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Planet Fitness CEO: Gen Z gym memberships are 'off the charts'

Planet Fitness CEO Chris Rondeau joins Yahoo Finance Live to discuss company earnings, membership growth, hiring strategies, Gen Z gym users, and the outlook for the fitness industry.

Video transcript

JULIE HYMAN: Well, you just saw Brian Sozzi and Chris Rondeau doing push-ups together. Planet Fitness reported mixed earnings after the bell yesterday. And shares have been lower as revenue came in later than expected. I think actually, they came-- didn't you report it-- the shares are not lower anymore. They're higher.

Anyway, the sales are up more than 63% from 2021 as stores look to return to pre-COVID membership levels. Joining us now to weigh in is indeed, Chris Rondeau, Planet Fitness CEO. Sorry about my double take there on the shares. So what kind of trends-- just give us sort of the big picture here as to what you're seeing and how things have evolved over the past couple of years.

CHRIS RONDEAU: Yeah, first of all, the last couple of years is a little tough.

JULIE HYMAN: Right.

CHRIS RONDEAU: You know, this year has been really, really good. I'm happy with what I'm seeing. We've added over a million members in the first quarter, another 300,000 net members in the second quarter. We're at an all-time high of 16.5 million.

And all going in the right direction. The boomers and the-- and the Gen Xers just a little slower to come back. Going the right direction though, finally, which is great to see. Millennials are great. But Gen Zs are gone off the charts. I mean, they've been joining about 150% of normal pre-COVID ever since we started opening our doors, and they continue, which is really great to see.

BRIAN SOZZI: What else are they coming to you for? I think when I started going to the gym, it was to pump weights, look good on a photo when phones were just coming out. But it seems like just listening to your call, they want different things from you now.

CHRIS RONDEAU: Absolutely. I think people have begun to see that fitness is not just about waistline and going to the beach. It really isn't. It's really what happens on the inside, right? Mental health, good for your heart, clears your mind, reduces stress, helps you sleep better-- and I think people are really realizing now, especially with what's going on in the world, what we all went through with COVID, that that's really what matters.

And the waistline, that will happen in time, right? That's the long-term benefit. The short term is, like, you walk out of there, you feel good. It's that Planet Fitness glow you see our commercials now. Get the glow, right? And you walk out, you feel good after every workout. You'll never regret that you went.

BRAD SMITH: We've talked about the digital investments that you've made as well in the past, to really have kind of that companion-- that companion platform alongside the in-person experience. So where have you seen that, either kind of maintain the number of users ship or the amount of user ship, or perhaps, has that leveled off as people are getting back into the in-person experience?

CHRIS RONDEAU: Yeah, so I would look at digital. And again, the app was just launched in 2019, very different than what it is today. And when I look at digital, people generally gravitate right to fitness in content, which it's a part of it for sure. And they use it in the club and out of the club.

But it's also our-- we look at it as a way to reduce friction and customer engagement in the club and out of the club. And not just fitness, right? So we can talk to them. They can pay their balance if they have a balance in their account. They can check their crowd meter. Is the gym busy before I come in? I can adjust my schedule.

So it's how we interact with the customer. If you think about gyms for a minute, we don't have a way to interact with our customer unless they come through our front door, generally speaking. But now with the app, we can touch them all the time. And we have like a-- we have a perks now in our app where they have discounts on gas, discount-- we did a deal with Crocs, went crazy. I thought Crocs were like my generation.

BRIAN SOZZI: I've seen people wearing Crocs.

CHRIS RONDEAU: It's big.

BRIAN SOZZI: What if they drop a-- I mean, come on. Like, I like Crocs. But you drop a dumbbell on your feet wearing Crocs, it's over for you.

JULIE HYMAN: And the support too.

CHRIS RONDEAU: Gen Zs is back. It's like, this was like I thought they were old school. But no, we have a perk where they get a discount on Crocs through the app. So it's like being part of Planet as a member, we just touch you in all the ways we can. You know?

JULIE HYMAN: So when you talked about, you know, you used to only interact with people when they came through the door. Let's talk about the interaction when they come through the door though and labor, because that's something, obviously, we're interested in. We've talked to you about it before. How's it going now in terms of your ability to hire people, not just people who are working the front desk, but also you know, if you've got people who are trainers, for example, more qualified folks?

CHRIS RONDEAU: I would say last year was a much bigger struggle than it is today, for sure, and maybe earlier this year. But-- but now, we don't see that much of an issue. And a lot of our employees and our-- you know, who we're looking for, I mean, you're working in a great environment.

So we're fighting for you know, general retail employee or a fast food employee, you know you're in-- you're in a gym. You're wearing you know, shorts and workout gear, listen to cool music with people that are in doing fun things. You're not just flipping burgers, you know? So-- so our pool of people that we're fighting for, they come to us because it's just a funner job.

JULIE HYMAN: Have you had to raise wages?

CHRIS RONDEAU: No. We generally raise-- we actually pay more than minimum wage, generally speaking, anyway. So we made a little bit here and there to help compensate, yes. What's good thing about our model though is it's very fixed cost in payroll as well.

