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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.02pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.03pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.08pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
against+1
instability+1
insufficient+1
voided+1
threatened+1
Positive rising
enhanced+1
strong+1
Risk Factors (Item 1A)
22,655 words
Item 1A. Risk Factors
We could be adversely impacted by various risks and uncertainties. If any of these risks actually occur, our business, financial condition, operating results, cash flow and prospects may be materially and adversely affected. As a result, the trading price of our Class A common stock could decline.
Summary of Risk Factors
Risks related to our business and industry
• Our success depends substantially on the value of our brand, which could be materially and adversely affected by the high level of competition in the health, fitness and wellness industry, our ability to anticipate and satisfy consumer preferences, shifting views of health and fitness and our ability to obtain and retain high-profile strategic partnership arrangements.
• Our and our franchisees’ clubs may be unable to attract and retain members, which would materially and adversely affect our business, results of operations and financial condition.
• Our intellectual property rights may be infringed, or by others.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
loss+7
closure+5
termination+2
impairment+2
deficit+1
Positive rising
gain+10
attractive+1
improved+1
MD&A (Item 7)
10,798 words
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless the context requires otherwise, references in this report to the “Company,” “we,” “us” and “our” refer to Planet Fitness, Inc. and its consolidated subsidiaries.
Discussions of fiscal 2023 items and year-to-year comparisons between fiscal 2024 and fiscal 2023 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our annual report on Form 10-K for the fiscal year ended December 31, 2024.
Overview
We are one of the largest and fastest-growing franchisors and operators of fitness centers in the world by number of members and locations, with a highly recognized national brand. Our mission is to enhance people’s lives by providing a high-quality fitness experience in a welcoming, non-intimidating environment, which we call the Judgement Free Zone. Our bright, clean clubs are typically 20,000 square feet, with a large selection of high-quality Planet Fitness-branded cardio, circuit- and strength-training equipment and friendly staff trainers who offer unlimited free fitness instruction to all our members in small groups. We offer this differentiated fitness experience starting at only $15 per month to new members for our standard Classic Card membership. This attractive value proposition is designed to appeal to a broad population, inclusive of all fitness levels from beginners to athletes. We and our franchisees fiercely protect Planet Fitness’ community atmosphere—a place where you do not need to be fit before joining and where toward your fitness goals (big or small) is supported and applauded by our staff and fellow members.
• We and our franchisees rely heavily on information systems and any material failure, interruption or weakness may prevent us from effectively operating our business, damage our reputation or subject us to potential fines or other penalties.
• If we fail to properly maintain the confidentiality and integrity of our data, our reputation and business could be materially and adversely affected.
• The occurrence of cyber incidents, or a deficiency in cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of confidential information, and/or damage to our employee and business relationships and reputation, all of which could harm our brand and our business.
• If we fail to successfully implement our growth strategy, our ability to increase our revenues and operating profits could be adversely affected.
• Our planned growth and changes in the industry could place strains on our management, employees, information systems and internal controls, which may adversely impact our business.
• If we cannot retain our key employees and hire additional highly qualified employees, we may not be able to successfully manage our businesses and pursue our strategic objectives.
• Economic, political and other risks associated with our international operations could adversely affect our profitability and international growth prospects.
• Our financial results are affected by the operating and financial results of, our relationships with and actions taken by our franchisees. Financial forecasting may differ materially from actual results.
• We are subject to a variety of additional risks associated with our franchisees, which could adversely affect the attractiveness of our franchise model, and in turn our business, results of operations and financial condition.
• We and our franchisees could be subject to claims related to health and safety risks to members that arise while at both our corporate-owned and franchise clubs.
• Our business is subject to various laws and regulations and changes in such laws and regulations, failure to comply with existing or future laws and regulations or failure to adjust to consumer sentiment regarding these matters, could harm our reputation and adversely affect our business.
• Our failure to address evolving ESG issues may have an adverse effect on our business, financial condition and results of operations.
• We are subject to risks associated with leasing property subject to long-term non-cancelable leases.
• If we and our franchisees are unable to identify and secure suitable sites for new franchise clubs, our revenue growth rate and profits may be negatively impacted.
• Opening new clubs in close proximity may negatively impact our existing clubs’ revenues and profitability.
• Our franchisees may incur rising costs related to construction of new clubs and maintenance of existing clubs, which could adversely affect the attractiveness of our franchise model, and in turn our business, results of operations and financial condition.
• Our dependence on a limited number of suppliers for equipment and certain products and services could result in disruptions to our business and could adversely affect our revenues and gross profit.
• Planet Fitness’ adoption or non-adoption of artificial intelligence could result in an adverse impact on Planet Fitness’ financial performance or reputation or otherwise result in liability.
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Risks related to our indebtedness
• Substantially all of the assets of certain of our subsidiaries are security for our indebtedness, which imposes certain restrictions on our activities and the activities of our subsidiaries.
• We have a significant amount of debt outstanding, which could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet their debt payment obligations.
• The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.
Risks related to our organizational structure
• We will be required to pay certain of our existing and previous owners for certain tax benefits we may claim. We expect that the payments we will be required to make will be substantial and may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreements and we will not be reimbursed for any payments made pursuant to the tax receivable agreements in the event that any tax benefits are disallowed.
• Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
• Our ability to pay taxes and expenses may be limited by our structure.
• In certain circumstances, Pla-Fit Holdings will be required to make distributions to us and the Continuing LLC Owners, and the distributions that Pla-Fit Holdings will be required to make may be substantial.
Risks related to our Investment Portfolio
• Our marketable debt securities portfolio is subject to credit, liquidity, market, and interest rate risks that could cause its value to decline and materially adversely affect our financial condition.
Risks related to our Class A common stock
• Provisions of our corporate governance documents could make an acquisition of our Company more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.
• Our organizational structure, including the tax receivable agreements, confers certain benefits upon the TRA Holders and the Continuing LLC Owners that do not benefit Class A common stockholders to the same extent as it will benefit the TRA Holders and the Continuing LLC Owners.
• If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
• Our certificate of incorporation designates courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
• Our stock price could be extremely volatile, and, as a result, stockholders may not be able to resell shares at or above their purchase price.
• Because we do not currently pay any cash dividends on our Class A common stock, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it.
• We cannot guarantee that our share repurchase program will be fully consummated or that such program will enhance the long-term value of our share price.
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Risks related to our business and industry
Our success depends substantially on the value of our brand.
Our success is dependent in large part upon our ability to maintain and enhance the value of our brand, our club members’ connection to our brand and a positive relationship with our franchisees. Brand value can be severelydamaged even by isolated incidents, particularly if the incidents receive considerable negative publicity or result in litigation. Some of these incidents may relate to our policies, the way we manage our relationships with our members and franchisees, our growth strategies, our development efforts or the ordinary course of our, or our franchisees’, businesses. Other incidents that could be damaging to our brand may arise from events that are or may be beyond our ability to control, such as:
• actions taken (or not taken) by one or more franchisees or their employees relating to health, safety, welfare or otherwise;
• data security breaches or fraudulent activities associated with our and our franchisees’ electronic payment systems;
• regulatory, investigative or other actions relating to our and our franchisees’ data privacy practices;
• litigation and legal claims;
• third-party misappropriation, dilution or infringement or other violation of our intellectual property;
• regulatory, investigative or other actions relating to our and our franchisees’ provision of indoor tanning services;
• regulatory, investigative or other actions relating to pricing, billing and cancellation practices;
• illegal activity targeted at us or others;
• politically motivated accusations or other negative publicity directed at us or our franchisees, regardless of factual basis;
• allegations of harassment or disparate treatment based upon race, gender identity, sexual orientation, national origin, religion or other class; and
• conduct by individuals actually or perceived to be affiliated with us which could violate ethical standards or otherwise harm the reputation of our brand.
Consumer demand for our clubs and our brand’s value could diminish significantly if any such incidents or other matters erode consumer confidence in us, our clubs or our reputation as a health and fitness brand, which would likely result in fewer memberships sold or renewed and, ultimately, lower royalty revenue, which in turn could materially and adversely affect our results of operations and financial condition.
The high level of competition in the health, fitness and wellness industry could materially and adversely affect our business.
We compete with a fragmented group of participants in the global health, fitness and wellness industry, including: other health and fitness clubs; physical fitness and recreational facilities established by non-profit organizations and businesses for their employees; private studios and other boutique fitness offerings; racquet, tennis, pickleball and other athletic clubs; amenity and condominium/apartment clubs; country clubs; community centers; online personal training and fitness coaching; providers of digital fitness content and wearable devices; the home-use fitness equipment industry; local tanning salons; wellness centers; businesses offering similar or ancillary services; and other businesses that rely on consumer discretionary spending in the health, fitness and wellness industry. We may not be able to compete effectively in the markets in which we operate. Competitors may attempt to copy our business model, or portions thereof, which could erode our position and brand recognition and impair our growth rate and profitability. Moreover, we expect the competition to intensify in the future as new and existing competitors introduce new or enhanced products and services that compete with members’ and prospective members’ time and resources. Competitors, including companies that are larger and have greater resources than us, may compete with us to attract members. Non-profit organizations in our markets may be able to obtain land and construct clubs at a lower cost and collect membership dues and fees without paying taxes, thereby allowing them to charge lower prices. Luxury fitness companies may reduce prices and create strong value propositions or create lower price brand alternatives. Furthermore, due to the increased number of low-cost health and fitness club alternatives and digital fitness alternatives, we may face increased competition if we increase our price or if discretionary spending declines. This competition may limit our ability to attract and retain existing members and our ability to attract new members, which in each case could materially and adversely affect our results of operations and financial condition. Consumer demand for digital member management functionality and digital fitness offerings has been increasing, which has required us to effectively recruit the skills and talent structure needed to adequately compete in this space, in addition to investing incremental marketing and digital infrastructure funds to produce and deliver differentiated content.
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If we are unable to anticipate and satisfy consumer preferences and shifting views of health and fitness, our business may be adversely affected.
Our success depends on our ability to anticipate and satisfy consumer preferences relating to health and fitness. Our business is and all of our services are subject to changing consumer preferences that cannot be predicted with certainty. Developments or shifts in research or public opinion on the types of health and fitness services we provide could negatively impact the business or consumers’ preferences for health and fitness services could shift rapidly to different types of health and fitness centers or at-home fitness options; and we may be unable to anticipate and respond to shifts in consumer preferences. It is also possible that competitors could introduce new products and services that negatively impact consumer preference for our business model, or that consumers could prefer health and fitness opportunities outside of the gym that do not align with our business model. The increased prevalence of weight loss medications may negatively impact consumer demand for health and fitness centers, particularly if consumers perceive such medications as a substitute for exercise-based fitness programs. Failure to predict and respond to changes in public opinion, public research and consumer preferences could adversely impact our business.
If we fail to obtain and retain high-profile strategic partnership arrangements, or if the reputation of any of our partners is impaired, our business may suffer.
A principal component of our marketing program has been to partner with high-profile marketing partners, such as our sponsorship of ABC’s “Dick Clark’s New Year’s Rockin’ Eve with Ryan Seacrest 2026,” to help us extend the reach of our brand. Although we have partnered with several well-known partners in this manner, we may not be able to attract and partner with new marketing partners in the future. In addition, if the actions of our partners were to damage their reputation, our partnerships may be less attractive to our current or prospective members. Any of these failures by us or our partners could adversely affect our brand, business and revenues.
Our and our franchisees’ clubs may be unable to attract and retain members, which would materially and adversely affect our business, results of operations and financial condition.
Our target market is comprised of people of all fitness levels, from beginners to athletes. The success of our business depends on our and our franchisees’ ability to attract and retain members. Our and our franchisees’ marketing efforts may not be successful in attracting members to clubs, and membership levels may materially decline over time, especially at clubs in operation for an extended period of time. Members may cancel their memberships at any time after giving proper notification, in accordance with the terms of their membership agreement and, for certain memberships, subject to an initial minimum term. We may also cancel or suspend memberships if a member fails to provide payment for an extended period of time. In addition, we experience attrition and must continually engage existing members and attract new members in order to maintain membership levels. A portion of our member base does not regularly use our clubs and may be more likely to cancel their memberships. Some of the factors that could lead to a decline in membership levels include changing desires and behaviors of consumers or their perception of our brand, a shift to digital fitness versus our core bricks and mortar fitness offerings, changes in discretionary spending trends and general economic conditions, such as inflation, changes in customer behavior as a result of public health or other concerns, market maturity or saturation, a decline in our ability to deliver quality service at a competitive price, any further increases in monthly membership dues, direct and indirect competition in our industry and a decline in the public’s interest in health and fitness, among other factors. In order to increase membership levels, we may from time to time offer promotions or lower monthly dues or annual fees. If we and our franchisees are not successful in optimizing price or in adding new memberships in new and existing clubs, growth in monthly membership dues or annual fees may suffer. Any decrease in our average dues or fees or higher membership costs may adversely impact our results of operations and financial condition.
Our intellectual property rights, including trademarks, trade names, copyrights and trade dress, may be infringed, misappropriated or challenged by others.
Our intellectual property (including our brand) is important to our continued success. We seek to protect our trademarks, trade names, copyrights, trade dress and other intellectual property by exercising our rights under applicable state, provincial, federal and international laws. Policing unauthorized use and other violations of our intellectual property rights is difficult and costly, and the steps we take may not prevent misappropriation, infringement, dilution or other violations of our intellectual property, especially internationally where foreign nations may not have laws to protect against “squatting,” or in “first-to-file” nations where trademark rights can be obtained despite a third-party’s prior use of our intellectual property. If we fail to successfully protect our intellectual property rights for any reason, or if any third-party (including franchisees) misappropriates, dilutes, infringes or violates our intellectual property, the value of our brand and other intellectual property may be harmed, which could have an adverse effect on our business, results of operations and financial condition. Any damage to our reputation could cause membership levels to decline or make it more difficult to attract new members.
