Problems at Planet Fitness (PLNT)
Planet Fitness (NYSE: PLNT — $7.43 billion) is the leading franchisor of low-cost gyms in the United States. The company’s low price point, as little as $10/month, convenient 2,000+ locations, and branding as a “judgment free zone” have been a hit with consumers. Planet Fitness has also been a hit with investors, shares are up ~350% since the company’s August 2015 IPO propelled by a growing franchise base that’s nearly doubled from 1,066 in 2015 to 2,091 franchised gyms today. At ~40x forward earnings, investors believe the franchise network is healthy and has room to grow. The Bear Cave doesn’t.
Through numerous Freedom of Information Act requests, The Bear Cave has uncovered hundreds of consumer complaints concerning overbilling, fraudulent transactions, excessive fees, and uncancellable memberships. The complaints allege a pattern of misconduct including 1) customers sending multiple cancellation letters that are ignored, 2) cancellation attempts in person that are ignored 3) billing being resumed post-cancelation 4) spurious fees, and 5) Planet Fitness preventing customers from canceling because they owe a back balance, among many other complaints. In addition, The Bear Cave believes Planet Fitness created a fake investor presentation slide to obscure franchisee saturation. After reviewing the evidence, The Bear Cave is left wondering whether Planet Fitness is actually a thriving gym franchise or an illegal billing operation with gyms on the side.
Every year millions of Planet Fitness members attempt to cancel their memberships. Many never go to the gym, some move, and others are off-put by Planet Fitness’s beginner-friendly antics. For example, Planet Fitness gyms have “lunk alarms,” loud alarms that will sound if gymgoers drop weights, grunt loudly, or engage in any intimidating behavior. In addition, Planet Fitness has no squat racks, no barbells, dumbbells that only go up to 75 pounds, and many franchisees host monthly pizza and bagel days. Planet Fitness staff have also turned away guests for having oversized water bottles or oversized builds.
Planet Fitness often boasts these measures ensure a “judgement free environment” for beginners. A skeptic may wonder if these measures are simply designed to discourage frequent gymgoers from joining Planet Fitness.
Because of its reliance on beginners, Planet Fitness is much more vulnerable to gym cancellations. Planet Fitness doesn’t make it easy.
On its corporate Q&A about cancellations, Planet Fitness is vague and discloses, in part,
“Our cancellation process may vary from club to club, so the best way to begin the cancellation process is to contact your home club location to confirm the cancellation policy. For most locations, you can send a letter to your home club requesting to cancel, or you can stop by your home club and cancel in person.”
Planet Fitness does not allow customers to cancel online, over phone, over email, over its app, or over a web portal. Under Planet Fitness policy, customers must go into the club they initiated their membership or send a letter with reasons for cancellation.
The natural consequence of unwanted billing or tough-to-cancel subscriptions tends to be credit card disputes — if a customer feels a payment or subscription is unwanted they can call their credit card company and easily file a dispute, get a refund, and stop ongoing payment.
To circumvent this, most Planet Fitness gyms do not allow customers to sign up with credit cards, and instead require direct access to checking accounts or debit cards. On its corporate Q&A for “why do you need my checking account for a membership?” Planet Fitness says,
“The method in which members are able to pay for their monthly membership varies by location, but many Planet Fitness clubs accept payment through checking accounts only. We require an Electronic Funds Transfer through checking accounts for your convenience: This allows us to be able to continue your membership without interruption or the hassle of updating your payment information if your credit cards are lost/stolen, invalid or expired.”
Unlike credit cards, checking accounts do not generally have a dispute mechanism or easy way to block future payments. As a result, Planet Fitness customers, ~79% of whom earn less than $100,000/year, have little ability to stop unwanted payments. A top comment on the YouTube short, “Why Do People Dislike Planet Fitness?” says in part,
“I work at a bank. Planet Fitness is BY FAR the worst offender of attempting endless ACH debits from people's accounts. Payment doesn't go through, Planet Fitness tries again the next day, and the next day. Before you know it, your bank has charged $300 in fees, and Planet Fitness won't cancel your subscription unless you go into the exact location you signed up.”
So how difficult is it to cancel a Planet Fitness subscription? Is it as easy as sending a letter or stopping by the gym?
Evidence suggests no.
An October 2020 complaint to the North Dakota Attorney General submitted by a Planet Fitness customer includes a cancellation letter dated September 23, 2020. The customer called both Planet Fitness corporate and the franchised gym in an attempt to cancel and ultimately sent a cancellation letter.
Despite the cancellation letter dated September 23, Planet Fitness still billed the customer a $39 annual fee on October 1 and then “gave a song and dance about a third party biller and [said] they could not refund it locally.”
Below is a copy of the cancelation letter filed with the North Dakota attorney general:
In response, the Planet Fitness franchise group alleged that even though the letter was dated September 23, 2020, it was not postmarked until September 28, and not received until after October 1. Even after the inquiry from the North Dakota Attorney General, the Planet Fitness franchise group refused to refund the $39 annual fee because it “is fully earned when received and is non-refundable.”
A December 2020 complaint to the Iowa Attorney General echoes similar concerns about Planet Fitness’s refusal to cancel memberships. The consumer writes, in part,
“Around late October to November, I noticed I was still getting billed by Planet Fitness. I panicked and told my bank to stop giving payments to Planet Fitness around December 17 of this year. In addition, I tried to call Planet Fitness…. [The manager] told me that [letters] will take 2 weeks to get to them even though I just live a couple blocks down the street from them… Anyway, I sent a letter in late this November and I've been receiving calls from Planet Fitness collections about how my bank wasn't processing transactions anymore… the manager developed a new excuse that they are stocked with [cancellation] letters and will take a while to see if they received mine.”
The complaint ends,
“As of 12/29/20 they haven’t cancelled my membership. I plan on sending a third letter at their address as stated. With video proof hopefully soon.”
These are no isolated incidents.
A recent December 2022 complaint to the Florida Attorney General reads, in part,
“On 12/10 I called Planet Fitness and asked to cancel my membership... Planet Fitness told me to either come in person or mail in a cancelation request via regular US mail. I have moved out of state so I sent a letter. On 12/30 I called and was advised that they never received a letter. I asked for an email I could use to send them my cancelation request, and they refused to provide one. They said I will again be charged in January unless they receive a letter. It is obvious they want to use mail instead of email so they can just say they never received the letter and keep charging me. This is theft. I want a refund for what I was charged on 12/16 ($24.78). I also want my membership canceled immediately. This is ridiculous. Their employees are rude and unhelpful. It is obvious they feel entitled to steal from me.”