Planet Fitness, Inc. (PLNT) Earnings Call Transcript & Summary

Well, good morning, everyone. Thank you for joining us. I'm Joe Altobello, equity research analyst here at Raymond James, covering the household, personal care and leisure sectors. Our next presentation of the day will be Planet Fitness, the largest franchisor and operator of fitness centers in the United States with over 2,100 stores globally. Planet was on a rapid growth trajectory prior to COVID, having delivered 53 consecutive quarters of positive comp growth before being derailed, to some degree, by the pandemic. However, the company is working very hard to get back on track and here to talk about those plans with us today are CEO, Chris Rondeau; President, Dorvin Lively; and CFO, Thomas Fitzgerald. Welcome to all of you. We should have some time at the end of our chat for some audience questions as well [Operator Instructions]

So with that, I did want to begin with an overview of your business model. I do get the question asked to me a number of times how you've been able to be so successful in growing the business rapidly and profitably when others in the fitness space have not. So for the benefit of those in the audience who may not be as familiar with the Planet Fitness story, Chris, if you wouldn't mind describing sort of what it is that makes Planet Fitness different from other gyms.

Sure, Joe. Thanks for doing this for us today. Yes, Planet Fitness is a very different business model when it comes to the gym space, and we developed this back in the '90s, me and my partners, and truth of the matter is, there's only 20% of the population of the U.S. even has a gym membership today. So it's a very small percentage of the U.S. has a gym membership. And when you think about the gym models out there, the CrossFits, the Orangetheorys, the LA Fitness, Equinox, for example, they all cater to the fit getting fitter, the Gold's Gyms back in the '90s. And what we determined was is let's create a business model and at a price point that has catered to someone that's either never worked out before, and about 40% of our members have never gone to the gym in their entire life or don't have a gym membership today and really make the atmosphere extremely comfortable, we call it the Judgment Free Zone, so you don't come in feeling like a new kid in school. The old saying that you -- I got to lose weight before I join a gym, well, we're the answer to that. You just join and come as you are. And we have a lot of cardiovascular equipment. We don't have the 120 pounds dumbbells or the squat racks or the Olympic benches. We don't have the CrossFit-type classes and things like that in the gyms with punching bags. And it's very low-key, very inviting atmosphere, which really gets people off the couch. And our gyms, pre-COVID, averaged about 7,500 members per store. The industry averages about 1,200. So very, very, very different. And it's really just catering to the masses, getting people off the couch for the very first time. The last 2 years, Planet Fitness alone accounted for over 100% of member growth in the industry. And I say that because the industry added 2,800 more locations of gyms in the industry. So 2018 and 2019, the industry added 2,800 stores, we accounted for 100% member growth. The reason I say that is because as more and more of these boutiques open up or other models, they're catering to the same customer. They're not getting more people off the couch. So all they're doing is swapping customers one for one and the other. But we're truly getting people off the couch and adding more people to the pool here. We're over 20% market share today of the industry.

And if you could talk a little bit about the price tiers that you offer relative to other gyms.

Sure. Yes. So our entry-level price is $10 a month. We pioneered that price even back in the '90s, and we've been there ever since. That's really our go-to get-you-off-the-couch, I-can-do-this price. And then we always offer no-commitment memberships. You can come in today and join and no harm, no foul. If it's just not the right time for you, you can cancel in 3 weeks or 3 months. So no long-term contracts. And then our Black Card membership, which is our higher-priced membership, if you can call it that, is to $22.99. That price point gives you access to the club like the white card, but gives you access reciprocity to all locations throughout the country and it gives you guest privileges, so you can bring a free guest to work out with you, free guest. Same guest or different guest every day. Also gives you access to our Black Card spa areas in our clubs, which we have hydro-massage beds, massages chairs like you see in the airports as well as tanning, and those are all free if you're a Black Card member and you use those amenities there. And right now, we're about 60% Black Card. So even though you see us advertise a $10 price point mostly on TV, we get about 60% conversion of people taking the Black Card membership.