We may also from time to time be required to initiate litigation to enforce our intellectual property rights. Third parties (including franchisees) may also assert that we have infringed, diluted, misappropriated or otherwise violated their intellectual
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property rights, which could lead to litigationagainst us. Litigation, even where we are likely to prevail, is inherently uncertain and could divert the attention of management, result in substantial costs and diversion of resources and negatively affect our membership sales and profitability regardless of whether we are able to successfully enforce or defend our rights. Despite our efforts to enforce and defend our intellectual property rights, title defects can arise from conduct of third parties that we cannot anticipate or control, or our exclusive ownership and control over our intellectual property, especially our rights in trademarks and trade secrets, could be diminished or impaired. For example, under U.S. law a third-party’s prior use of a trademark similar to a Planet Fitness trademark could impair our rights in our trademarks, which, despite reasonable research and efforts, we may not have been able to discover or anticipate. In addition, our trade secrets and confidential information could be compromised through misappropriation or unauthorized disclosure, including through a cyber incident or violation by a third party of confidentiality obligations owed to us, and, despite our reasonable efforts to protect our confidential information and trade secrets, and to maintain the proprietary status thereof, the information could be disclosed or a court could rule that legal protections provided to trade secrets are no longer enforceable, which could have a material adverse effect on our business, results of operations, financial condition and cash flow.
We and our franchisees rely heavily on information systems, and any material failure, interruption or weakness may prevent us from effectively operating our business and damage our reputation.
We and our franchisees increasingly rely on information systems, including point-of-sale processing systems in our clubs and other information systems managed by third parties, to interact with our franchisees and members and collect, maintain, club and transmit member information, billing information and other personally identifiable information, including for the operation of clubs, collection of cash, legal and regulatory compliance, management of our supply chain, accounting, staffing, payment of obligations, ACH transactions, credit and debit card transactions and other processes and procedures. Since 2015, we have used a commercially available third-party point-of-sale system. Unforeseen issues, such as bugs, data inconsistencies, outages, changes in business processes, discontinuation of systems or their maintenance, and other interruptions with the point-of-sale system in the past have had, and in the future could have, an adverse impact on our business. Additionally, if we move to different third-party systems, or otherwise significantly modify the point-of-sale system, our operations, including EFT drafting, could be interrupted. Our ability to efficiently and effectively manage our franchisee and corporate-owned clubs depends significantly on the reliability and capacity of these systems, and any potential failure of these third parties to provide quality uninterrupted service is beyond our control.
Our digital platform runs on data services and solutions, and facilitates digital experiences across digital channels, including mobile, online, and in-club media, some of which are supported by third-party partners and vendors. We continue to invest in this platform to deliver new digital experiences that provide better services and value to our club members and franchisees. If we move to different partners or vendors (either voluntarily or as a result of existing partners or vendors no longer being able to offer services to us on acceptable terms) to develop and maintain this platform, or if the ability of the partners or vendors providing digital platform services to provide its services is impaired, our operations could increasingly be interrupted. This platform is built on commercial cloud computing platforms and future digital services we may offer could also be sourced from third-party platforms. Since 2019, we developed and rolled out a new customized mobile application, evaluated and rolled out a new in-club media solution, introduced premium digital content through a partnership across multiple channels and have worked to develop and implement a strategy focused on streamlining the join process and increasing member engagement across all our digital platforms. Such platforms depend on the internet, internet providers and cloud computing providers to deliver ongoing services, the interruption of which could disrupt our operations. Disruption to those platforms and/or services could adversely impact the products and services we offer to our members and affect our membership sales and retention.
Our and our franchisees’ operations depend upon our ability, and the ability of our franchisees and third-party service providers (as well as their third-party service providers), to protect our computer equipment and systems againstdamage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security incidents, viruses, denial-of-service attacks and other disruptions. There is also a potential heightened risk of cyber security incidents as a result of geopolitical events outside of our control, such as the ongoing Russia-Ukraine or Israel-Palestine conflicts. The failure of these systems to operate effectively, stemming from maintenance problems, existing systems becoming obsolete, upgrading or transitioning to new platforms, expanding our systems as we grow, a breach in security or other unanticipatedproblems could result in interruptions to or delays in our business and member services and reduce efficiency in our operations. In addition, the implementation of technology changes and upgrades to maintain current and integrate new systems may also require the expenditure of substantial costs, prove ineffective, cause service interruptions, operational delays due to the learning curve associated with using a new system, transaction processing errors and system conversion delays and may cause us to fail to comply with applicable laws. If our information systems, or those of our franchisees and third-party service providers (as well as their third-party service providers), fail and our or our partners’ third-party back-up or disaster recovery plans are not adequate to address such failures, our revenues and profits could be reduced and the reputation of our brand and our business could be materially adversely affected, which in turn may materially and adversely affect our results of operations and financial condition. Furthermore, we currently operate with a hybrid work model whereby most of our
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headquarters-based employees work remotely at least one day per week. The significant increase in remote working, particularly for an extended period of time, could exacerbate certain risks to our business, including an increased risk of cyber incidents and improper collection and dissemination of personal or confidential information.
Use of email marketing, mobile application and social media may adversely impact our reputation or subject us to fines or other penalties.
The popularity of email, social media and other consumer-oriented technologies, including v-logs, blogs, podcasts, chat platforms, social media websites and applications, and other forms of internet-based communication has increased the speed and accessibility of information dissemination and broadened the pool of consumers and other interested persons. Use of social media and such other technologies by or on behalf of us and our franchisees exposes us and our franchisees to a variety of risks, including the improper disclosure of proprietary information, negative comments about or negativeincidents regarding our brand, boycotts of our business, increased regulatory scrutiny and compliance costs, exposure of personally identifiable information, fraud, claimsallegingviolation or infringement of our intellectual property, trade secrets or rights of publicity, claimsallegingfalse advertising or deceptive trade practices, or out of date information. Notably, negative or false commentary about us has been in the past, and may at any time in the future be, posted on social media platforms or similar devices and may harm our business, brand, reputation, marketing partners, financial condition, and results of operations, regardless of the information’s accuracy and even if the commentary is ultimately proven to be false or removed. Consumers value readily available information about health clubs and often act on such information without further investigation and without regard to its accuracy. The harm caused by social media or similar technologies may be immediate without affording us an opportunity for redress or correction and may expose us to fines and other legal liability. In addition, social media platforms provide users with access to such a broad audience that collective action against our clubs, such as boycotts, can be more easily organized. If such actions were organized, we could suffer reputational damage as well as physical damage to our clubs. Furthermore, our ability to respond to adverse social media coverage could be constrained by limitations in our marketing budget, may require expending substantial costs, or divert the attention of management, marketing or other resources. Social media and other platforms have in the past been and may in the future be used to attack us, our information security systems and our reputation, including through use of spam, spyware, ransomware, phishing and social engineering, viruses, worms, malware, distributed denial of service attacks, password attacks, “Man in the Middle” attacks, cybersquatting, impersonation of employees or officers, abuse of comments and message boards, fake reviews, doxing and swatting. We have a cyber security policy that attempts to prevent and respond to these attacks. Nonetheless, these types of attacks are pervasive inside and outside of the industry and could lead to the improper disclosure of proprietary information, negative comments about our brand, exposure of personally identifiable information, fraud, hoaxes or malicious dissemination of false information, which could lead to a decline in the value of our brand, which could have a material adverse effect on our business.
We also use email, sms/texting, mobile application, web and social media platforms as marketing tools. For example, we maintain social media accounts and may occasionally email or text members to inform them of certain offers or promotions. As laws and regulations, including FTC enforcement, rapidly evolve to govern the use of these platforms and devices, we may face increased costs to attempt to comply with such laws and regulations and the failure by us, our employees, our franchisees, our spokespeople and brand ambassadors or other third parties acting at their direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our and our franchisees’ business, financial condition and results of operations or subject us to fines or other penalties or negatively affect our brand (even where we may have contractually obligated such persons to abide by such laws and regulations).
If we fail to properly maintain the confidentiality and integrity of our data, including member credit card, debit card, bank account information and other personally identifiable information, our reputation and business could be materially and adversely affected.
In the ordinary course of business, we and our franchisees handle member, prospective member and employee data, including credit and debit card numbers, bank account information, driver’s license numbers, dates of birth and other highly sensitive personally identifiable information, in information systems that we maintain and in those maintained by franchisees and third parties with whom we contract to provide services. Our mobile application tracks exercise and activity-related data, which may in the future track other personal information. Some of this data is sensitive and could be an attractive target of a criminal attack by malicious third parties with a wide range of motives and expertise, including lone wolves, organized criminal groups, “hacktivists,” disgruntled current or former employees and others. The integrity and protection of member, prospective member and employee data is critical to us.
Despite the security measures we have in place to comply with applicable laws and rules, our facilities and systems, and those of our franchisees and third-party vendors (as well as their third-party service providers), may be vulnerable to security breaches, acts of cyber terrorism or sabotage, vandalism or theft, computer viruses, loss or corruption of data, programming or human errors or other similar events. Furthermore, the size and complexity of our information systems, and those of our franchisees and our third-party vendors (as well as their third-party service providers), make such systems potentially vulnerable to security breaches from inadvertent or intentional actions by our employees, franchisees or vendors, or from attacks by malicious third parties. Because such attacks are increasing in sophistication and change frequently in nature, we, our
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franchisees and our third-party vendors may be unable to anticipate these attacks or implement adequate preventative measures, and any compromise of our systems, or those of our franchisees and third-party vendors (as well as their third-party service providers), may not be discovered and remediated promptly. Changes in consumer behavior following a security breach or perceived security breach, act of cyber terrorism or sabotage, vandalism or theft, computer viruses, loss or corruption of data or programming or human error or other similar event affecting a competitor, large retailer or financial institution may materially and adversely affect our business, which in turn may materially and adversely affect our results of operations and financial condition.
Additionally, the handling of personally identifiable information by our, or our franchisees’, businesses are regulated at the federal, state and international levels, as well as by certain industry groups, such as the Payment Card Industry Security Standards Council, National Automated Clearing House Association (“NACHA”), Canadian Payments Association and individual credit card issuers. Federal, state, international and industry groups may also consider and implement from time to time new privacy and security requirements that apply to our businesses. Compliance with contractual obligations and evolving privacy and security laws, requirements and regulations may result in cost increases due to necessary systems changes, new limitations or constraints on our business models and the development of new administrative processes. They also may impose further restrictions on our handling of personally identifiable information that is housed in one or more of our, or our franchisees’ databases, or those of our third-party service providers. Noncompliance with privacy laws or industry group requirements or a security breach or perceived non-compliance or breach involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive or confidential information, whether by us or by one of our franchisees or vendors, could have material adverse effects on our and our franchisees’ business, operations, brand, reputation and financial condition, including decreased revenue, material fines and penalties, litigation, increased financial processing fees, compensatory, statutory, punitive or other damages, adverse actions against our licenses to do business and injunctive relief by court or consent order. Despite our efforts, the handling of personally identifiable information may not be in compliance with applicable law, or this information could be disclosed or lost due to a hacking event or unauthorized access to our information system, or through publication or improper disclosure, any of which could affect the value of our brand. We maintain and we require our franchisees to maintain cyber risk insurance, but in the event of a significant data security breach, this insurance may not cover all of the losses that we would be likely to suffer.
The occurrence of cyber incidents, or a deficiency in cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of confidential information, and/or damage to our employee and business relationships and reputation, all of which could subject us to loss and harm our brand and our business.
We have been in the past, and we could be in the future, subject to cyber incidents or other adverse events that threaten the confidentiality, integrity or availability of information resources, including intentional attacks or unintentional events where parties gainunauthorized access to systems to disrupt operations, corrupt data or steal confidential, personal or other information about customers, franchisees, vendors and employees. Such attacks have become more common, and many companies have recently experienced serious cyber incidents and breaches of their information technology systems. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. We could also be subject to negative impacts on our business caused by cyber incidents relating to our third-party vendors. The three primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to the relationship with members and private data exposure, which each in turn could create additional risks and exposure. We maintain insurance coverage to address cyber incidents, and have also implemented processes, procedures and controls to help mitigate these risks. However, these measures do not guarantee that our reputation and financial results will not be adversely affected by such an incident.
Because we and our franchisees accept electronic forms of payment from our respective customers, our business requires the collection and retention of customer data, including credit and debit card numbers and other personally identifiable information in various information systems that we and our franchisees maintain and in those maintained by third parties with whom we and our franchisees contract to provide credit card processing. We also maintain important internal company data, such as personally identifiable information about our employees and franchisees and information relating to our operations. Our use of personally identifiable information is regulated by federal, state, and foreign laws, as well as by certain third-party agreements. As privacy and information security laws and regulations and contractual obligations with third parties evolve, we may incur additional costs to ensure that we remain in compliance with those laws and regulations and contractual obligations. If our security and information systems are compromised or if we, our employees or franchisees fail to comply with these laws, regulations, or contract terms, and this information is obtained by unauthorized persons or used inappropriately, it could adversely affect our reputation and could disrupt our operations and result in costlylitigation, judgments, or penalties arising from violations of federal and state laws and payment card industry regulations.