Whether we have 7,000 members in the store or 8,000 members in a store, we don't need more employees. So we have-- you know, we have 13.6% same-store sales growth in the second quarter. That flow through is great, because you add more members per store, which is mostly member growth, we don't need more employees to compensate for that.

BRIAN SOZZI: I believe you're having a franchisee event coming up soon, right? Like a convention-- what do you hear-- what are you hearing from franchisees? Now, they're moving past this pandemic, what do they want from you over at corporate? What do they need to learn?

CHRIS RONDEAU: I'd say you know, we work really close with our franchisees. And about 34% of our clubs today are at or above pre-COVID membership. So every quarter and every month, we have more and more member-- clubs that reach that thing. They just want to see that memberships come in, and they've seen that. And the marketing is working. And members are coming through the front door again.

So you know, and the same sort of sales growth-- that just gets them fired up, right? And it's mostly member growth. So they see people coming back, open stores, they want to support our open stores, find real estate, help the market, and help run their stores. But we use them. We help them. They're very sophisticated franchisees at this point. And we have a lot of committees with them. And they help us run the business.

BRAD SMITH: It also comes down to equipment within this experience too. And so there's been such a push towards-- even within some other gyms, having that connected fitness device so that somebody could take their membership and still be in that gym setting, but at the same time, engage with their own personal account. Is that something that you've started to consider? Are there-- are you kicking the tires even on having that ability for people to bring their own perhaps, connected to fitness device experience into a physical location at a Planet Fitness?

CHRIS RONDEAU: What I see mostly is they bring their own phone in, and they have it up against the wall. And they're following a routine, whether it's a HIIT workout. You know, they grab their kettlebells from one part of the gym and the dumbbells, and they do the mats or the BOSU balls.

BRAD SMITH: You've been watching security camera footage of me then?

[LAUGHTER]

JULIE HYMAN: Is that what he's watching?

CHRIS RONDEAU: Everybody-- everybody's doing this though. We even have our own content in our app. And sometimes, they use an outside app, you know? But-- but they're actually being guided that way. And what's interesting with the Gen Z population, I remember when I was in high school, my form was horrible. You know what I mean? You know, you look at your buddies, and our form was just throw weights around. Their form is unbelievable, and it's because they can teach themselves. I mean, when we were younger, you--

JULIE HYMAN: There's so many resources.

CHRIS RONDEAU: Yeah, before there was none. You had "Muscle and Fitness" was the only magazine. That was the only thing you had. Where you know, their form isn't perfect. And we just did the Teen Summer Challenge, High School Summer Pass, which is free teens all summer. And you see them in there. We signed up over 3 million of them. And they're coming in like perfect form.

BRAD SMITH: Do you see family conversions off of that too?

CHRIS RONDEAU: Yeah. So we have over 3 million teens have activated throughout the summer. They've logged over 14 million workouts. It's really, really spectacular. And we only had a million in 2019. So it's just-- their-- their propensity to work out now is even way higher than it was pre-COVID, which is great.

But the good thing now is with the app again, they sign up in the app. Parent does-- parent/guardian does the waiver, you know, because they're younger. They're under 18. And then we have their contact info. We have had parents now convert, because their kids are in there, and they're bringing them, dropping them off. So they might as well join. So it's-- it's a great thing to do too, mental health and stuff.

BRIAN SOZZI: You've been around this industry for a long time, Chris. And I-- you know, I belong to a couple of gyms. And they took over from somebody else. And they're letting the whole gym just go to waste. The machines are falling apart. They're clearly not investing in these gyms. Why are these-- some of these franchises, not Planet Fitness, but why is this happening?

CHRIS RONDEAU: You know, unfortunately, that's been the crux of the industry forever, whether you can go back all way to Bally's and all the other brands and over the days, they never spent CapEx dollars to upkeep, right? You go in a club that's 20 years old, the equipment is 20 years old, right?

And-- and we've been very, very diligent at Planet to make sure that we never get out nude, is my saying, that our clubs always look new and fresh. And you go into a club that's 10 years old or 15 years old, it'll have brand new equipment. It'll be remodeled. You know, we always keep up with our clubs.

And all I can say is I think it's probably-- our business model is extremely strong. Got us through COVID with not a single closure. Over 10,000 gyms closed in the industry. We didn't lose one. Because our business model is so strong, our franchisees are very strong, that they reinvest. And they don't just take all the money out of the business.

JULIE HYMAN: Do you have a Planet Fitness in Astoria?

CHRIS RONDEAU: Yes.

JULIE HYMAN: Important--

BRIAN SOZZI: No.

CHRIS RONDEAU: No?

BRIAN SOZZI: No, we do. We do. Yes, we do, around the block. Yes, we do. We do. Yes, we do.

JULIE HYMAN: All right.

BRAD SMITH: Chris, we appreciate the time here--

CHRIS RONDEAU: Always.

BRAD SMITH: And-- and for the little bit of a workout that you gave Brian Sozzi a little bit--

BRIAN SOZZI: I'm still out of breath, trust me.

CHRIS RONDEAU: You're gonna feel the next one. Come on in. We'll do another one.

BRAD SMITH: There you go. Chris Rondeau, Planet Fitness CEO, glad to have you in the studio.

CHRIS RONDEAU: Thank you very much.

BRAD SMITH: Definitely.