Got it. That's helpful. So I just want to move on a second to get an update on store reopenings. As I mentioned, you ended Q4 with a little over 2,100 stores globally. I think about 90% of those were currently open, at least as of your last earnings call. From what I understand, most of the 200-or-so that are still closed are located in California. So was there any timetable at all for when those might reopen? And is the recall effort that's going on in California perhaps accelerating that reopening process?

Yes. Happy to say that the Panama is now open, country Panama. And just even this week, we got word in California that a few counties are now starting to open up. So it's the beginning of -- they have a coding system there, a color-coding system of purple, orange and a couple other colors. And with some -- few of those counties now are starting to open. So it's the first time that's beginning to happen in California. So we're slightly above now 90% open and going in the right direction. So that's really great to see. And a lot of -- also we're seeing some of the mask mandates, which you might have seen in Texas, is changing. So we have a lot of positive momentum here in the right direction. So hopefully, we'll have -- no real time frame, but hopefully, the 100% of the stores will be open here, not too distant future.

And just to be clear, those stores that are currently closed in California, had they ever opened back up and been forced to reclose or they've been closed since March?

For the most part, they were closed. They all opened up for like less-than-a-month-period and then reclosed back in the summertime and then ever since then, they haven't been opened. So essentially, they haven't been opened really since March. And you may recall they -- when we closed our clubs back in March, most of our members had a 30-day credit because we had billed in the middle of the month. So when the California clubs opened in March, opened in the middle of summer for that 1 month, all they did is simply burn off the credit the members had. So they never billed. So they really haven't had any drop since last March.

Got it. Okay. So if we look back at 2020, you typically experienced spikes in membership cancellations once stores had reopened. And more importantly, once billing restarted, as you mentioned. Once these stores do reopen, would you expect to see the same sort of pent-up cancellations that you've seen during other reopenings during the summer?

Yes. I'd say a couple of things to that question, Joe, is I'd say which is interesting last year, you might have heard me talk about this in the fourth quarter call is when you look at the cancellations for 2020, you would expect that there'd be an incremental number of cancellations because of COVID, right, very rightfully. But if you look at our cancellations for 2020 in relation to the member base and look at the cancellations of 2019 in relation to the member base, our cancellations in 2020 were not any higher, believe it or not. It's really a join issue. We're closed for many months, some stores never opened. We also, for the first time in 29-year history, we didn't market for 6 months. So we never drove acquisition. So it was really just a leaky bucket. And as -- you're right, we always see cancellations even pre-COVID around our billing dates. We see people that cancel leading up to a bill date and people that cancel following a bill date. So we weren't open for, call it, a club for 5 months, as soon as we started billing, we had 5 months of cancellations that people weren't billed that, all of a sudden, came in. So they were higher within those months, but over the year, they weren't any higher. I do believe that when California reopens, you'll see a slew of cancellations come through that people haven't been billed for, call it, almost -- well, now it is 12 months. The one thing that will be interesting to see is that these clubs are opening up in a very different time than the clubs or their peers that opened up last May when it was still chaos in the country. So it will be interesting that maybe they won't see or feel quite the spike of cancels that the rest of their peer franchisees did. And the other thing, it is good, as you heard us talk about a lot, is 75% of our stores are owned by franchisees that have clubs in multiple states, which has allowed us to weather the storm quite good because these franchisees have been billing in Florida, for example, since last June, so they've had cash flow coming through as a franchisee, even though they got stores in California as well.

We're also talking about a smaller number of stores this time around, 200 versus the 500 store tranches that you were reopened back in the summer so...

Yes.

On the membership front, it's not surprising in the midst of a pandemic that you lost almost 1 million members in 2020. I think you ended the year with around 13.5 million. What I find interesting is that the cancellations that you mentioned weren't the issue as I think they were about flat for 2019 on a per-store basis. Instead, the issue was lower gross new joins. I mean you've attributed that to -- it's largely a lack of national advertising, as you mentioned, for a good portion of the year. However, you did turn on your advertising back on in September. And membership still declined rather substantially in Q4. So given that, was it simply a lack of advertising or is there still a lingering concern about going back to the gym, particularly among older people and those of big designations, for example?