Under certain laws, regulations and contractual obligations, a cyber incident could also require us to notify customers, employees or other groups of the incident or could result in adverse publicity, loss of sales and profits or an increase in fees payable to third parties. We could also incur penalties or remediation and other costs that could adversely affect the operation of
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our business and results of operations, which in turn may materially and adversely affect our results of operations and financial condition.
If we fail to successfully implement our growth strategy, which includes new club development by existing and new franchisees, our ability to increase our revenues and operating profits could be adversely affected.
Our growth strategy relies in large part upon new club development by existing and new franchisees. Our franchisees face many challenges in opening new clubs, including:
• availability and cost of financing;
• selection and availability of suitable club locations;
• competition for club sites;
• negotiation of acceptable lease and financing terms;
• inflationary pressures, including due to tariffs, on build out costs;
• disruptions in the supply chain for required build out, equipment and materials;
• securing required domestic or foreign governmental permits and approvals;
• health and fitness trends in new geographic regions and acceptance of our offerings;
• employment, training and retention of qualified employees;
• ability to open new clubs during the timeframes we and our franchisees expect; and
• general economic and business conditions.
In particular, because the majority of our new club development is funded by franchisee investment, our growth strategy is dependent on our franchisees’ (or prospective franchisees’) ability to access funds to finance such development. If our franchisees (or prospective franchisees) are not able to obtain financing at commercially reasonable rates, or at all, they may be unwilling or unable to invest in the development of new clubs, and our future growth could be adversely affected.
Our growth strategy also relies on our ability to identify, recruit and enter into agreements with a sufficient number of franchisees. In addition, our ability and the ability of our franchisees to successfully open and operate new clubs in new or existing markets may be adversely affected by a lack of awareness or acceptance of our brand, as well as a lack of existing marketing efforts and operational execution in these new markets. To the extent that we are unable to implement effective marketing and promotional programs and foster recognition and affinity for our brand in new domestic and international markets, our and our franchisees’ new clubs may not perform as expected and our growth may be significantly delayed or impaired. In addition, franchisees of new clubs may have difficulty securing adequate financing, particularly in new markets where there may be a lack of adequate history and brand familiarity. New clubs may not be successful or our average club membership sales may not increase at historical rates, which could materially and adversely affect our business, results of operations and financial condition.
To the extent our franchisees are unable to open new clubs as we anticipate, we will not realize the revenue growth that we hope or expect. Our failure to add a significant number of new clubs would adversely affect our ability to increase our revenues and operating income and could materially and adversely affect our business, results of operations and financial condition.
Our planned growth could place strains on our management, employees, information systems and internal controls, which may adversely impact our business.
For several years prior to the COVID-19 pandemic, we experienced growth in our business activities and operations, including a significant increase in the number of system-wide clubs. Although such growth was temporarily slowed by measures put in place in response to the COVID-19 pandemic and the resulting temporary closure of clubs and accompanying decrease in membership, we have resumed our expansion strategy, in line with prior plans for growth. Our past expansion and our current planned expansion place significant demands on our administrative, operational, financial and other resources. Such demands may be heightened by our efforts to expand internationally, where our brand is new and will require additional resources to enter new markets. Any failure to manage growth effectively could seriouslyharm our business. To be successful, we will need to continue to implement management information systems and improve our operating, administrative, financial and accounting systems and controls. We will also need to train new employees and maintain close coordination among our executive, accounting, finance, legal, human resources, risk management, digital, marketing, technology, sales and operations functions. These processes are time-consuming and expensive, increase management responsibilities and divert management attention, and we may not realize a return on our investment in these processes. In addition, we believe the culture we foster at our and our franchisees’ clubs is an important contributor to our success. However, as we expand, we may have difficulty maintaining
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our culture or adapting it sufficiently to meet the needs of our operations. These risks may be heightened as our growth accelerates. Our failure to successfully execute on our planned expansion of clubs could materially and adversely affect our results of operations and financial condition.
Changes in the industry could place strains on our management, employees, information systems and internal controls, which may adversely impact our business.
Changes in the industry affecting gym memberships and payment for gym memberships may place significant demands on our administrative, operational, financial and other resources or require us to obtain different or additional resources. Any failure to manage such changes effectively could adversely affect our business. To be successful, we will need to continue to implement management information systems and improve our operating, administrative, financial and accounting systems and controls in order to adapt quickly to such changes. These changes may be time-consuming and expensive, increase management responsibilities and divert management attention, and we may not realize a return on our investment in implementing these changes, which in turn could materially and adversely affect our results of operations and financial condition.
If we cannot retain our key employees and hire additional highly qualified employees, we may not be able to successfully manage our businesses and pursue our strategic objectives.
We are highly dependent on the services of our senior management team and other key employees at our Club Support Center and our corporate-owned clubs, and on our and our franchisees’ ability to recruit, retain and motivate their own key employees. Competition for such employees can be intense, and the inability to attract and retain the additional qualified employees required to expand our activities or the loss of current key employees could adversely affect our and our franchisees’ operating efficiency and financial condition.
Economic, political and other risks associated with our international operations could adversely affect our profitability and international growth prospects.
We currently have clubs operating in certain other countries around the world, including Canada, Panama, Mexico, Australia and Spain. Our international operations are subject to a number of risks inherent to operating in foreign countries, and any expansion of our international operations will increase the impact of these risks. These risks include, among others:
• inadequate brand infrastructure within foreign countries to support our international activities;
• inconsistent regulation or sudden policy changes by U.S. and foreign agencies or governments;
• maintaining non-U.S. employees;
• the collection of royalties from foreign franchisees;
• difficulty of enforcing contractual obligations of foreign franchisees;
• increased costs in maintaining international franchise and marketing efforts;
• franchisees’ difficulty in raising adequate capital;
• problems entering international markets with well-established competitors and different cultural bases and consumer preferences;
• political and economic instability of foreign markets, including as a result of war or conflict;
• compliance with laws and regulations applicable to our international operations, such as the Foreign Corrupt Practices Act and regulations promulgated by the Office of Foreign Asset Control;
• fluctuations in foreign currency exchange rates; and
• operating in new, developing or other markets in which there are significant uncertainties regarding the interpretation, application and enforceability of laws and regulations relating to contract and intellectual property rights.
As a result, those new clubs may be less successful than clubs in our existing markets. Further, effectively managing growth can be challenging, particularly as we continue to expand into new international markets where we must balance the need for flexibility and a degree of autonomy for local management against the need for consistency with our mission and standards.
Our financial results are affected by the operating and financial results of, and our relationships with, our franchisees.
A substantial portion of our revenues come from royalties, which are generally based on a percentage of gross monthly membership dues and annual fees at our franchise clubs or, in certain cases, a sliding scale based on gross monthly membership dues, other fees and commissions generated from activities associated with our franchisees, and equipment sales to our franchisees. As a result, our financial results are largely dependent upon the operational and financial results of our franchisees. As of December 31, 2025, we had 86 franchisee groups operating 2,604 clubs. Negative economic conditions,
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including recession, public health emergencies, inflation, increased unemployment levels and the effect of decreased consumer confidence or changes in consumer behavior, could materially harm our franchisees’ financial condition, which would cause our royalty and other revenues to decline and materially and adversely affect our results of operations and financial condition as a result. In addition, if our franchisees fail to renew their franchise agreements, these revenues may decrease, which in turn could materially and adversely affect our results of operations and financial condition.
Our franchisees could take actions that harm our business.
Our franchisees are contractually obligated to operate their clubs in accordance with the operational, safety and health standards set forth in our agreements with them, including adherence to applicable laws and regulations. However, franchisees are independent third parties and their actions are outside of our control. In addition, we cannot be certain that our franchisees will have the business acumen or financial resources necessary to operate successful franchises in their approved locations, and certain franchise laws limit our ability to terminate or not renew these franchise agreements. Our franchisees own, operate and oversee the daily operations of their clubs. As a result, the ultimate success and quality of any franchise club rests with the franchisee. If franchisees do not successfully operate clubs in a manner consistent with required standards and comply with local laws and regulations, franchise fees and royalties paid to us may be adversely affected, and our brand image and reputation could be harmed, which in turn could materially and adversely affect our results of operations and financial condition.
Although we believe we generally maintain positive working relationships with our franchisees, disputes with franchisees have occurred in the past and may occur in the future. Such disputes could damage our brand image and reputation and our relationships with our franchisees generally.
We are subject to a variety of additional risks associated with our franchisees.
Our franchise business model subjects us to a number of risks, any one of which may impact our revenues collected from our franchisees, may harm the goodwill associated with our brand, and may materially and adversely impact our business and results of operations.
Bankruptcy of franchisees. A franchisee bankruptcy could have a substantial negative impact on our ability to collect payments due under such franchisee’s franchise agreement(s). In a franchisee bankruptcy, the bankruptcy trustee may reject its franchise agreement(s), ADA(s) and/or franchisee lease/sublease pursuant to Section 365 under the U.S. bankruptcy code, in which case there would be no further royalty payments from such franchisee, and we may not ultimately recover those payments in a bankruptcy proceeding of such franchisee in connection with a damage claim resulting from such rejection.
Franchisee changes in control. Our franchises are operated by third-party independent business owners. Although we have the right to approve franchise owners, and any transferee owners, we cannot predict in advance whether a particular franchise owner will be successful. If an individual franchise owner is unable to successfully establish, manage and operate the club, the performance and quality of service of the club could be adversely affected, which could reduce memberships and negatively affect our royalty revenues and brand image. Although our agreements prohibit “changes in control” of a franchisee without our prior consent as the franchisor, our form franchise agreement, and certain franchise relationship laws limit our ability to withhold our consent to the transfer of a club to a new owner. In any transfer situation, the transferee may not be able to perform its obligations under its franchise agreements and successfully operate the club. In such a case, the performance and quality of service of the club could be adversely affected, which could also reduce memberships and negatively affect our royalty revenues and brand image.
In addition, in the event of the death or permanent disability of a franchisee (if a natural person) or a principal of a franchisee entity, the executors and representatives of the franchisee are required to appoint an operator approved by us to manage the club. There is, however, no assurance that any such operator would be found or, if found, would be able to successfully operate its club. In the event that an acceptable operator is not found, the franchisee would be in default under its franchise agreement and, among other things, the franchise agreement and the franchisee’s right to operate the club under the franchise agreement could be terminated. If a new operator is not found or approved by us, or the new operator is not as successful in operating the club as the then - deceased franchisee or franchisee principal, the gross EFT of the club may be affected and could adversely affect our business and operating results.
Franchisee insurance. Our form franchise agreement requires each franchisee to maintain certain insurance types and levels. Losses arising from certain extraordinary hazards, such as extreme weather events brought on by climate change, however, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates) with respect to many other risks, or franchisees may fail to procure the required insurance. Moreover, any loss incurred could exceed policy limits and policy payments made to franchisees may not be made on a timely basis. Any such loss or delay in payment could have a material adverse effect on a franchisee’s ability to satisfy its obligations under its franchise agreement or other contractual obligations, which could cause the termination of the franchisee’s franchise agreement and, in turn, may materially and adversely affect our operating and financial results.
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Some of our franchisees are operating entities. Franchisees may be natural persons or legal entities. Our franchisees that are operating companies (as opposed to limited purpose entities) are subject to business, credit, financial and other risks, which may be unrelated to the operation of their clubs. These unrelated risks could materially and adversely affect a franchisee that is an operating company and its ability to service its members and maintain club operations while making royalty payments, which in turn may materially and adversely affect our business and operating results.
Franchise agreement termination; nonrenewal. Each franchise agreement is subject to termination by us as the franchisor in the event of a default, generally after expiration of applicable cure periods, although under certain circumstances a franchise agreement may be terminated by us upon notice without an opportunity to cure. The default provisions under the form franchise agreement are drafted broadly and include, among other things, any failure to meet operating standards and actions that may threaten our brand’s goodwill. Moreover, a franchisee may have a right to terminate its franchise agreement in certain circumstances. Our ability to terminate a franchise agreement following a default that is not cured within the applicable cure period, if any, and the ability of franchisees under certain circumstances to terminate a franchise agreement, could reduce our royalty revenue, which in turn may materially and adversely affect our business and operating results.
In addition, each franchise agreement has an expiration date. Upon the expiration of a franchise agreement, we or the franchisee may, or may not, elect to renew the franchise agreement. If the franchise agreement is renewed, the franchisee will receive a “successor” franchise agreement for an additional term. Such option, however, is contingent on the franchisee’s execution of the then-current form franchise agreement (which may include increased royalty payments, advertising fees and other fees and costs), the satisfaction of certain conditions (including re-equipment and remodeling of the club and other requirements) and the payment of a successor fee. If a franchisee is unable or unwilling to satisfy any of the foregoing conditions, the expiring franchise agreement will terminate upon expiration of its term. If not renewed, a franchise agreement and the related payments will terminate. We may be unable to find a new franchisee to replace such lost revenues, which in turn may materially and adversely affect our business and operating results.
Franchisee litigation; effects of regulatory efforts. We and our franchisees are subject to a variety of litigation risks, including, but not limited to, member claims, personal injuryclaims, vicarious liability claims, litigation with or involving our relationship with franchisees, litigationalleging that the franchisees are our employees or that we are the co-employer of our franchisees’ employees, employee allegationsagainst the franchisee or us of impropertermination and discrimination, landlord/tenant disputes and intellectual property claims. Each of these claims may increase costs, reduce the execution of new franchise agreements and affect the scope and terms of insurance or indemnifications we and our franchisees may have. In addition, we and our franchisees are subject to various regulatory efforts, such as efforts to classify franchisors as the co-employers of their franchisees’ employees and legislation to categorize individual franchised businesses as large employers for the purposes of various employment benefits. We and our franchisees also may be subject to changes in state tax laws or enforcement of state tax laws, whereby states subject certain franchisee payments to out of state franchisors to state sales tax or other, similar taxes. These and other legislation or regulations may have a disproportionate impact on franchisors and/or franchised businesses. These changes may impose greater costs and regulatory burdens on franchising and negatively affect our ability to sell new franchises, which in turn may materially and adversely affect our results of operations and financial condition.
