth could stall. Black Card penetration reaching 66.1%, up 300 basis points year-over-year, indicates members are upgrading to the higher-priced tier, partially offsetting any Classic Card attrition.

Outlook, Management Guidance, and Execution Risk

Management raised full-year 2025 guidance across all key metrics, reflecting confidence in the strategy's execution. Same-club sales growth is now expected at approximately 6.5%, up from 6%, with revenue growth around 11% and Adjusted EBITDA growth near 12%. The guidance implies some moderation in Q4, acknowledging that the Classic Card price increase will anniversary and click-to-cancel attrition will persist. This balanced outlook suggests management is not getting ahead of itself despite strong Q3 results.

The planned Black Card price increase to $29.99 in 2026 represents the next phase of the pricing strategy. Management expects a temporary dip in Black Card acquisition rates followed by a rebound within the year, making the increase accretive to average unit volume. The wrinkle is that this will be the first price increase occurring after the Classic Card moved to $15, creating uncertainty about cross-tier elasticity. If members downgrade from Black to Classic in meaningful numbers, the net revenue impact could be muted.

New club development is accelerating, with 160-170 openings expected in 2025 weighted toward Q4. The company is developing smaller prototypes for less-dense markets, expanding the addressable geography. Long-term, management believes the system can return to 200 new clubs annually within a few years, implying significant runway remains. Unit growth, not just same-club sales, will drive long-term revenue expansion and franchisee value creation.

The click-to-cancel rollout remains the key near-term risk. Attrition rates were elevated year-over-year in Q3 but began moderating late in the quarter. Management expects continued elevation in Q4 before normalizing, consistent with historical patterns where the impact peaks in the first 12 weeks and diminishes thereafter. The risk is that this time could be different—members now have permanent online cancellation access, potentially structurally increasing churn. However, management notes that test environments showed a lift in join conversion from the functionality, suggesting it builds consumer trust that ultimately benefits membership growth.

Risks and Asymmetries

The pricing strategy carries execution risk that could meaningfully impact the thesis. If the Classic Card increase from $10 to $15 proves too aggressive for price-sensitive consumers, membership growth could decelerate beyond the modest levels currently projected. Competitors like Crunch Fitness or 24 Hour Fitness could exploit this by maintaining lower entry prices, capturing defecting members. The Black Card increase to $30 amplifies this risk—if penetration rates don't rebound as expected, average revenue per member could stagnate.

Macroeconomic volatility presents a broader threat. While Planet Fitness demonstrated resilience during the Great Financial Crisis and pandemic, a severe recession could pressure discretionary spending on fitness. The company's low-cost positioning should theoretically benefit from trade-down effects, but this assumes consumers view gym memberships as essential rather than expendable. Management acknowledges increasing macro volatility but has not seen material weakness in membership trends.

Franchisee relationships, while currently strong, remain a structural vulnerability. The asset-light model only works if franchisees remain profitable and motivated to expand. Any misalignment on marketing strategy, equipment requirements, or pricing could create system-wide friction. The shift of marketing funds from local to national advertising, while voted on by franchisees, concentrates decision-making and could backfire if national campaigns don't drive local membership growth.

Tariff uncertainty on equipment imports could pressure the Equipment segment's margins. While management is leveraging scale to negotiate with manufacturers and exploring alternative production markets, a significant tariff increase would raise costs for franchisees, potentially slowing re-equip cycles and new club development. The company expects to address these impacts without adjusting guidance, but sustained trade tensions could alter the enhanced economic model's math.

Valuation Context

At $111.08 per share, Planet Fitness trades at a market capitalization of $9.36 billion and an enterprise value of $11.53 billion. The stock's valuation multiples reflect a premium for the asset-light model and growth prospects: price-to-free-cash-flow of 46.13, price-to-operating-cash-flow of 26.10, and EV/EBITDA of 21.72. The P/E ratio of 45.52 appears elevated but must be considered alongside the company's 17.11% profit margin and 32.57% operating margin, which are superior to most fitness peers.

Comparing to direct competitors highlights Planet Fitness's unique positioning. Life Time Group (LTH) trades at 20.87 P/E and 13.18 EV/EBITDA with 9.88% profit margins, reflecting its premium but capital-intensive model. Xponential Fitness (XPOF) has negative profit margins and trades at 1.10 price-to-sales, showing the market's skepticism of its fragmented boutique studio strategy. Planet Fitness's 7.26 price-to-sales ratio and 8.95 EV/Revenue reflect confidence in its scalable, high-margin franchise model.

The balance sheet provides strategic flexibility with $329 million in cash, $114.4 million in short-term marketable securities, and $78.2 million in long-term securities against manageable debt levels. The company used $100 million in Q3 to repurchase 950,000 shares, indicating management views the stock as attractively valued despite premium multiples. With no dividend payout, all cash flow is reinvested in growth or returned through buybacks.

For an asset-light franchise model, the most relevant valuation metrics are free cash flow yield and EV/EBITDA. Planet Fitness's 2.2% free cash flow yield (inverse of P/FCF) is modest but supported by 25.1% equipment segment growth and 12.1% franchise EBITDA growth. The EV/EBITDA of 21.72 is rich but comparable to other high-quality franchise businesses at similar growth inflection points. The key question is whether the pricing power strategy can deliver the mid-teens earnings growth implied by the valuation.

Conclusion

Planet Fitness stands at an inflection point where two decades of brand building and scale creation are translating into pricing power and capital-efficient growth. The Classic Card increase from $10 to $15, followed by the Black Card move to $30, represents a fundamental repricing of the low-cost fitness category that could drive sustained same-store sales growth and margin expansion. The asset-light model, reinforced by franchisee confidence and capital recycling, provides a scalable platform to capture industry fragmentation.

The investment thesis hinges on execution of this pricing strategy while maintaining membership growth and franchisee support. Current metrics are encouraging: 6.9% same-club sales, 66.1% Black Card penetration, and robust equipment sales all point to a healthy system. However, the click-to-cancel attrition dynamics and macroeconomic volatility remain near-term watch points that could pressure guidance.

For long-term investors, the critical variables are whether Planet Fitness can sustain its pricing power without sacrificing market share, and whether the enhanced franchisee economics can drive new club openings back toward 200 annually. If management executes, the combination of mid-single-digit same-store sales growth and mid-single-digit unit growth could support mid-teens earnings expansion, justifying current valuations. The company's proven resilience through prior crises and its demographic tailwinds provide confidence, but the margin for error has narrowed as the stock prices in a successful transformation.