Yes. Yes. The boomer population for sure is more anxious in coming back and even today, are still hesitant to come back at the same rate as they were before. Millennials are pretty much on par. Gen Zs are extremely higher than we've seen than ever. Gen Zs are coming back pretty fast. Gen X is slightly off as well, not as bad as the boomers by any means, but you're right. And so September, we kicked in our national marketing for the first time since the close period in March. So for 6 months, we weren't marketing at all, but also our marketing spend is much lower back then because we had still, at that point, in fact, September, probably almost close to 40% of the stores were still closed. So the marketing budget was also shrunk back then. So as stores had began to reopen, the marketing budget continues to get stronger and stronger. And you also -- you may recall that we corporately decided to fund an extra $10 million of marketing to help that flywheel get jump-started in the fourth quarter. So I think as the -- I think there's still some anxiousness in the boomers and there still is today. And I think as time goes, we'll continue to see them come back. But we are seeing, which is really encouraging, is that our rejoin rate is the highest we've ever seen. So right now, we're about 28% of our members joining as rejoins, and that typically runs about 20%, 23%. So we're starting to see a high influx of rejoins coming back, which I -- as I said is a few things: One is home fitness isn't the replacement, right? They're coming back at a faster rate than ever, which is great. And I think -- and they're not scared by bricks and mortar. They're ready to come back and get back to working out. So as much as we don't like to see cancellations, Joe, we do -- I feel like we do the right thing with people. Cancellations, we don't drag them through the mud on the way out. And they'll come back because we treated them right. And we didn't bill members during the close period, which a lot of our peers did, which left a dirt -- a bad taste in a lot of people's mouths. So I think the cancellation trend -- our rejoin trend could be better for this year than we've seen in the past, which just adds to the new members we get off the couch.

Just curious if you guys have any data...

Joe, just one thing...

Yes, sure, go ahead, Tom.

Sorry. Just one thing since some of the folks may not be as familiar with the story. I think one thing that makes us unique, and as Chris said, back to the joins piece. We consider ourselves a marketing company as much as a company that has a bunch of gyms. And pre-COVID, our franchisees would earn four-wall EBITDA margins in the high 30%, low 40% after spending 9% of monthly dues on marketing. And when you look at our size compared to anybody else in the industry, pre-COVID, we were spending, as a system, upwards of $200 million a year marketing to drive people to get off the couch and come join Planet Fitness. And that just dwarfs any ad budget of any competitor in our space. So that's a distinguishing characteristic, I think, between us and maybe what other people may be thinking about for Planet.

No, I definitely have a lot of questions on four-wall economics later, but...

Oh, okay. Sure.

Onto the point, in terms of how your membership has evolved, do you have any data on maybe the average age of a Planet member today versus a year ago? I'm curious if it's gotten materially younger.

Average age, I don't have it off the top of my head. I mean my guess is probably has skewed because the boomers have canceled at a faster rate than the Gen -- Millennials and Gen Zs have, for example. But as a whole, even pre-COVID, almost half of our members are millennial. So boomers make up a very small piece even pre-COVID. Our breakdown is about 50% Millennial, about 25% Gen X and the last 25% is made up of Gen Z and boomers. Where the Gen Z population is growing really fast for us, the boomers shrunk some. So I guess luckily, in some ways, the boomers' not a huge subset of our member base that we're losing.

Got it. That's helpful. So just going back to membership for a second. The bad news is you lost about 600,000 net members in Q4. The good news is that you gained about 300,000 in the month of January alone, your first month, I believe, where you saw a month-on-month increases in membership since the pandemic began. Is it safe to say, assuming that we don't see another round of widespread shutdown, that we've probably bottomed from a membership standpoint? And is the pace of the vaccine rollout likely to be the biggest determinant, you think, of member growth, at least in the near term?