Franchise agreements and franchisee relationships. Our franchisees develop and operate their clubs under terms set forth in our ADAs and franchise agreements, respectively. These agreements typically give rise to long-term relationships that involve a complex set of mutual obligations and mutual cooperation. We have a standard set of agreements that we typically use with our franchisees, but various franchisees have negotiated specific terms in these agreements. Furthermore, we may from time to time negotiate terms of our franchise agreements with individual franchisees or groups of franchisees (e.g., a franchisee association). We implemented our franchise growth model which, among other things, provides for extended franchise agreement terms, up to 12 years, and provides more flexibility on the timing of re-equipment obligations. We seek to have positive relationships with our franchisees, based in part on our common understanding of our mutual rights and obligations under our agreements, to enable both the franchisees’ business and our business to be successful. However, we and our franchisees may not always maintain a positive relationship or always interpret our agreements in the same way. Our failure to have positive relationships with our franchisees could individually or in the aggregate cause us to change or limit our business practices, which may make our business model less attractive to our franchisees or our members and could result in costlylitigation between us and our franchisees. Finally, we have the discretion to, and may change over time, the financial and other terms of our franchise agreements and ADAs offered to new franchisees and developers. In the past, we have sought to discuss and reach accord with our franchisee association over such changes, but there is no assurance that we will be successful in such efforts in the future. If we were unsuccessful, this may lead to discord with our franchisee association that could have a detrimental effect on the growth of our business.
While our revenues from franchisees are not concentrated among one or a small number of parties, the success of our franchise model depends in large part on our ability to maintain contractual relationships with franchisees in profitable clubs. Under our franchise growth model, a typical franchise agreement has a term of between 10 and 12 years. Our largest franchisee group accounts for approximately 7% of our total clubs and another large franchisee group accounts for approximately 7% of our total
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clubs as of December 31, 2025. If we fail to maintain or renew our contractual relationships on acceptable terms for these or other clubs, or if one or more of these large franchisees were to become insolvent or otherwise were unwilling to pay amounts due to us, our business, reputation, financial condition and results of operations could be materially and adversely affected.
Construction and maintenance costs. Our franchisees have incurred and may in the future incur rising costs related to construction of new clubs and maintenance of existing clubs, which could adversely affect the attractiveness of our franchise model, and in turn our business, results of operations and financial condition. Corporate-owned clubs require significant upfront and ongoing investment, including periodic remodeling and equipment replacement. If our franchisees’ costs are greater than expected, franchisees may need to outperform their operational plan to achieve their targeted return. In addition, increased costs may result in lower profits to franchisees, which may allow a franchisee to terminate its franchise agreement or make it harder for us to attract new franchisees, which in turn could materially and adversely affect our business, results of operations and financial condition.
In addition, if a franchisee is unwilling or unable to acquire the necessary financing to invest in the maintenance and upkeep of its clubs, including periodic remodeling and replacement of equipment, the quality of its clubs could deteriorate, which may have a negative impact on our brand image and our ability to attract and maintain members, which in turn may have a negative impact on our revenues.
Franchisee turnover. There can be no guarantee of the retention of any, including the top performing, franchisees in the future, or that we will maintain the ability to attract, retain, and motivate sufficient numbers of franchisees of the same caliber. The quality of existing franchisee operations may be diminished by factors beyond our control, including franchisees’ failure or inability to hire or retain qualified managers and other personnel. Training of managers and other personnel may be inadequate. These and other such negative factors could reduce franchise clubs’ revenues, impact payments to us from franchisees under the franchise agreements and could have a material adverse effect on our revenues, which in turn may materially and adversely affect our business.
We and our franchisees could be subject to claims related to health and safety risks to members that arise while at both our corporate-owned and franchise clubs.
Use of our and our franchisees’ clubs poses some potential health and safety risks to members or guests through physical exertion and use of our services and facilities, including exercise and tanning equipment. Claims might be asserted against us and our franchisees for injuries or death suffered by members or guests while exercising and using the facilities at a club. In addition, actions we have taken or may take, or decisions we have made or may make, in response to public health emergencies may result in legal claims or litigationagainst us, including legal claims related to alleged exposure to highly prevalent viruses at corporate-owned clubs and franchise clubs. We may not be able to successfullydefend such claims. We also may not be able to maintain our general liability insurance on acceptable terms in the future or maintain a level of insurance that would provide adequate coverage against potential claims. Depending upon the outcome, these matters may have a material adverse effect on our results of operations, financial condition and cash flows.
Our business is subject to various laws and regulations and changes in such laws and regulations, or failure to comply with existing or future laws and regulations, could adversely affect our business.
We are subject to the Federal Trade Commission (the “FTC”) Franchise Rule, as amended (the “Rules”), which is a trade regulation promulgated by the FTC that regulates the offer and sale of franchises in the U.S. and it territories (including Puerto Rico) and that requires us to provide to all prospective franchisees certain mandatory disclosures in a franchisee disclosure document (“FDD”), unless the prospect or transaction is otherwise exempt from the Rule. In addition, we are subject to state franchise registration and disclosure laws in approximately 14 states and various state business opportunity laws that regulate the offer and sale of franchises and require us, unless otherwise exempt from the applicable law, to register our franchise offering in those states prior to our making any offer or sale of a franchise in those states and to provide a FDD to prospective franchisees in accordance with such laws. We are subject to franchise disclosure laws in six provinces in Canada that regulate the offer and sale of franchises by requiring us, unless otherwise exempt, to prepare and deliver a franchise disclosure document to disclose our franchise offering in a prescribed format to prospective franchisees in accordance with such laws, and that regulate certain aspects of the franchise relationship. We are subject to similar franchise sales laws in Mexico, Australia, and Spain and may become subject to similar laws in other countries in which we may offer franchises in the future. Failure to comply with such laws may result in a franchisee’s right to rescind its franchise agreement and damages, and may result in investigations or actions from federal or state franchise authorities, civil fines or penalties, and stop orders, among other remedies. We are also subject to franchise relationship laws in approximately 20 states and in various U.S. territories that regulate many aspects of the franchise relationship including, depending upon the jurisdiction, renewals and terminations of franchise agreements, franchise transfers, the applicable law and venue in which franchise disputes must be resolved, discrimination and franchisees’ right to associate, among others. In addition, we and our franchisees may also be subject to laws in other foreign countries where we or they do business. Our failure to comply with such franchise relationship laws could result in fines, damages and our inability to enforce franchise agreements where we have violated such laws. Although we
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believe that our FDDs, franchise sales practices and franchise activities comply with such franchise sales laws and franchise relationship laws, our non-compliance could result in liability to franchisees and regulatory authorities (as described above), inability to enforce our franchise agreements and a reduction in our anticipated royalty revenue, which in turn may materially and adversely affect our business and results of operations.
We and our franchisees are also subject to the U.S. Fair Labor Standards Act of 1938, as amended, similar state laws in certain jurisdictions, and various other laws in the U.S., Canada, Panama, Mexico, Australia and Spain governing such matters as minimum-wage requirements, overtime and other working conditions. Based upon our experience with hiring employees and operating corporate-owned clubs, we believe a significant number of our and our franchisees’ employees are paid at rates related to the U.S. federal or state minimum wage, and past increases in the U.S. federal and/or state minimum wage have increased labor costs, as would future increases. Any increases in labor costs might result in our and our franchisees inadequately staffing clubs. Such increases in labor costs, and those that may arise due to other changes in labor laws or as a result of low unemployment rates, could affect club performance and quality of service, decrease royalty revenues and adversely affect our brand.
Our and our franchisees’ operations and properties are subject to extensive U.S., Canadian, Panamanian, Mexican, Australian, and Spanish federal, international, state, provincial and local laws and regulations, including those relating to environmental, building and zoning requirements. Our and our franchisees’ development of properties depends to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements. Failure to comply with these legal requirements could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability, which could adversely affect our business.
We and our franchisees are responsible at the clubs we each operate for compliance with federal, state, international, provincial and local laws that regulate the relationship between clubs and their members. Many states and provinces have consumer protection regulations and laws, including laws to regulate, methods of cancellation and automatic renewals of contracts, that may limit the collection of membership dues or fees prior to opening, require certain disclosures of pricing information, mandate the maximum length of contracts and “cooling off” periods for members (after the purchase of a membership), set escrow and bond requirements for clubs, govern member rights in the event of a member relocation or disability, provide for specific member rights when a club closes or relocates, require us to offer specific mechanisms for membership cancellation, provide rights of rescission, impose periodic notice requirements, including for consent confirmation, automatic renewal reminder, options for cancellation, or limit automatic membership renewals. Similar to the state and provincial laws described above, the FTC previously proposed a Click to Cancel Rule, which imposed certain disclosure, consent, cancellation, and no misrepresentation requirements relating to automatic renewal provisions included in certain memberships. While the FTC’s Click to Cancel Rule was voided by the U.S. Court of Appeals for the Eighth Circuit in July 2025, the FTC continues to actively define new standards for automatic renewal provisions, has taken initial steps to propose a new rule on automatic renewal provisions and has recently prioritized enforcement actions against companies offering auto-renewing products and services. Additionally, we and our franchisees are subject to state and federal total price disclosure laws which regulate the display of pricing for services or products provided, as well as state merchant surcharge regulations which regulate disclosure rules for a merchants’ ability to pass on credit card processing fees to consumers. Our or our franchisees’ failure to comply fully with these laws, rules or requirements may subject us or our franchisees to fines, penalties, damages and civil liability, result in membership contracts being void or voidable, or otherwise harm our brand or reputation. In addition, states or provinces may update these laws and regulations. Any additional costs that may arise in the future as a result of changes to the legislation and regulations or in their interpretation could individually or in the aggregate cause us to change or limit our business practices, which may make our business model less attractive to our franchisees or our members.
We and our franchisees are subject to laws and regulations governing the collection, use, disclosure, security or other processing of personal information including in the U.S., E.U., Canada, Panama, Mexico, Australia and Spain, as well as self-governing standards promulgated by certain financial industry groups, such as the Payment Card Industry, Security Standards Council, the NACHA and the Canadian Payments Association. In the U.S. in particular, there are rules and regulations promulgated under the authority of the FTC, the CCPA, and various other federal and state data privacy and breach notification laws. In California, the CCPA was amended and expanded by the California Privacy Rights Act (the “CPRA”). The CCPA, as amended, broadly defines personal information, provides an expansive meaning to activity considered to be a sale or sharing of personal information, and gives California consumers expanded privacy rights and protections, including the right to opt out of the sale of personal information or the sharing of personal information for purposes of cross-context behavioral advertising. The CCPA also requires that businesses make disclosures to California consumers about their collection and use practices and restricts a business’s ability to use, disclose or retain personal information, in some cases. The CCPA also provides for civil penalties for violations and a private right of action for certain data breaches. The CPRA has further established a new enforcement agency in California dedicated to consumer privacy. Additionally, comprehensive privacy laws akin to the CCPA have recently gone into effect in many other states, and several other states have passed similar laws that will go into effect in the next few years. It is quite possible that other U.S. states, Federal agencies, or the U.S. Congress will follow suit. New data privacy laws have been proposed in more than half of the states in the United States and in the U.S. Congress, reflecting a trend
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toward more stringent privacy legislation in the United States. The data privacy laws under consideration by federal and state legislators also include sector-specific laws. The My Health My Data Act, which recently became effective in Washington, contains new notice and consent requirements for the processing of “consumer health data” with the potential for large penalties enforceable through private lawsuits. The FTC and other authorities are likewise imposing standards for the collection, use, dissemination and security of personal information under consumer protection laws. Additionally, in the United States, laws in all 50 states require businesses to provide notice to individuals whose personally identifiable information has been disclosed as a result of a data breach. The laws are not consistent, and compliance in the event of a widespread data breach is costly. In addition, laws, regulations, and standards covering marketing and advertising activities conducted by telephone, email, mobile devices and the internet are applicable to our business, including the Telephone Consumer Protection Act (the “TCPA”) and the Controlling the Assault of Non‑Solicited Pornography and Marketing Act (“CAN-SPAM Act”). The TCPA places certain restrictions on making certain outbound calls, faxes, and text messages to consumers. The CAN-SPAM Act imposes penalties for the transmission of commercial emails that do not comply with certain requirements, such as providing an opt-out mechanism for stopping future emails from the sender. Further, state and federal auto-renewal laws continue to evolve, which may require us to make changes to our processes in order to comply with such laws. Compliance with evolving privacy and security laws, requirements and regulations may result in cost increases due to necessary systems changes, new limitations or constraints on our business models and the development of new administrative processes. They also may impose further restrictions on our or our franchisees’ handling of personally identifiable information that is housed in one or more of our, or our franchisees’ databases, or those of their third-party service providers. Non-compliance with privacy laws or industry group requirements or a security breach or perceived non-compliance or breach involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive or confidential information, whether by us, a franchisee or vendor, could have adverse effects on our and our franchisees’ business, operations, brand, reputation and financial condition, including decreased revenue, material fines and penalties, litigation, increased financial processing fees, compensatory, statutory, punitive or other damages, adverse actions against their licenses to do business and injunctive relief by court or consent order. Despite our efforts, the handling of personally identifiable information may not be in compliance with applicable law, or this information could be acquired, disclosed or lost due to a hacking event or unauthorized access to our or our franchisees’ information systems, or through publication or improper disclosure, any of which could result in fines, legal claims, or proceedings, including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation, and expose us to claims from impacted individuals, any of which could have a material adverse effect on our business, financial condition, and results of operations. We maintain and require our franchisees to maintain cyber risk insurance, but in the event of a significant data security breach, this insurance may not cover all of the losses.
