Planet Fitness CEO: ‘I think we will have unseasonable gains this year’

Planet Fitness CEO, Chris Rondeau, joins Yahoo Finance to discuss the gym's reopening and how a post-pandemic Planet Fitness could see an influx of new members.

Video Transcript

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JULIE HYMAN: We just talked about reopening of restaurants, let's talk about reopening of gyms now.

Chris Rondeau is with us, he is CEO of Planet Fitness And Chris, things have changed quite a bit since the last time we talked in terms of reopening, in terms of capacity, in terms of masks. Where do you guys stand?

We were just talking with the CEO of Brinker, the owner of Chili's about their mask mandate for their employees and people who come into the restaurants. What are you guys doing on the mask front?

CHRIS RONDEAU: Yeah, definitely following the State and local guidelines for sure. The mask mandate from the CDC lift was a great start to increasing and improving customer sentiment, which we're seeing some really good momentum.

Even back in March honestly, it was already starting I think with the broad rollout of vaccines. And local franchisees make a decision based on their staff and their clubs, whether they require the mask or not based on State guidelines.

BRIAN SOZZI: Chris what's been the trend in new member sign-up's?

CHRIS RONDEAU: So Through the end of March is really interesting, Brian. January was, although a good month, positive member growth was slower than a normal January. But by the end of the first quarter in March-- I think with the broad distribution of vaccines further into the year as cases counts came down-- we actually saw March of this year outpaced March of 2019.

So I really believe, and we've been talking about this a lot over the last six or eight months-- as doors were locked and masks are becoming-- taking off and also vaccines being distributed-- I think we're going to have really unseasonable gains this year even through the summer, which typically is a slow time of year for gyms.

And we're seeing some really, really good momentum even in April. Again, we saw April was on-par with April of '19 and April of '19 had a 10 day national sale in that. So really really, really, really exciting stuff.

MYLES UDLAND: Well and Chris, you know, obviously the gym business is quite seasonal as you noted. Are you anticipating though that maybe there's a longer term? Maybe a two or three year trend where some of that seasonality is disrupted just because of how disrupted our lives were, you know, during the pandemic and the way that a lot of people's priorities I think are going to change on the other side here.

CHRIS RONDEAU: Yeah, really good point Myles. You think so-- you think for a minute I mean, people haven't even gone to a beach in two summers. So let's put a bathing suit on.

And as mask polices are come off and people are getting dressed for work again, going back to the office, they haven't put their work clothes on in a year and a half. So there's a lot going on.

And I think the other thing which is really, really unfortunate is, there's some recent stats coming out that 61% of adults put on an average of 29 pounds during COVID. 29 pounds on average. And the sad case is 70% of adults were overweight going into COVID already.

So there's really an epidemic even before the pandemic, that people got to get off the couch and get physical again. And with planet fitness we're in all 50 states, pretty much every day here in the country, and for $10 a month it's really excessive.

BRIAN SOZZI: Chris as you just mentioned, folks have really packed on the pounds during the pandemic, eating all sorts of packaged food and other nonsense. But you know, do you think that sets the table for Planet Fitness to start bringing instructors in or classes into gyms? I know that hasn't been a big focus of you-- of the company in the past, but clearly people need a lot of help right now.

CHRIS RONDEAU: Yeah a good point, so we, we, we did a real lot, a lot, a lot of work on our digital strategy during the COVID. I mean, we clubs were closed for an average of six months. So we had a lot of time on our hands, you know.

And we were going down a digital strategy even pre-COVID. And a lot of it is around education and instruction. And you know, with averaging 6,500 to 7,500 members per store, how do you service that many people, right?

So we've done a lot of work on our app, we partnered with iFIT to help us produce a premium content as well to offer really good experience, instruction how to use all the equipment, and also work out at home.

And for the first time in our history and honestly the industry's history, what was really exciting to me-- and I've been here for 28 of the 29 years of the company-- is for the first time now is, we can engage our members outside our four walls. And as an industry we've never had that ability, right? If they didn't walk in the front door we couldn't service them. So now it's really exciting for me that I can get in touch with our members outside our four walls, give them some benefit for being a member of Planet.

JULIE HYMAN: Chris you guys-- this is a franchise business, right? So I am curious you know, for those effectively small businesses that are your franchisees, how many of them are coming out of this versus how many went in? And do you expect to grow the number of franchisees this year?

CHRIS RONDEAU: Yeah, you know we are extremely fortunate that the strength of this business model and the strength of our franchisees that we closed a little over 2,000 stores and we opened with over 2,000 stores. And we didn't leave-- loose a single location due to COVID.

So super fortunate for that, but a testament to the strength of the business model. Our average store's 38-40% EBITDA margin so we can weather a storm like this. So really fortunate to that example here and great group of franchisees that have been with us for over 10 years of most of them. So really veteran operators here in our system.

But the sad thing is 17% of the industry is permanently shut down already. And, and the Industry Trade Organization IHRSA, they predicted 25%. So what's even worse about that as much as standing up for the industry is that, like I mentioned earlier 70% of the US is already overweight, 60% put on over 29 pounds average. Now there's less access to fitness. So it's really an issue unfortunately, but now with Planet it gives us more runway I think longer term.

JULIE HYMAN: All right, we'll check back in with you as the year progresses. Chris all the best to you, thanks for being with us. Chris Rondeau is the CEO of Planet Fitness.