Yes. I think you're right. So we gained 300,000 net members in January. So that was great to see. And we -- and I think week by week, Joe, it is -- we're seeing that the further we get into the vaccine distribution and we see more states opening up at the same time, I think it's -- all of the momentum is in the right direction. And even if you look at our first week of January sale and we had the extension in the last week of January, the last week of January performed better, which is not really the norm. So I think even though it was the same month, within weeks, people's sentiment was getting better, and we're seeing good momentum in February as well. So I do believe the further we get into the vaccines, more states open up, there's less fear out there. The bigger question will be do we have a stronger July sale or October sale than we typically see just because, at that point, as you saw probably yesterday, Texas now is no more masks mandate and so on. So people get back to normal, could there be a definitely more active spike in membership than we typically see that time of the year when summer is typically slower.

Right. So I'm curious because in Q1, obviously seasonally, that's the biggest quarter not only for yourselves, particularly the gym industry generally in terms of net new adds, everyone coming off of the holiday season. So January being up 300,000 shouldn't be a huge surprise. And I think, correct me if I'm wrong, January, the month is typically, call it, 40% of your full year net adds. And if that's the case, could that be a little bit different this year because given the vaccine rollout and the timing of that, could we actually see more net adds beyond Q1, for example, than you typically would see because of that?

Yes. I mean it's hard to say. It goes back to what I was saying a minute ago, it's hard for us to predict the future, but from what we're seeing in trends, and I think you'd probably agree just from what you're seeing with government opening up the doors and getting off masks and now California even opening up, that we'll begin to see better customer sentiment later in the year about joining gyms and if the boomer population finally gets comfortable, that's just on top of the 300,000 in January. So I think if things go in the right direction, I don't see there's any reason why that couldn't happen.

And it's still your expectation that we're going to see hopefully getting back to that year-end '19 membership number sometime in early '22?

That would be a good goal. That's what we're planning on but we'll see.

Got you. Okay. So a couple of data points that you mentioned on your most recent earnings call was that the 5% Planet members have canceled during COVID have already rejoined. And as you mentioned earlier today, 28% of new joins overall since COVID began our prior Planet members. Can you help us put those numbers into context? I think you mentioned 20% to 23% is the typical versus 28%. What does that 5% look like to you?

In terms of -- I mean they canceled during COVID. So sometime after March until the end of the year, so they canceled during that timeframe came back.

Yes. Okay. So yes. I guess I'm just trying to compare the 5% and I guess how high that could go. Are you expecting that to build over time?

Yes. Well, I think that the overall 28% could build over time or at least stay high like that for a while. And I really believe coming out of COVID that people are going to realize either you cancel during COVID, but you probably shouldn't though because it's probably the one thing that's keeping you healthier and your keeping immune system strong. And the people that cancel pre-COVID that are coming back are people that probably realized, why the heck did I cancel my membership, I probably should have kept it because maybe I wouldn't have gained the 20 pounds that I gained or have been healthier if I got COVID. Or if I did get COVID, had to battle it and took longer. So -- and I really think the tailwind coming out of this, Joe, is people aren't going to come out of COVID thinking I'm going to eat worse, workout less and start smoking, right? It's like people have to got to start taking better care themselves. The industry is in for a big tailwind, the sweet spot of it is there's less competition for us, so the members have really one place to go.

Right, right. I want to switch over to usage rates, which is another statistic that you guys often quote, which effectively represents the number of member visits to a particular store, indexed to pre-COVID levels. Now that number has steadily improved over time. And I think in Q4, system-wide, you're indexing at around 75%. I'm curious if you see this as a leading indicator or a lagging indicator for membership growth since the 2 are clearly related.

Yes, I think it probably they go two and the same. I think it probably does -- I think that they probably coincide with each other. We start in September, and it could be just seasonality going from summertime to September, but when we started advertising in September, even though it was a member acquisition commercial, featuring our cleanliness standards and so on, we did see a pretty quick increase in the members working out again. So could it be just on August to September? Or is it really that a member was sitting at home hesitant to came in, saw the commercial, saw the cleanliness standards and then began to come in and work out again? So it does seem that the more members we sell, which is also commercial-driven, that the more and more people begin to work out. So I think they probably coincide with each other.