Regulatory restrictions placed on indoor tanning services and negative opinions about the health effects of indoor tanning services could harm our reputation and our business.
Although our business model does not place an emphasis on indoor tanning, the vast majority of our corporate-owned clubs and franchise clubs offer indoor tanning services. We offer tanning services as one of many amenities available to our PF Black Card members. Many states and provinces where we and our franchisees operate have health and safety regulations that apply to health clubs and other facilities that offer indoor tanning services. U.S. federal law imposes a 10% excise tax on indoor tanning services. Under the rule promulgated by the IRS imposing the tax, a portion of the cost of memberships that include access to our tanning services are subject to the tax. In addition to regulations imposed on the indoor tanning industry, medical opinions and opinions of commentators in the general public regarding negative health effects of indoor tanning services could adversely impact the value of our PF Black Card memberships and our future revenues and profitability. Although the tanning industry is regulated by U.S. federal and state, and international government agencies, negative publicity regarding the potentially harmful health effects of the tanning services we offer at our clubs could lead to additional legislation or further regulation of the industry. The potential increase in cost of complying with these regulations could have a negative impact on our profit margins.
The continuation of our tanning services is dependent upon the public’s sustained belief that the benefits of utilizing tanning services outweigh the risks of exposure to ultraviolet light. Any significant change in public perception of tanning equipment or any investigative or regulatory action by a government agency or other regulatory authority could impact the appeal of indoor tanning services to our PF Black Card members, and could in turn have an adverse effect on our and our franchisees’ reputation, business, results of operations and financial condition as well as our ability to profit from sales of tanning equipment to our franchisees.
In addition, from time to time, government agencies and other regulatory authorities have shown an interest in taking investigative or regulatory action with respect to tanning services. For example, we reached a settlement with the New York Office of the Attorney General (“OAG”) in November 2015 in connection with allegations that in the spring of 2013, seven of the approximately 80 independently owned and operated Planet Fitness franchise locations in New York at the time had violated certain state laws related to tanning advertising, signage, paperwork and eyewear. Upon being alerted to these allegedviolations, we re-emphasized to all franchisees that they are contractually required to operate their businesses in compliance with all applicable laws and regulations. The OAG’s investigation was part of a larger initiative with respect to tanning salons and other providers of tanning services and the settlement did not have a material adverse effect on us. However, similar future
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initiatives could influence public perception of the tanning services we offer and of the benefits of our PF Black Card membership.
Environmental, social and governance (ESG) issues may have an adverse effect on our business, financial condition and results of operations and damage our reputation.
Many of our members, investors, employees, franchisees, and other stakeholders are increasingly focused on social impact, environmental sustainability, human capital management, human rights and other ESG practices and reporting in a variety of ways that are not necessarily consistent. As we continue to develop our ESG strategy and reporting, our ESG policies and practices will be evaluated against evolving stakeholder expectations for corporate responsibility. If our ESG practices do not meet investor or other stakeholder expectations and standards, including related to climate change, environmental sustainability, human capital management, supply chain management, and human rights, or do not meet related regulations and expectations for increased transparency, which continue to increase, our reputation may be negatively impacted, and we may be subject to litigation risk and/or regulatory enforcement. In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters, and that evaluation may be based on factors unrelated to the impact of these matters on our business, financial or otherwise. Our failure, or perceived failure, with these initiatives or more generally to manage reputational threats and meet shifting and in certain cases, inconsistent, stakeholder expectations or consumer preferences could negatively impact our brand, image, reputation, credibility, employee and franchisee retention, and the willingness of our customers and franchisees to do business with us. Additionally, changes in ESG-related reporting frameworks and guidance and negative consumer attitudes related to both taking ESG activities and not taking ESG activities, create a new and evolving set of risks that could broadly affect us and our franchisees, which could lead to negative consumer sentiment against us or our franchisees, increase compliance and other costs, or divert investments or management attention. Increased regulatory and legal requirements concerning ESG issues may also lead to increased operational costs. Further, as a global company, we recognize physical climate-related risks wherever our business is conducted. Our clubs may be located in areas that are subject to natural disasters such as severe weather and other potential risks and costs associated with the impacts of climate change. Our failure to adapt to evolving stakeholder expectations, regulatory and legal requirements and general environmental conditions could negatively impact our business, financial condition and results of operations.
Changes in legislation or requirements related to electronic fund transfer, or our failure to comply with existing or future regulations, may materially and adversely impact our business.
We and our franchisees primarily accept payments for our memberships through EFT from members’ bank accounts and, therefore, we are subject to federal, state and international legislation and certification requirements governing EFT, including the Electronic Funds Transfer Act. Some states and provinces have passed or have considered legislation requiring gyms and health clubs to offer a prepaid or cash membership option at all times, provide notice to members in advance of automatic renewals, make online cancellation available to some or all members in a particular jurisdiction, and/or limit the duration for which gym memberships can auto-renew through EFT payments, if at all. Our business relies heavily on the fact that our memberships continue on a month-to-month basis after the completion of any initial term requirements, and compliance with these laws and regulations and similar requirements may be onerous and expensive. In addition, variances and inconsistencies from jurisdiction to jurisdiction may further increase the cost of compliance and doing business. States that have such health club statutes provide harshpenalties for violations, including membership contracts being void or voidable. Our failure to comply fully with these rules or requirements may subject us to fines, higher transaction fees, penalties, damages and civil liability and may result in the loss of our ability to accept EFT payments, which would have a material adverse effect on our business, results of operations and financial condition. In addition, any such costs, which may arise in the future as a result of changes to the legislation and regulations or in their interpretation, could individually or in the aggregate cause us to change or limit our business practice, which may make our business model less attractive to our franchisees and our and their members.
We are subject to a number of risks related to ACH, credit card, debit card, and digital payment options we accept.
We and our franchisees accept payments through ACH, credit card, debit card and certain digital payment transactions. For such transactions, we and our franchisees pay interchange and other fees, which may increase over time. An increase in those fees would require us to either increase the prices we charge for our memberships, which could cause us to lose members or suffer an increase in our operating expenses, either of which could harm our operating results.
If we or any of our processing vendors have problems with our billing software, or the billing software malfunctions, it could have an adverse effect on our member satisfaction and could cause one or more of the major credit card or digital payment companies to disallow our continued use of their payment products. In addition, if our billing software fails to work properly and, as a result, we and our franchisees do not automatically charge our members’ bank accounts, credit cards, debit cards or digital payment provider on a timely basis or at all, we could lose membership revenue and associated royalty revenue, which would harm our operating results.
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If we fail to adequately control fraudulent ACH, credit card, debit card and digital payment transactions, we may face civil liability, diminished public perception of our security measures and significantly higher ACH, credit card, debit card and digital payment related costs, each of which could adversely affect our business, financial condition and results of operations. The termination of our ability to process payments through ACH, credit card, debit card or digital payment transactions would significantly impair our ability to operate our business.
As consumer behavior shifts to use more modern forms of payment, there may be an increased reluctance to use ACH, credit cards or debit cards for membership dues and point of sale transactions which could result in decreased revenues as consumers choose to give their business to competition with more convenient forms of payment. We may need to expand our information systems to support newer and emerging forms of payment methods, which may be time-consuming and expensive, and may not realize a return on our investment.
We are subject to risks associated with leasing property subject to long-term non-cancelable leases.
All but one of our corporate-owned clubs are located on leased premises. The leases for corporate-owned clubs generally have an initial term of 10 to 12 years and typically include one or more renewal options that can generally extend the lease term from three to 10 years or more, as well as for rent escalations. Moreover, although historically we have generally not guaranteed franchisees’ lease agreements, we have done so in a few certain instances and may do so from time to time.
Generally, our leases are net leases that require us to pay our share of the costs of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent. We generally cannot terminate these leases before the end of the initial lease term. Additional sites that we lease are likely to be subject to similar long-term, non-terminable leases. If we close a club, we nonetheless may be obligated to perform our monetary obligations under the applicable lease, including, among other things, payment of the base rent for the balance of the lease term. In addition, if we fail to negotiate renewals, either on commercially acceptable terms or at all, as each of our leases expire we could be forced to close clubs in desirable locations. We depend on cash flows from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under our securitized financing facility or other sources, we may not be able to service our lease expenses or fund our other liquidity and capital needs, which would materially affect our business.
If we and our franchisees are unable to identify and secure suitable sites for new franchise clubs, our revenue growth rate and profits may be negatively impacted.
To successfully expand our business, we and our franchisees must identify and secure sites for new franchise clubs and, to a lesser extent, new corporate-owned clubs that meet our established criteria. In addition to finding sites with the right demographic and other measures we employ in our selection process, we also need to evaluate the penetration of our competitors in the market. We face significant competition for sites that meet our criteria, and as a result we may lose those sites, our competitors could copy our format or we could be forced to pay significantly higher prices for those sites. If we and our franchisees are unable to identify and secure sites for new clubs, our revenue growth rate and profits may be negatively impacted. Additionally, if our or our franchisees’ analysis of the suitability of a club site is incorrect, we or our franchisees may not be able to recover the capital investment in developing and building the new club.
As we increase our number of clubs, we and our franchisees may also open clubs in higher-cost geographies, which could entail greater lease payments and construction costs, among others. The higher level of invested capital at these clubs may require higher operating margins and higher net income per club to produce the level of return we or our franchisees and potential franchisees expect. Failure to provide this level of return could adversely affect our results of operations and financial condition.
Opening new clubs in close proximity may negatively impact our existing clubs’ revenues and profitability.
We and our franchisees currently operate clubs in all 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico, Australia and Spain, and we and our franchisees plan to open many new clubs in the future, some of which will be in existing markets and may be located in close proximity to clubs already in those markets. Opening new clubs in close proximity to existing clubs may attract some memberships away from those existing clubs, which may lead to diminished revenues and profitability for us and our franchisees rather than increased market share. In addition, as a result of new clubs opening in existing markets and because older clubs will represent an increasing proportion of our club base over time, our same club sales increases may be lower in future periods than they have been historically.
Our franchisees may incur rising costs related to construction of new clubs and maintenance of existing clubs, which could adversely affect the attractiveness of our franchise model, and in turn our business, results of operations and financial condition.
Our clubs require significant upfront and ongoing investment, including periodic remodeling and equipment replacement. We implemented our franchise growth model which, among other things, extends franchise agreement terms up to 12 years and
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provides more flexibility on the timing for re-equipment obligations. We and our franchisees have experienced, and may in the future experience, increased costs due to inflation and supply chain disruptions brought on by public health emergencies, threatened or imposed trade controls or tariffs, geopolitical instability, adverse weather conditions, including due to climate change, and other factors. Additionally, certain of our vendors operate manufacturing facilities in countries, such as Canada, China, Mexico and Germany, that have in the past and may in the future be subject to tariffs imposed by the U.S. government. While some of these vendors have taken proactive measures, such as moving their manufacturing facilities out of countries subject to such tariffs, to reduce the applicability or impact of such tariffs, the imposition of future tariffs or the increase in existing tariffs could result in these vendors increasing their prices, resulting in increased costs for us and our franchisees. Despite the changes under our franchise growth model, our franchisees may not realize the benefits of such flexibility if costs continue to rise. If our franchisees’ costs are greater than expected, franchisees may need to outperform their operational plan to achieve their targeted return. In addition, increased costs may result in lower profits to the franchisees, which may cause them to terminate their franchise agreement or make it harder for us to attract new franchisees, which in turn could materially and adversely affect our business, results of operations and financial condition.
In addition, if a franchisee is unwilling or unable to acquire the necessary financing to invest in the maintenance and upkeep of its clubs, including periodic remodeling and replacement of equipment, the quality of its clubs could deteriorate, which may have a negative impact on our brand image and our ability to attract and maintain members, which in turn may have a negative impact on our revenues.
Our dependence on a limited number of suppliers for equipment and certain products and services could result in disruptions to our business and could adversely affect our revenues and gross profit.
Equipment and certain products and services used by us, including our exercise equipment, point-of-sale software and hardware, and digital content produced for our mobile application, are sourced from third-party suppliers. In addition, we rely on third-party suppliers to manage and maintain our websites and online join processes, and in 2025 approximately 88% of our new members joined either online through our websites or through our mobile application. Although we believe that adequate substitutes are currently available, we depend on these third-party suppliers to operate our business efficiently and consistently meet our business requirements. The ability of these third-party suppliers to successfully provide reliable and high-quality services is subject to technical and operational uncertainties that are beyond our control, including, for our overseas suppliers, tariffs, vessel availability and port delays or congestion. Any disruption to our suppliers’ operations could increase our and our franchisees’ costs, impact our supply chain, our ability to retain customers, and our ability to service our existing clubs and open new clubs on time or at all and thereby generate revenue. If we lose such suppliers or our suppliers encounter financial hardships unrelated to the demand for our equipment or other products or services, we may not be able to identify or enter into agreements with alternative suppliers on a timely basis on acceptable terms, if at all. Transitioning to new suppliers would be time-consuming and expensive and may result in interruptions in our operations. If we should encounter increased costs, delays or difficulties in securing the quantity of equipment we or our franchisees require to open new and refurbish existing clubs, or our suppliers encounter difficulties meeting our and our franchisees’ demands for products or services, our and our franchisees’ ability to open new clubs or remodel or service existing clubs may be interrupted. If our websites or other digital platforms experience delays or become impaired due to errors in the third-party technology or there is a deficiency, lack or poor quality of products or services provided or there is damage to the value of one or more of our vendors’ brands, our ability to serve our members and grow our brand may be interrupted. If any of these events occurs, it could have a material adverse effect on our business and operating results.
