Marc Grondahl of Planet Fitness: How a Lean Business Model Became a Franchise Heavyweight

After living in his first gym because he couldn't afford an apartment, Marc Grondahl has managed to expand to 650 locations.
June 13, 2013

Nearly every entrepreneur strives to achieve market disruption—the kind that creates controversy, conversation and, ultimately, adoption from droves of customers.

Marc Grondahl is a master of disruption. He is co-founder of Planet Fitness, a Newington, New Hampshire-based chain of workout facilities that opened in 1992 and now has more than 650 locations nationwide and a reported 4.5 million members.

The company’s runaway success can be attributed to several factors: $10 monthly dues, free pizza on Monday nights, no group workout classes and a strict policy against lunkheads (“the stereotypical bodybuilder who drops weights loudly in the gym and creates a bad atmosphere, an intimidating atmosphere,” Grondahl explains. “When we see one of those, we sound an alarm.”)

The alarm is no joke. When a "lunk" is found traipsing around a Planet Fitness location, employees trigger ambulance-style flashing lights and screeching sirens. Bodybuilders inevitably flee in embarrassment … and usually proceed to write seething comments about the company on message boards.

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The alarm is a strategic move. “We are going after the 85 percent of the population that isn’t hard-core fit,” Grondahl says. “We want people to feel comfortable and accepted here no matter what their workout level.”

Planet Fitness’ unorthodox business model is at the core of Grondahl’s advice for entrepreneurs starting out: “Just be true to yourself. If you have an idea, even if it is an unpopular idea, be tough and don’t give up. Don’t be afraid to do things differently."

Take me back to the early days. How did you get the idea to open a gym?

Mike [Marc’s brother and co-founder] and I were about three years out of college and hated our jobs. He was working in real estate and I was doing accounting at a manufacturing company. We saw that a Gold’s Gym in Leominster, Massachusetts, was going through bankruptcy and decided to buy it. It wasn’t the right decision. We ended up getting evicted.

You got evicted from your first location? What happened?

We didn’t have enough experience, the location was bad and it didn’t have enough parking. There were lots of problems. We went back to the drawing board and started again in 1993 with a new location, which turned out much better. At first we were Coastal Fitness. We changed the name to Planet Fitness in 1994.

What challenges did you face starting out?

Both Mike and I second-guessed ourselves a lot in the beginning. We didn’t have much money, so we lived in our first gym for at least six months until we could afford an apartment.

Beyond that, pricing was a challenge. We started by offering memberships at $99 for a year, which was great because a lot of people would sign up, but then we wouldn’t have any guaranteed renewals for the following year. For the first five or so years, we experimented with different pricing models and went up to $35 per month. We found that people really appreciated the $10 per month price point, so we stuck with that.

How are you able to price your memberships so low?

It comes down to our business model. We run 24-hour gyms with 12 employees each. We don’t have salespeople, group exercise classes or child care. Everything is streamlined.

When did things start picking up for Planet Fitness?

We had a few gyms in the early 2000s, but things really got going in 2003 when we started franchising. We started with six franchises that year and growth has exploded ever since, especially in inner city areas. We’ve done really well in places like Brooklyn, the Bronx and Harlem. We offer an affordable, clean place for people to work out with air conditioning and flat screen TVs.

What's it like to work at Planet Fitness?

It is a fun and collaborative environment. We have about 60 people at our corporate office and I’d say at least half of them came right from the gyms. Our VP of marketing worked at a gym desk while in college. We are really proud of our retention rates. Our main salesperson has been with us for 15 years.

We try to involve our staff in big decisions and encourage them to be part of our growth. A number of great ideas have come from our staff, including our 30-minute circuit training—a partitioned section in most Planet Fitness locations today.

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How have two brothers been able to work together for so long and keep the peace?

[Laughs] Well, it was hard in the beginning. When we started out, we were both doing the same things, which we quickly learned wasn’t going to work. We brought in consultants in the late '90s and realized that we needed to focus on our specializations. For me that was accounting; for Michael it was marketing and the creative side of the business.

I recommend other members of family businesses do the same. Make sure your roles are defined. It makes life much better.

Meet more inspiring entrepreneurs in our Building an Empire series.

Katie Morell is an independent journalist based in San Francisco. She regularly contributes to Hemispheres, USA Today, Consumers Digest, Destination Weddings & Honeymoons, Crain’s Chicago Business and others.

 Photos: Thinkstock, Planet Fitness