Okay. That's helpful. So a couple of weeks ago, you did provide your outlook for new store growth in '21. You said 75 to 100 this year. That's below the record of 260 that you added 2 years ago and the 130 that you added last year during the pandemic. How much visibility do you have into that number? And is that a floor? Or is that really your best guess and that number could go higher or even lower, actually?

Yes. Obviously, we've talked about each year when we give our Q4 results, we kind of talk about how we see the current year coming up. Obviously, last year, we gave some guidance, and then we pulled that with the uncertainties. And throughout the year, as you know, Joe, just from other businesses, the real uncertainty of closing and reopening and possibly closing again, those types of things really cause most of our franchisees to really slow down or totally stop their pipeline development. Generally, in normal times, franchisees are -- they're working sites, potential sites every month. And it's about a 6- to 9-month lead time. So you think about it today, in normal circumstances, they'd be working on sites for potentially late Q4 into Q1 and quite frankly, even a year in -- even in late next year, I mean, it's kind of a 2-year, 24-month kind of process because you want to be, as a franchisee, when you're trying to develop your markets, you want to take advantage of an opportunity that pops up and it may be something that -- something is coming off-lease, but it's not coming off-lease for another 12 months, but you want it when it's coming off-lease. And we've been a benefactor of the fact that a lot of landlords, when they had tenants that the leases were expiring, they'd rather have us, and so they'd be talking to us about coming in. So from a pipeline perspective, it was much further than 9 months that we'd be looking at sites albeit sometimes maybe not fully committing to those. So with the pipeline generally being kind of stopped, obviously some still going on, and that's why we -- when we gave our guidance of somewhere in that 75 to 100, it was our best view into where franchisees are and sites that have been approved, sites where leases have been signed and discussions with franchisees on what are they thinking over the balance of the year. Obviously, it's not at the same rate that we were back in 2019 and prior, as you mentioned. I think the issue will be how quickly does it appear that the country is kind of back to normal, whatever that's going to be, with the general population feeling comfortable getting out, going to restaurants, going to bars, doing other things in venues and seeing that the economy is kind of back on track, so to speak, I think that's when you'll see franchisees really kind of dig in. There's no -- we don't have any concern of franchisees' lack of enthusiasm about the brand at all. And we've said on other calls in the past that franchisee, there's a lot of franchisees, particularly the private equity guys, that would like to buy out some of the other guys. They don't want to sell. We've reached out to some franchisees and said, "Hey, if you'd be willing to sell or if you need to sell, we corporately, we’d be interested in buying. And they don't want to. So what that tells you is the confidence level of the brand, the economics and return of the brand and I think what it tells you is that there's this kind of waiting period until there's this comfort level of I'm ready to go plot down a couple million-plus dollars in building out a club and signing a 10-year lease with some level of certainty that I'm going to start getting a return on that investment sometime soon. You don't want to build a store, which some did, by the way, and they sat closed for 5, 6, 7, 8, 10 months. And so you had that soft cost that you couldn't start getting any kind of return on that investment. So I think that where we sit back today is that the franchisees are as bullish as the brand as ever. I think they think and we do, the moat is even greater than it was prepandemic, but we just have to kind of get through this to the other side to start seeing a lot of positive things happen out in our everyday world. And then we don't have any doubt that they'll start doing it. So it's just a matter of kind of when, it's not a matter of if.

So it sounds like what you're saying, Dorvin, is that the uncertainty is the bigger factor right now from a franchisee standpoint and not any balance sheet issues or credit.