The accounting treatment of goodwill, equity method investments and other long-lived assets could result in future asset impairments, which would reduce our earnings.
We periodically test our goodwill, equity method investments and other long-lived assets to determine whether their estimated fair value is less than their value recorded on our balance sheet. The results of this testing for potential impairment may be adversely affected by uncertain market conditions for the industry and general economic conditions. If we determine that the fair value of any of these assets is less than the value recorded on our balance sheet, and, in the case of equity method investments the decline is other than temporary, we would likely incur a non-cash impairmentloss that would negatively impact our results of operations. We have not incurred asset impairment charges in the past, but there can be no assurances that continued market dynamics or other factors may not result in a future impairment charge.
Our adoption or non-adoption of artificial intelligence could result in an adverse impact on our performance or reputation or otherwise result in liability.
In light of the increased public interest and technological advancements in artificial intelligence and other similar technologies, our failure to efficiently incorporate such technologies into our business may result in the deterioration of our financial performance. To the extent we pursue or utilize artificial intelligence technologies (either directly or through our franchisees or third-party information technology vendors or service providers), the incorporation of such technologies into our business may require substantial resources to be expended, may divert the attention of management, and/or may prove to be unsuccessful or
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even harmful to our business, including by producing inaccurate data or information, by relying on algorithms or training data that may be flawed, biased, or insufficient, by producing intellectual property that is not capable of being owned, enforced, or protected, and/or by increasing the risk that we become subject to claims that we violate third-party intellectual property rights, rights of publicity, or data rights, or consumer class action and other consumer claims. There has also been increased scrutiny from regulators and other bodies regarding the use of data in connection with artificial intelligence and similar technologies, including around the use of personal data in a manner that may involve identifying, tracking, or marketing to individuals. The legal regimes and enforcement actions associated with artificial intelligence continue to change rapidly and may not be predictable. Additionally, if we or our franchisees or third-party information technology vendors or services providers adopt such technologies for use in connection with our business, several factors, including the public perception of adopting such technologies, any failure to appropriately govern their use, or if such technologies are used in a manner that is unethical, insecure, biased, or otherwise inappropriate—whether justified or not— in each case, could harm our reputation, increase scrutiny from or actions by regulators, consumer groups or other third parties, increase the scope of regulation or government restrictions applicable to us, involve us or our franchisees in litigation, or otherwise have a material adverse impact on our business or financial position.
Risks related to our indebtedness
Substantially all of the assets of certain of our subsidiaries are security under the terms of securitization transactions that were completed on August 1, 2018, December 3, 2019, February 10, 2022, June 12, 2024 and December 15, 2025.
On August 1, 2018, Planet Fitness Master Issuer LLC (the “Master Issuer”), our limited-purpose, bankruptcy-remote, indirect subsidiary, entered into a base indenture (the “Original Base Indenture”) and a related supplemental indenture (collectively, the “2018 Indenture”) under which the Master Issuer issued $575 million in aggregate principal amount of Series 2018-1 4.262% Fixed Rate Senior Secured Notes, Class A-2-I (the “2018 Class A-2-I Notes”) and $625 million in aggregate principal amount of Series 2018-1 4.666% Fixed Rate Senior Secured Notes, Class A-2-II (the “2018 Class A-2-II Notes” and together with the 2018 Class A-2-I Notes, the “2018 Notes”) in an offering exempt from registration under the Securities Act of 1933, as amended. In connection with the issuance of the 2018 Notes, the Master Issuer also entered into a revolving financing facility that allows for the issuance of up to $75 million in Series 2018-1 Variable Funding Senior Notes, Class A-1 (the “2018 Variable Funding Notes”), and certain letters of credit (the “Letters of Credit”). On December 3, 2019, the Master Issuer issued $550 million Series 2019-1 3.858% Fixed Rate Senior Secured Notes, Class A-2 (the “2019 Notes”) in an offering exempt from registration under the Securities Act of 1933, as amended. The 2019 Notes were issued under the 2018 Indenture and a related supplemental indenture dated December 3, 2019 (together, the “2019 Indenture”).
The Master Issuer entered into an amended and restated base indenture (replacing the Original Base Indenture) and a related supplemental indenture (collectively, the “2022 Indenture”) on February 10, 2022, under which the Master Issuer issued $425 million Series 2022-1 3.251% Fixed Rate Senior Secured Notes, Class A-2-I (the “2022 Class A-2-I Notes”) and $475 million Series 2022-1 4.008% Fixed Rate Senior Secured Notes, Class A-2-II (the “2022 Class A-2-II Notes,” and together with the 2022 Class A-2-I Notes, the “2022 Notes”, and together with the Securitized Senior Notes and the 2022 Variable Funding Notes (as defined below) then outstanding, the “2022 Notes”). In connection with such Series 2022-1 Issuance (as defined below), the Master Issuer repaid the outstanding principal amount (and all accrued and unpaid interest thereon) of the 2018 Class A-2-I Notes, and the Master Issuer also entered into a new revolving financing facility that allows for the issuance of up to $75 million in Series 2022-1 Variable Funding Senior Notes, Class A-1 (the “2022 Variable Funding Notes”) and certain Letters of Credit (the issuance of such notes, the “Series 2022-1 Issuance”), which were undrawn as of December 31, 2025.
On June 12, 2024, the Master Issuer completed a prepayment in full of its 2018 Class A-2-II Notes and an issuance of Series 2024-1 5.765% Fixed Rate Senior Secured Notes, Class A-2-I with an initial principal amount of $425 million and an anticipated repayment term of five years and Series 2024-1 6.237% Fixed Rate Senior Secured Notes, Class A-2-II with an initial principal amount of $375 million and an anticipated repayment term of 10 years (together, the “2024 Notes”) in an offering exempt from registration under the Securities Act of 1933, as amended. The 2024 Notes were issued under the 2018 Indenture and a related supplemental indenture dated June 12, 2024 (the “2024 Indenture” and the issuance of such notes, the “Series 2024-1 Issuance”).
On December 15, 2025, the Master Issuer completed a prepayment in full of its 2022-1 Class A-2-I Notes and an issuance of Series 2025-1 5.274% Fixed Rate Senior Secured Notes, Class A-2-I (the “2025 Class A-2-I Notes”) with an initial principal amount of $400.0 million and Series 2025-1 5.649% Fixed Rate Senior Secured Notes, Class A-2-II (the “2025 Class A-2-II Notes” and together with the 2025 Class A-2-I Notes, the “2025 Notes”) with an initial principal amount of $350.0 million, and also entered into a new revolving financing facility that allows for the issuance of up to $75.0 million in Variable Funding Notes (the “2025 Variable Funding Notes,” and together with the 2022 Variable Funding Notes, the “Variable Funding Notes”) and certain Letters of Credit (the issuance of such notes, the “Series 2025-1 Issuance”). The 2025 Notes were issued under the 2018 Indenture and a related supplemental indenture dated December 15, 2025 (together, with the 2019 Indenture, 2022 Indenture, and the 2024 Indenture, the “Indenture”).
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The 2018 Notes, 2019 Notes, 2022 Notes, 2024 Notes, the 2025 Notes, the 2022 Variable Funding Notes and the 2025 Variable Funding Notes are referred to collectively as the “Securitized Senior Notes.”
The Securitized Senior Notes were issued in securitization transactions pursuant to which most of our revenue-generating assets in the United States are held by the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly-owned direct and indirect subsidiaries of the Master Issuer that act as guarantors of the Securitized Senior Notes and that have pledged substantially all of their assets to secure the Securitized Senior Notes.
The outstanding Securitized Senior Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Securitized Senior Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the 2019 Notes, 2022 Notes, 2024 Notes and 2025 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the transfers of the assets pledged as collateral for the Securitized Senior Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. The outstanding Securitized Senior Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain a stated debt service coverage ratio, the sum of system-wide sales being below certain levels on certain measurement dates, certain manager termination events (including in certain cases a change of control of Planet Fitness Holdings, LLC), an event of default and the failure to repay or refinance the Securitized Senior Notes on the applicable anticipated repayment date. The outstanding Securitized Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to the outstanding Securitized Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective and certain judgments.
In the event that a rapid amortization event occurs under the Indenture (including, without limitation, upon an event of default under the Indenture or the failure to repay the securitized debt at the end of the applicable term), the funds available to us would be reduced or eliminated, which would in turn reduce our ability to operate or grow our business. If our subsidiaries are not able to generate sufficient cash flow to service their debt obligations, they may need to refinance or restructure debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If our subsidiaries are unable to implement one or more of these alternatives, they may not be able to meet debt payment and other obligations.
The securitization imposes certain restrictions on our activities or the activities of our subsidiaries.
The Indenture and the management agreement entered into between certain of our subsidiaries and the Indenture trustee (the “Management Agreement”) contain various covenants that limit our and its subsidiaries’ ability to engage in specified types of transactions. For example, the Indenture and the Management Agreement contain covenants that, among other things, restrict, subject to certain exceptions, the ability of certain subsidiaries to:
• incur or guarantee additional indebtedness;
• sell certain assets;
• create or incur liens on certain assets to secure indebtedness; or
• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.
As a result of these restrictions, we may not have adequate resources or flexibility to continue to manage the business and provide for growth of the Planet Fitness system, including product development and marketing for the Planet Fitness brand, which could have a material adverse effect on our future growth prospects, financial condition, results of operations and liquidity.
We have a significant amount of debt outstanding. Such indebtedness, along with the other contractual commitments of certain of our subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet their debt payment obligations.
Under the Indenture, Master Issuer had approximately $2.5 billion of outstanding debt as of December 31, 2025. Additionally, the Master Issuer has the ability to borrow amounts from time to time on a revolving basis, up to an aggregate principal amount of $75 million pursuant to the 2022 Variable Funding Notes and up to an aggregate principal amount of $75 million pursuant to the 2025 Variable Funding Notes. The Company had no amounts outstanding on the 2022 Variable Funding Notes or 2025 Variable Funding Notes as of December 31, 2025.
This level of debt could have significant consequences on our future operations, including:
• resulting in an event of default if our subsidiaries fail to comply with the financial and other restrictive covenants contained in debt agreements, which event of default could result in all of our subsidiaries’ debt becoming immediately due and payable;
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• reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;
• limiting the Company’s flexibility in planning for, or reacting to, and increasing its vulnerability to, changes in our business, the industry in which it operates and the general economy;
• placing us at a competitive disadvantage compared to our competitors that are less leveraged;
• subjecting us to the risk of increased sensitivity to interest rate increases on indebtedness with respect to the Variable Funding Notes or the refinancing of the outstanding Securitized Senior Notes or the Variable Funding Notes; and
• increasing the possibility that we may be unable to generate cash sufficient for the Master Issuer to pay, when due, interest on and principal of the Securitized Senior Notes.
The ability to meet payment and other obligations under the debt instruments of our subsidiaries depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors, as well as other factors that are beyond our control. Our business may not generate cash flow from operations, and that future borrowings may not be available to us under existing or any future credit facilities or otherwise, in an amount sufficient to enable our subsidiaries to meet our debt payment obligations and to fund other liquidity needs. If our subsidiaries are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If our subsidiaries are unable to implement one or more of these alternatives, they may not be able to meet debt payment and other obligations.
In addition, the financial and other covenants we agreed to with our lenders may limit our ability to incur additional indebtedness in the future. If new debt or other liabilities are added to our current consolidated debt levels or if we fail to comply with the covenants of our existing indebtedness, the related risks that we now face could intensify.
We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.
Our ability to make scheduled payments on, or to refinance our respective obligations under, our indebtedness and to fund planned capital expenditures and other corporate expenses will depend on our subsidiaries’ and our franchisees’ future operating performance and on economic, financial, competitive, legislative, regulatory and other factors. Many of these factors are beyond our control. We can provide no assurance that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized or that future borrowings will be available to us in an amount and at reasonable rates sufficient to enable us to satisfy our respective obligations under our indebtedness or to fund our other needs. In order for us to satisfy our obligations under our indebtedness and fund planned capital expenditures, we must continue to execute our business strategy. If we are unable to do so, we may need to reduce or delay our planned capital expenditures or refinance all or a portion of our indebtedness on or before maturity. Significant delays in our planned capital expenditures may materially and adversely affect our future revenue prospects. In addition, we can provide no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
Risks related to our organizational structure
We will be required to pay certain of our existing and previous owners for certain tax benefits we may claim, and we expect that the payments we will be required to make will be substantial.
