Why Owning a Gym May Be the Best Business Ever

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After encountering some health issues, my wife joined a Planet Fitness gym several years ago to help improve her condition.

And although I detest going to the gym with almost every fiber in my being, I was encouraged by her enthusiasm and soon joined her on different occasions.

The gym had an inviting and nonthreatening atmosphere I wasn’t used to in previous gym visits. There was a bunch of workout machines in a large warehouse and the fees ranged from $10 (for a basic membership) to $22/month (for an upgraded one that offered access to a massage table and (as my wife likes to call it) the “jiggle” machine.)

To top things off, if I accompanied my wife, I was allowed in for free as a guest.

The whole pricing structure has boggled my mind for years.

“How are they making money on $10/mo memberships when they have all this overhead?”

This past year, I saw that Planet Fitness stock has been gradually going up and up.

a look at planet fitness increase stock
Planet Fitness stock

“What gives?”

Granted, many stocks have been going up. But, all this just piqued my curiosity even more.

Eventually, I stumbled on a post by Ben Carlson of A Wealth of Common Sense. As another Planet Fitness customer, he also was wrestling with the growth of the gym, their membership prices and how he found them to be not very busy.

Then he came up with a hypothesis.

“(I think) one of the main reasons it’s never overly crowded is because people sign up for a membership, go a few times, but then stop coming.

Most people keep their membership because it’s not that expensive and in the back of their mind they assume they’ll go back at some point in the future.”

Ah. So, these gyms – like Planet Fitness – aren’t marketing to the gym rats or fitness fanatics. Their market is the couch potato.

The “Judgment Free Zone” message is to help Mr. Flabby feel better about working out there. I do (did).

In a Wall Street Journal article chronicling Planet Fitness, it stated:

And in another interesting article at the Washington Post entitled, “What your new gym doesn’t want you to know”, stated that more than half of gym members don’t ever show up. It cited a stat of how one gym had a capacity for 300 people but had sold 6,000 memberships. (Obviously not every one shows up at once – but you’d think popular times would be very hectic?)

Wow.

“It might seem like kind of a weird business model – a business that succeeds when its customers don’t set foot in the door…But it’s also the way that health insurance works.”

So the couch potato who went to the gym for the first part of the year and then quit going – but didn’t cancel his membership – is subsidizing that lower cost membership for those (more) frequent members.

Interesting.

All this got to thinking about our own situation and the gym membership we still have at Planet Fitness. And, I’m embarrassed to say it but we haven’t gone in quite some time due to various reasons. Now those infrequent visits have become quite costly.

Guess there is a name for this type of behavior. Projection bias.

In essence, people exaggerate the how much their future tastes will resemble their current tastes.

“I’ll just keep this membership, because I’ll start working out in the future,” we say to ourselves.

We also tend to shrug off “nominal”, recurring costs like this. Add to that, it’s not as easy as clicking on a cancel button on the website. Many of these gym require an in-person visit to cancel the membership.

What are your thoughts?

For me, it’s an indication that I need to be more aware of my recurring expenses and what I subscribe to. Am I really going to use it – is it worth it?

How about you. Do you have any unused subscriptions costing you here and there?

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3 comments

  1. GenX FIRE says:

    There is so much truth in this. In my case, I am a runner. My gym has tread mills and I use them in the winter. In the warmer months, I run in the gym’s parking lot. I never go inside unless I am unusually thirsty or need to use the facilities. Both are very rare, but the parking lot is just shy of a mile around and quite a good place to run. The thing is, I was injured from running and didn’t run for the better part of a year. The first few months were from the injury, and the rest was from the laziness birds that landed on my shoulders. My wife is even worse. Sigh.

    • Aaron says:

      That’s an interesting perspective. Yeah, I would think more might quit their memberships in the summer months / then rejoin in the winter. Of course many have the joiner fees which can be costly in themselves.

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