Yes. And we've said, Joe, I mean, I think the balance sheet issue is a real issue in the sense they need to build back some liquidity. It's almost like your personal finances. You need a little bit of money in your savings account. So some of these guys, particularly the guys in California being on the extreme, but a lot of the other guys went 5 and 6 months without any cash coming in the door. And it's cash going out the door because they couldn't obviously curtail all their expenses. So -- but we think they've managed it well. Tom, as the CFO, has led a lot of business reviews with our franchisees and reviewing their financial situation, having conversations one-on-one with them. So -- and we've done a number of things to help them with the extension of development, the extensions of the re-equipped requirements. And we think those were the -- certainly the prudent things to do in a pandemic. So I think that it's been win-win and the way that we work with our franchisees. With that said, we have franchisees out there signing leases right now. So that's why I said that we and they are still bullish about the opportunities ahead of us and the fact that we still believe, maybe more so than ever, that the 4,000 locations is a real, real opportunity for us.

Yes. So obviously, you just gave 2021 guidance in store growth. So you're certainly in no position to talk about 2022 and any specificity at this point, but thinking about that and the 6- to 9-month lag time and how bullish the franchisees are on the concept, could we actually see 2022 be sort of a catch-up year, where you kind of look at last year and look at this year and then see additional growth even beyond that?

Yes. I think it's too early to say whether that would be the case. And the biggest reason on that is, I think there's 2 things. One is what -- how quickly and how soon will that be somewhat back to normal. Because if -- and then the franchisees building back their balance sheet and starting because if you don't start until October, November, December, you lose basically the first half of '22, right, because of the pipeline because it takes 6 to 9 months generally to get a site from the time you start to the time you are able to open. If that started today, then I would think '22 would be more so than where we're sitting at right now, but it's just -- there's so many uncertainties to where we're at right now, Joe. We'll continue to give updated thoughts on that throughout the year.

Okay. Great. So if we look at the industry, we've seen a number of bankruptcies, some high-profile bankruptcies and store closures. And I know you talked about the opportunity to gain some serious market share during this period. Are you starting to see members come to you from other gyms that have closed permanently?

Yes. We're seeing about right now about 4% of our joints that are coming from clubs that they're reporting that their club permanently closed and are coming to us. So about 4% today is what we're seeing from new joins. In the industry's -- IHRSA trade organizations report about 19% of clubs that permanently closed at this point, up a little bit from even the fourth quarter call. So it's -- I think it's probably not over yet. IHRSA said the estimate could be as high as 25% closed, by the time it's all said and done, at the end of the day. So the time will tell. I think with the marketing dollars that we spend, anybody who's looking for gym is probably more apt to come to us than anybody else. And with 2,000 stores now in all 50 states and pretty much any municipality that we're in, we're definitely going to be probably the choice that they're going to consider as their club permanently closes.

In terms of your market share, I think pre-COVID, you were in that 20% to 25% range in terms of membership. Where do you see that number going over time? I know you it's a tough one.

Over how long a time?

Over the next 5 years, I thought.

And even pre-COVID, I mean, we were well on track. We broke 2,000 stores in 2019. December 31, 2019, we broke 2,000 stores and we continue to open up that 250 to 250-or-so a year, we'll be at 3,000 stores here in a few years. And then the marketing spend goes up by -- was up by 30%. And it's like continues to get that flywheel spinning faster and faster. And the other question we always get is what about the 4,000-store potential. I said, well, even pre-COVID, we were selling more than almost half our new franchise unit sales, more were than the existing ADAs that we already had sold for 10 units to a franchisee and they're coming to us saying, I have 8 built in or 10, I could probably fit 15 in of this ADA because what we learned is the more we open, the more marketing dollars that we keep spending, we keep getting more and more people off the couch. So our market penetration was that -- or limit that we never thought we're capable 8, 9 years ago. So you run the math that 2,000 stores are already over 20% market share, what happens to 3,000 stores or 4,000 stores or more. And now with more closings out there that the 1970 industry close, question is, is what's that 4,000 number going to go to, I think. So the market share question, I think it's inevitable. I don't see why we couldn't get to 50%, maybe higher.