Certain future and past exchanges of Holdings Units for shares of our Class A common stock (or cash) are expected to produce and have produced favorable tax attributes for us. We are a party to two tax receivable agreements, pursuant to which we are required to make payments to certain holders of equity interests or their successors-in-interest (the “TRA Holders”). Under the first of those agreements, we are generally required to pay to certain existing and previous equity owners, or their successors-in-interest, of Pla-Fit Holdings, LLC 85% of the applicable cash savings, if any, in U.S. federal and state income tax that we are deemed to realize as a result of certain tax attributes of their Holdings Units sold to us (or exchanged in a taxable sale) and that are created as a result of (i) the sales of their Holdings Units for shares of our Class A common stock and (ii) tax benefits attributable to payments made under the tax receivable agreement (including imputed interest). Under the second tax receivable agreement, we are generally required to pay 85% of the amount of cash savings, if any, that we are deemed to realize as a result of tax attributes of certain equity interests previously held by affiliates of TSG Consumer Partners (“TSG”) that resulted from TSG’s purchase of interests in our 2012 acquisition (the “2012 Acquisition”), and certain other tax benefits. Under both agreements, we generally retain the benefit of the remaining 15% of the applicable tax savings.
The payment obligations under the tax receivable agreements are obligations of Planet Fitness, Inc., and we expect that the payments we will be required to make under the tax receivable agreements will be substantial. In particular, assuming no further material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the tax receivable agreements, we expect that the reduction in tax payments for us associated with all past and future exchanges and sales of Holdings Units as described above would aggregate to approximately $488.5 million over the remaining term of
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the tax receivable agreements based on a price of $108.47 per share of our Class A common stock (the closing price per share of our Class A common stock on the New York Stock Exchange (“NYSE”) on the last trading day for the fiscal year ending December 31, 2025) and assuming all future sales had occurred on such date. Under such scenario, we would be required to pay the other parties to the tax receivable agreements 85% of such amount, or $415.3 million, over the applicable period under the tax receivable agreements. The actual amounts may materially differ from these hypothetical amounts, as potential future reductions in tax payments for us, and tax receivable agreement payments by us, will be calculated using the market value of our Class A common stock at the time of the sale and the prevailing tax rates applicable to us over the life of the tax receivable agreements and will be dependent on us generating sufficient future taxable income to realize the benefit. Payments under the tax receivable agreements are not conditioned on the TRA Holders’ ownership of our shares.
The actual increase in tax basis, as well as the amount and timing of any payments under these agreements, will vary depending upon a number of factors, including the timing of sales by the TRA Holders, the price of our Class A common stock at the time of the sales, whether such sales are taxable, the amount and timing of the taxable income we generate in the future, the tax rate then applicable and the portion of our payments under the tax receivable agreements constituting imputed interest. Payments under the tax receivable agreements may give rise to certain additional tax benefits attributable to either further increases in basis or in the form of deductions for imputed interest (generally calculated using one-year Secured Overnight Financing Rate (“SOFR”) plus 71 basis points), depending on the tax receivable agreements and the circumstances. Any such benefits are covered by the tax receivable agreements and will increase the amounts due thereunder. The tax receivable agreements provide for interest, at a rate equal to one-year SOFR plus 71 basis points, accrued from the due date (without extensions) of the corresponding tax return to the date of payment specified by the tax receivable agreements. In addition, under certain circumstances where we are unable to make timely payments under the tax receivable agreements, the tax receivable agreements provide for interest to accrue on unpaid payments, at a rate equal to one-year SOFR plus 571 basis points.
Payments under the tax receivable agreements will be based on the tax reporting positions that we determine. Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase or other tax attributes subject to the tax receivable agreements, we will not be reimbursed for any payments previously made under the tax receivable agreements if such basis increases or other benefits are subsequently disallowed. As a result, in certain circumstances, payments could be made under the tax receivable agreements in excess of the benefits that we are deemed to realize in respect of the attributes to which the tax receivable agreements relate.
In certain cases, payments under the tax receivable agreements to our TRA Holders may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreements.
The tax receivable agreements provide that (i) in the event that we materially breach such tax receivable agreements, (ii) if, at any time, we elect an early termination of the tax receivable agreements, or (iii) upon certain mergers, asset sales, other forms of business combinations or other changes of control, our (or our successor’s) obligations under the tax receivable agreements (with respect to all Holdings Units, whether or not they have been sold before or after such transaction) would accelerate and become payable in a lump sum amount equal to the present value of the anticipated future tax benefits calculated based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the tax deductions, tax basis and other tax attributes subject to the tax receivable agreements.
As a result of the foregoing, (i) we could be required to make payments under the tax receivable agreements that are greater than or less than the specified percentage of the actual tax savings we realize in respect of the tax attributes subject to the agreements and (ii) we may be required to make an immediate lump sum payment equal to the present value of the anticipated tax savings, which payment may be made years in advance of the actual realization of such future benefits, if any such benefits are ever realized. In these situations, our obligations under the tax receivable agreements could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. We may not be able to finance our obligations under the tax receivable agreements in a manner that does not adversely affect our working capital and growth requirements. For example, if we had elected to terminate the tax receivable agreements as of December 31, 2025, based on a share price of $108.47 per share of our Class A common stock (based on the closing price of our Class A common stock on the NYSE on the last trading day for the fiscal year ending December 31, 2025) and a discount rate equal to 5.4%, we estimate that we would have been required to pay $329.8 million in the aggregate under the tax receivable agreements.
We will not be reimbursed for any payments made to the TRA Holders under the tax receivable agreements in the event that any tax benefits are disallowed.
If the IRS or a state or local taxing authority challenges the tax basis adjustments and/or deductions that give rise to payments under the tax receivable agreements and the tax basis adjustments and/or deductions are subsequently disallowed, the recipients of payments under the agreements will not reimburse us for any payments we previously made to them. Any such disallowance would be taken into account in determining future payments under the tax receivable agreements and would, therefore, reduce the amount of any such future payments. Nevertheless, if the claimed tax benefits from the tax basis adjustments and/or
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deductions are disallowed, our payments under the tax receivable agreements could exceed our actual tax savings, and we may not be able to recoup payments under the tax receivable agreements that were calculated on the assumption that the disallowed tax savings were available.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
We are subject to income taxes in the United States and various foreign jurisdictions, and our domestic and foreign tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
• changes in the valuation of our deferred tax assets and liabilities;
• expected timing and amount of the release of any tax valuation allowances;
• tax effects of stock-based compensation;
• costs related to intercompany restructurings;
• changes in tax laws, regulations or interpretations thereof;
• lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates; or
• higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state and foreign authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.
Our ability to pay taxes and expenses, including payments under the tax receivable agreements, may be limited by our structure.
Our principal asset is our ownership of Holdings Units in Pla-Fit Holdings. As such, we have no independent means of generating revenue. Pla-Fit Holdings is treated as a partnership for U.S. federal income tax purposes and, as such, is generally not subject to U.S. federal income tax. Instead, taxable income is allocated to holders of its Holdings Units, including us. Accordingly, we incur income taxes on our allocable share of any taxable income of Pla-Fit Holdings, and also incur expenses related to our operations. Pursuant to the limited liability company agreement of Pla-Fit Holdings that was amended and restated in connection with our initial public offering (the “IPO”), as amended on July 1, 2017 (the “LLC Agreement”), Pla-Fit Holdings makes cash distributions to the owners of Holdings Units for purposes of funding their tax obligations in respect of the income of Pla-Fit Holdings that is allocated to them, to the extent other distributions from Pla-Fit Holdings have been insufficient. In addition to tax expenses, we also incur expenses related to our operations, including payment obligations under the tax receivable agreements, which are significant. We have caused Pla-Fit Holdings to make distributions in an amount sufficient to allow us to pay our taxes and operating expenses, including ordinary course payments due under the tax receivable agreements. However, its ability to make such distributions in the future will be subject to various limitations and restrictions, including contractual restrictions under our Indenture and Variable Funding Notes. If, as a consequence of these various limitations and restrictions, we do not have sufficient funds to pay tax or other liabilities or to fund our operations (including as a result of an acceleration of our obligations under the tax receivable agreements), we may have to borrow funds and thus our liquidity and financial condition could be materially and adversely affected. To the extent that we are unable to make payments under the tax receivable agreements for any reason, such payments will be deferred and will accrue interest at a rate equal to one-year SOFR plus 571 basis points until paid.
In certain circumstances, Pla-Fit Holdings will be required to make distributions to us and the Continuing LLC Owners, and the distributions that Pla-Fit Holdings will be required to make may be substantial.
Funds used by Pla-Fit Holdings to satisfy its tax distribution obligations will not be available for reinvestment in our business. Moreover, the tax distributions that Pla-Fit Holdings will be required to make may be substantial and will likely exceed (as a percentage of Pla-Fit Holdings’ net income) the overall effective tax rate applicable to a similarly situated corporate taxpayer, particularly as a result of the 2017 Tax Cuts and Jobs Act.
As a result of potential differences in the amount of net taxable income allocable to us and to the owners of Holdings Units other than Planet Fitness, Inc. (the “Continuing LLC Owners”), as well as the use of an assumed tax rate in calculating Pla-Fit Holdings’ distribution obligations, we may receive distributions significantly in excess of our tax liabilities and obligations to make payments under the tax receivable agreements. To the extent we do not distribute such cash balances as dividends on our Class A common stock and instead, for example, hold such cash balances or lend them to Pla-Fit Holdings, the Continuing LLC Owners would benefit from any value attributable to such accumulated cash balances as a result of their ownership of Class A common stock following an exchange of their Holdings Units.
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Risks related to our Investment Portfolio
Our marketable debt securities portfolio is subject to credit, liquidity, market, and interest rate risks that could cause its value to decline and materially adversely affect our financial condition.
We maintain a portfolio of marketable debt securities through professional investment advisors. The investments in our portfolio are subject to our corporate investment policy, which focuses on the preservation of principal and avoiding speculative investments, maintaining adequate liquidity to meet our cash flow requirements, complying with our applicable debt covenants, minimizing risk through diversification, delivering competitive returns, providing fiduciary control over our cash and investments and complying with applicable laws. These investments are subject to general credit, liquidity, market, and interest rate risks. In particular, the value of our portfolio may decline due to changes in interest rates, instability in the global financial markets that reduces the liquidity of securities in our portfolio, and other factors, including unexpected or unprecedented events. As a result, we may experience a decline in value or loss of liquidity of our investments, which could materially adversely affect our financial condition. We attempt to mitigate these risks through diversification of our investments and continuous monitoring of our portfolio’s overall risk profile, but the value of our investments may nevertheless decline. To the extent that we increase the amount of these investments in the future, these risks could be exacerbated.
Risks related to our Class A common stock
Provisions of our corporate governance documents could make an acquisition of our Company more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.
Our certificate of incorporation and bylaws and the Delaware General Corporation Law (the “DGCL”) contain provisions that could make it more difficult for a third-party to acquire us, even if doing so might be beneficial to our stockholders. These provisions include:
• the division of our board of directors into three classes and the election of each class for three-year terms;
• advance notice requirements for stockholder proposals and director nominations;
• the ability of the board of directors to fill a vacancy created by the expansion of the board of directors;
• the ability of our board of directors to issue new series of, and designate the terms of, preferred stock, without stockholder approval, which could be used to, among other things, institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our board of directors; and
• limitations on the ability of stockholders to call special meetings and to take action by written consent.
In addition, Section 203 of the DGCL may affect the ability of an “interested stockholder” to engage in certain business combinations, for a period of three years following the time that the stockholder becomes an “interested stockholder.” While we have elected in our certificate of incorporation not to be subject to Section 203 of the DGCL, our certificate of incorporation contains provisions that have the same effect as Section 203 of the DGCL and accordingly will not be subject to such restrictions.
Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt to replace current members of our management team. As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures, and efforts by stockholders to change the direction or management of the Company may be unsuccessful.
Our organizational structure, including the tax receivable agreements, confers certain benefits upon the TRA Holders and the Continuing LLC Owners that do not benefit Class A common stockholders to the same extent as it will benefit the TRA Holders and the Continuing LLC Owners.
Our organizational structure, including the tax receivable agreements, confers certain benefits upon the TRA Holders and the Continuing LLC Owners that do not benefit the holders of our Class A common stock to the same extent. Although we retain 15% of the amount of tax benefits conferred under the tax receivable agreements, this and other aspects of our organizational structure may adversely impact the future trading market for the Class A common stock.
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If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weakness identified by our management in our internal control over financial reporting. In addition, we are required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act, which requires management to certify financial and other information in our quarterly and annual reports, and we are required to disclose significant changes made in our internal controls and procedures on a quarterly basis.
If we identify a material weakness in our internal control over financial reporting, we may not be able to remediate the material weaknesses identified in a timely manner or maintain all of the controls necessary to remain in compliance with our reporting obligations. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting in future periods, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could be negatively affected and we could become subject to investigations by the NYSE, on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
Our certificate of incorporation designates courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for:
• any derivative action or proceeding brought on our behalf;
• any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders;
• any action asserting a claim against us arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws;
• any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; or
• any other action asserting a claim against us that is governed by the internal affairs doctrine (each, a “Covered Proceeding”).
In addition, our certificate of incorporation provides that if any action, the subject matter of which is a Covered Proceeding is filed in a court other than the specified Delaware courts without the approval of our board of directors (each, a “Foreign Action”), the claiming party will be deemed to have consented to (i) the personal jurisdiction of the specified Delaware courts in connection with any action brought in any such courts to enforce the exclusive forum provision described above and (ii) having service of process made upon such claiming party in any such enforcement action by service upon such claiming party’s counsel in the Foreign Action as agent for such claiming party.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to these provisions. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Our stock price could be extremely volatile, and, as a result, stockholders may not be able to resell shares at or above their purchase price.