Okay. And in terms of the economics of your franchisees, obviously they've been incredibly attractive. It's part of the reason why you're seeing such rapid growth. There's a lot of puts and takes going on right now. Obviously, membership growth is starting to stabilize and grow again. Rents are probably coming down, labor costs is probably going up. So in another year or 2, where do you see franchisee economics, four-wall economics versus where they were prepandemic? Are they still below that level of, call it, 2018, 2019 or could we actually see those economics exceeding what they were previously?

Yes. I'll take that one, Joe. I think -- it's a great question. I think it will vary a little bit just based on each kind of franchisee and their stores and what percent of the members they lost. But just to kind of wind it back a little bit, if a franchisee -- and this is typical, it depends on the rent and the labor and all that. But typically, if a franchisee lost 10% of their membership through this period, their four-wall EBITDA margin probably dropped by 500 basis points. So -- and that's starting from what I was saying earlier, pre-COVID levels of high 30%, low 40% EBITDA margins. And that's a pretty tight range from what we've seen. There's not a wide dispersion among mature stores, stores that are more than 2 years old. We really -- and most of the franchisees, while their stores were closed, deferred rent, so they have to pay that back over some period of time for however many months, they were closed. Typically, that's paid back 6, 9, 12 months. So post that, though, to Dorvin's earlier point, probably rents aren't going to come down a lot. I think as most landlords I've ever dealt with, they care more about capping their sort of exit based on the rent multiple, not so -- and they're freer to give TI money than they are -- to build a new store than they are to reduce rent. So that's probably not going to be a big factor. But as the membership levels come back, the fixed costs -- the costs to operate a store are pretty fixed. They don't move a lot. So if you get back a former member, to Chris' earlier point, that rejoins maybe when they canceled during 2020 or somebody who comes from a competitor or somebody who gets off the couch, about 84% of that new membership dues or the dues from that new member will flow to the bottom line for that store because all they really have to do is pay our royalty and the marketing of 9% that we talked about earlier. So it's highly accretive. It will just be a question of what that ramp looks like. It may be a function of, as I said, where they -- what they lost, but also what the competitive landscape is in their market. But there's no doubt in talking to our franchisees, all of this is really a question of when it happens, not if it happens. And we talk about getting back to pre-COVID. That's just going to be, in our minds, and I think, in their minds, whether you're talking membership levels, four-wall profit margins, whatever the metric is, that, that's going to be a point in the journey forward and beyond that, but that's the first marker that we want to hit, is to kind of get back to those pre-COVID levels. But our anticipation and their expectation is no matter what metric you look at, we should continue to march forward from there.

Got it. Okay. I wanted to just get a little bit to digital. I think in my view, Planet Fitness has been at the forefront among fitness companies in developing digital content for your members, largest is the app. And I think it's something that you guys don't get enough credit for, maybe not enough attention is paid to this. How many downloads are we talking about right now in terms of your outlook?

Right now, we have about 40% of our members have the app. We're getting about 70% of our new joins that download the app, which is used for everything from checking in to your crowd meter to see how busy your club is before you leave the house, which is a great -- members actually love that. It's also how you refer a guest to bring, if you're a Black Card member, you can bring your guest in. You refer members to join through the app. So we have about 40% of our current members have the app. Total mobile users is about 8.5 million right now that have the app and about 1 million members, million people aren't members of Planet Fitness at all. So we have quite a few. And our content that's being consumed, the fitness content, about 20% of the fitness content being consumed are also nonmembers, which is really interesting to see. We started our digital subscription, the $5.99 test back in November. We haven't released the subscribers yet in the test, but we're seeing the same traction in the subscribers where 20% of the subscribers are non-Planet Fitness members, and 25% of those have gone on to buy bricks-and-mortar membership on top of their digital subscription, which is really interesting. So it's like a gateway to membership. So they're introducing themselves to Planet Fitness digitally and then joining bricks-and-mortar after that, which is really great. Also, we're seeing with the digital subscription is 75% of the subscribers are Planet Black Card members. And many of those are Black Card members for well north of 2 years. So they've been a loyal member for over 2 years, and they're actually adding another $5.99 on top of their current Black card price. So seeing some really good traction there, but I think really, the digital platform, what's really most exciting to me, Joe, is unless -- pre-app, if you will, bricks-and-mortar space, unless somebody walked through our door, we had no way to service our member, period, right? This gives us a way to interact with our member in the club, out of the club, throughout their entire wellness journey, whether they're got to be walking at home, and we can give them content to walk, working out in their house, diet, nutrition, we can get into that, which is our strategy as well, meditation and yoga. So we'll be able to service our members inside and outside our 4 walls, which for me is super exciting because it's never been something we've been able to do in the last 29 years. So to be able to service our members that way is really great. And the thing is that the content, too, is we originally get down on that road because we have seen members in our stores using equipment, but teaching themselves through another app that was even ours, right? They were getting content to teach and educating themselves in our clubs, but weren't getting it from us. So it only makes sense for us to be educating our own member with our own content. So that's really what started this whole thing, but we're seeing people utilize it outside our 4 walls, which is super intriguing.

So in terms of the app, is this a revenue generator? Is it a tool for customer retention and acquisition? Is it really all of the above at the end of the day?

Yes, all of the above. I mean I think when you look at -- member referrals is a prime example. We had no way for a member to formally refer a friend to join. You have to walk in with them, carry them by their hand or during promotional period. Now they can, in their app, they can refer a friend. You open up their address book, e-mail, they can text it to 100 friends if they want, right, a special offer. And we can talk to them through in-app messaging. Three -- you have the option to sponsor 3 friends right now for a special discount. So that's a revenue driver. Black Card upgrade is a revenue driver. So a White Card member to Black Card, can do an upgrade to a Black Card, click of a button. Otherwise, they have to come into the club, go to the front desk, hopefully the staff's not busy, upgrade their membership and fill up paperwork. So that's a revenue driver. And then outside of the whole membership structure, then there's the digital subscription, which we talked about, that, that gets a lot of legs in traction, which is a gateway to membership for the nonmember, non-Planet Fitness bricks-and-mortar that we introduced them to Planet through digital components. We in-app message them a special to join a club too. And that's not even getting into diet, nutrition and medication. And on top of that, you've got -- we don't sell merchandise yet or gym bags on the app or -- and protein powder or any kind of supplements in that sense. So it's really a platform now that we have a lot of levers that we can use to capitalize on our 13.5 million members and growing, 13.8 million members and growing, as well as now a new marketing vehicle for us to nonmembers that are seeing our brand for the first time.

And who gets the $6 a month for PF+? Is it you or your franchisee? I know it's small, but at some point, hopefully, it will get bigger, right?

Yes. No. Right now, we haven't nailed out exactly how we're going to share that with the franchisees. Our strategy always has been that we do it in the best interest of the franchisee and is a win-win for both sides. We want them to push the app, right? We want them to endorse the app. We want them to drive usage of the app. As the franchisee profitability continues to expand and maybe not just through bricks-and-mortar membership, but other ways, then what that does is we always get this question, could you raise royalty? Well, if we're able to drive revenue to the franchisee in other ways outside of just bricks and mortar, then yes, we have the ability to raise royalty again. And outside of that, too, which is God forbid a pandemic happens again, we close down, if a franchisee could be deriving some portion of revenue from a digital component and not go completely no revenue, we'd be able to weather the storm even in a better fashion, right? So -- and we do still have -- I mean, hey, today, we have plenty of those. We have a few of those take down clubs and hurricanes and floods and stuff that if a club could derive some revenue outside of just a bricks-and-mortar membership, it'd be in the great interest of the franchisee to endorse that.

Okay. Excellent. Well, unfortunately, I think we're just about out of time here. So with that, I want to thank Chris, Tom, Dorvin for your time this morning, and everybody else who is listening. Hopefully, you have a great rest of the day and enjoy the rest of the conference. Thank you.

Thanks, everybody.

Great. Thank you, Joe.

Thanks a lot, Joe. Thanks, everybody.