Since our IPO through December 31, 2025, the price of our Class A common stock, as reported by the NYSE, has ranged from a low of $13.23 on February 11, 2016 to a high of $113.55 on July 22, 2025. In addition, in recent years the stock market in general has been highly volatile. As a result, the market price and trading volume of our Class A common stock is likely to be similarly volatile, and investors in our Class A common stock may experience a decrease, which could be substantial, in the value of their stock, including decreases unrelated to our results of operations or prospects, and could lose part or all of their investment. The price of our Class A common stock has in the past, and in the future could be subject to wide fluctuations in response to a number of factors, including those described elsewhere in this report and others such as:
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• variations in our operating performance and the performance of our competitors;
• actual or anticipated fluctuations in our quarterly or annual operating results;
• publication of research reports by securities analysts about us or our competitors or our industry;
• the public’s reaction to our press releases, our other public announcements, our filings with the SEC and other press coverage of, or social media activity related to, our operations;
• our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
• additions and departures of key employees;
• strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
• the passage of legislation or other regulatory developments affecting us or our industry;
• speculation in the press or investment community;
• changes in accounting principles;
• terrorist acts, acts of war or periods of widespread civil unrest;
• natural disasters and severe weather events, including as a result of climate change, pandemics and other calamities;
• breach or improper handling of data or cybersecurity events; and
• changes in general market and economic conditions.
In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.
Because we do not currently pay any cash dividends on our Class A common stock, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it.
We may retain future earnings, if any, for future operations, expansion and debt repayment and do not currently pay any cash dividends on our Class A common stock. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our securitized financing facility. As a result, you may not receive any return on an investment in our Class A common stock unless you sell our Class A common stock for a price greater than that which you paid for it.
We cannot guarantee that our share repurchase program will be fully consummated or that such program will enhance the long-term value of our share price.
On December 15, 2025, our board of directors approved a share repurchase program of up to $500.0 million (the “2025 Share Repurchase Program”) to replace the 2024 share repurchase program of up to $500 million approved by our board of directors on June 13, 2024 (the “2024 Share Repurchase Program”), contingent upon the completion of a $350.0 million accelerated share repurchase agreement (the “2025 ASR Agreement”). The 2025 Share Repurchase Program became effective on January 12, 2026 upon the completion of the 2025 ASR Agreement. As of December 31, 2025, there were no remaining funds under the 2024 Share Repurchase Program following the effectiveness of the 2025 Share Repurchase Program. Repurchases may be made in the open market, in privately negotiated transactions or by other means, from time to time, subject to market conditions, applicable legal requirements and other factors. Although this repurchase program has been approved, there is no obligation for the Company to repurchase any specific dollar amount of stock. The repurchase program could affect the price of our stock and increase volatility. Price volatility may cause the average price at which the Company repurchases its stock in a given period to exceed the stock’s price at a given point in time. There can be no assurance that we will buy shares of our common stock or the timeframe for repurchases under our stock buyback program or that any repurchases will have a positive impact on our stock price or earnings per share. Important factors that could cause us to discontinue or decrease our share repurchases include, among others, unfavorable market conditions, the market price of our common stock, the nature of other investment or strategic opportunities presented to us from time to time, our ability to make appropriate, timely, and beneficial decisions as to when, how, and whether to purchase shares under the stock buyback program, and the availability of funds necessary to continue purchasing stock.
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Financial forecasting may differ materially from actual results.
Due to the inherent difficulty of predicting future events and results, our forecasted financial and operational results may differ materially from actual results. Discrepancies between forecasted and actual results could cause a decline in the price of our stock.
progress
achieving
As of December 31, 2025, we had approximately 20.8 million members and 2,896 clubs in all 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico, Australia and Spain. Of our 2,896 clubs, 2,604 were franchisee-owned and 292 were corporate-owned.
As of December 31, 2025, we had contractual commitments to open approximately 750 new clubs.
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Composition of Revenues, Expenses and Cash Flows
Revenues
We generate revenue from three primary sources:
• Franchise segment revenue: Franchise segment revenue relates to services we provide to support our franchisees and includes royalties, contributions to our NAFs (“NAF revenue”), franchise fees, upfront fees from ADAs, transfer fees, equipment placement revenue, membership join fees and other fees associated with our franchisee-owned clubs. Franchise segment revenue generally does not include the sale of tangible products by us to our franchisees. This source of revenue comprised 35.4% and 35.8% of our total revenue for the years ended December 31, 2025 and 2024, respectively.
• Corporate-owned club segment revenue : Includes monthly membership dues, enrollment fees, annual fees, other fees paid by our members, and retail sales. This source of revenue comprised 41.2% and 42.5% of our total revenue for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, approximately 92% of members at our corporate clubs paid their monthly dues by EFT.
• Equipment segment revenue : Includes equipment revenue for new franchisee-owned clubs as well as replacement equipment for existing franchisee-owned clubs, in the U.S., Canada and Mexico. Franchisee-owned clubs are generally required to replace their equipment every five to nine years. This source of revenue comprised 23.4% and 21.7% of our total revenue for the years ended December 31, 2025 and 2024, respectively.
See Item 8: Financial Statements and Supplementary Data - Note 2(e) for further discussion on our revenue streams and revenue recognition policies.
Expenses
We primarily incur the following expenses:
• Cost of revenue : Primarily includes the direct costs associated with equipment sales, including freight costs, to new and existing franchisee-owned clubs in the U.S., Canada and Mexico. Cost of revenue also includes the cost of retail merchandise sold at our corporate-owned clubs. Our cost of revenue changes primarily based on equipment sales volume.
• Club operations : Includes the direct costs associated with our corporate-owned clubs, primarily payroll, rent, utilities, supplies, maintenance, insurance, and local and national advertising. The components of club operations remain relatively stable for each club. Our statements of operations do not include, and we are not responsible for, any costs associated with operating franchisee-owned clubs.
• Selling, general and administrative expenses : Consists of costs primarily associated with administrative, corporate-owned club and franchisee support functions related to our existing business as well as growth and development activities, including certain costs to support equipment placement and assembly services. These costs primarily consist of payroll, information technology, marketing, legal, accounting, strategy and insurance related expenses.
• NAF Expense: Consists of expenses incurred on behalf of the NAFs (“NAF expense”). The use of amounts received by the NAFs are restricted to advertising, product development, public relations, merchandising, and administrative expenses and programs to increase sales and further enhance the public reputation of the Planet Fitness brand.
Cash flows
We generate a significant portion of our cash flows from monthly and annual membership dues, royalties, NAF revenue and various fees related to transactions involving our franchisee-owned clubs. We oversee the membership billing process, as well as the collection of our royalties, NAF revenue and certain other fees, through our third-party hosted point-of-sale systems in the United States and Canada. We bill monthly dues to our corporate-owned club members on or around the 17 th of each month and bill annual fees once per year to each member based upon when the member signed their membership agreement. Our royalties and certain other fees are generally deducted on or around the billing dates of each month from these membership billings by the processor prior to the net billings being remitted to the franchisees, although our billing and collection practices vary in certain international markets. Our franchisees are responsible for maintaining the membership billing records and collection of member dues for their respective clubs through the point-of-sale system. Our royalties are generally based on monthly and annual membership billings for the franchisee-owned clubs without regard to the collections of those billings by our franchisees. The amount and timing of the collection of royalties and membership dues and fees at corporate-owned clubs is, therefore, generally fairly predictable.
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Our corporate-owned clubs also historically generate strong operating margins and cash flows, as a significant portion of our costs are fixed or semi-fixed, such as rent and labor.
Equipment sales to new and existing franchisee-owned clubs also generate significant cash flows. Franchisees generally pay in advance, provide evidence of a committed financing arrangement for such equipment or provide evidence of sufficient liquidity or availability under an existing credit facility.
Recent Transactions
Securitized Financing Facility
On June 12, 2024, the Company completed the Series 2024-1 Issuance pursuant to which the Master Issuer issued the 2024 Notes in an aggregate outstanding principal amount of $800 million. In connection with such Series 2024-1 Issuance, the Master Issuer repaid the outstanding principal amount (and all accrued and unpaid interest thereon) of the 2018 Class A-2-II Notes.
On December 15, 2025, the Company completed the Series 2025-1 Issuance pursuant to which the Master Issuer issued the 2025 Notes in an aggregate outstanding principal amount of $750 million and also entered into a new revolving financing facility that allows for the issuance of up to $75 million in 2025 Variable Funding Notes and certain Letters of Credit. In connection with such Series 2025-1 Issuance, the Master Issuer repaid the outstanding principal amount (and all accrued and unpaid interest thereon) of the 2022 Class A-2-I Notes.
See Note 10 to the consolidated financial statements for more information.
Sale of Corporate-owned Stores
On August 19, 2025, the Company sold 8 corporate-owned stores located in California to a franchisee for $21.6 million. The net value of assets derecognized in connection with the sale amounted to $15.2 million, which included goodwill of $10.5 million, intangible assets of $0.2 million, and net tangible assets of $4.4 million, which resulted in a gain on sale of corporate-owned stores of $6.4 million. See Note 5 to the consolidated financial statements.
Share repurchases
During 2025, the Company repurchased and retired Class A common stock for a total cost of $500.0 million, consisting of 1,502,411 shares through open market transactions for $150.0 million and 2,548,234 initial shares representing 80% of a $350.0 million accelerated share repurchase agreement. See “—Share Repurchase Program” below for more information.
Seasonality
Our results are subject to seasonality fluctuations in that member joins are typically higher in January as compared to other months of the year. In addition, our quarterly results may fluctuate significantly because of several factors, including the timing of club openings, timing of price increases of monthly membership dues and general economic conditions.
Our Segments
We operate and manage our business in three business segments: Franchise, Corporate-owned clubs and Equipment. Our Franchise segment includes operations related to our franchising business in the United States, Puerto Rico, Canada, Panama, Mexico and Australia, as well as revenues and expenses of the NAFs. Our Corporate-owned clubs segment includes operations with respect to all corporate-owned clubs throughout the U.S., Canada, and Spain. The Equipment segment includes the sale of equipment to franchisee-owned clubs in the U.S, Canada and Mexico.
We evaluate the performance of our segments and allocate resources to them based on revenue and adjusted earnings before interest, taxes, depreciation and amortization, referred to as Segment Adjusted EBITDA. Revenue and Segment Adjusted EBITDA for all operating segments include only transactions with unaffiliated customers and do not include intersegment transactions.
Segment Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, adjusted for the impact of certain non-cash and other items that the Chief Operating Decision Maker (“CODM”) does not consider in her evaluation of ongoing performance of the segment’s core operations. For additional information, see Note 19 to the consolidated financial statements.
The following tables summarize revenue and Adjusted EBITDA broken out by our segments:
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Years Ended December 31,
(in thousands)
Revenue
Franchise segment
Corporate-owned clubs segment
Equipment segment
Total revenue
Adjusted EBITDA
Franchise segment
Corporate-owned clubs segment
Equipment segment
Segment Adjusted EBITDA (2)
Corporate and other Adjusted EBITDA (1)
Adjusted EBITDA (2)
(1) Corporate and other Adjusted EBITDA includes adjusted corporate overhead costs, such as payroll and related benefit costs and professional services that are not directly attributable to any individual segment and thus are unallocated.
(2) Segment Adjusted EBITDA plus the Adjusted EBITDA of corporate and other is equal to Adjusted EBITDA. Adjusted EBITDA is a metric that is not presented in accordance with GAAP. Refer to “—Non-GAAP Financial Measures” for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our business is performing include total monthly dues and annual fees from members (which we refer to as system-wide sales), the number of new club openings, same club sales for both corporate-owned and franchisee-owned clubs, net member growth, average royalty fee percentages for franchisee-owned clubs, PF Black Card penetration percentage, Adjusted EBITDA, Segment Adjusted EBITDA, four-wall Adjusted EBITDA, Royalty adjusted four-wall EBITDA, Adjusted net income, and Adjusted net income per share, diluted. See “—Non-GAAP Financial Measures” below for more information.
Total monthly dues and annual fees from members (system-wide sales)
We review the total amount of dues we bill to our members on a monthly basis, which allows us to assess changes in the performance of our corporate-owned and franchisee-owned clubs from period to period, any competitive pressures, local or regional membership traffic patterns and general market conditions that might impact our club performance. System-wide sales is an operating measure that includes monthly membership dues and annual fee billings by franchisees that are not revenue realized by the Company in accordance with GAAP, as well as monthly membership dues and annual fee billings by the Company’s corporate-owned clubs. While the Company does not record sales by franchisees as revenue, and such sales are not included in the Company’s consolidated financial statements, the Company believes that this operating measure aids in understanding how the Company derives its royalty revenue and is important in evaluating its performance. We typically bill monthly dues on or around the 17 th of every month and bill annual fees once per year to each member based upon when the member signed their membership agreement. System-wide sales were $5.3 billion and $4.8 billion during the years ended December 31, 2025 and 2024, respectively.
Number of new club openings
The number of new club openings reflects clubs opened during a particular reporting period for both corporate-owned and franchisee-owned clubs. Opening new clubs is an important part of our growth strategy and we expect the majority of our future new clubs will be franchisee-owned. Before we obtain the certificate of occupancy or report any revenue for new corporate-owned clubs, we incur pre-opening costs, such as rent expense, labor expense and other operating expenses. Our clubs open with an initial start-up period requirement of higher-than-normal marketing spend and operating expenses may also be higher, particularly as a percentage of monthly revenue. New clubs may not be profitable and their revenue may not follow historical patterns. The following table shows the growth in our corporate-owned and franchisee-owned club base:
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Years Ended December 31,
Franchisee-owned clubs:
Clubs operated at beginning of period
New clubs opened or acquired
Clubs refranchised (1)
Clubs debranded, sold or consolidated (2)
Clubs operated at end of period
Corporate-owned clubs:
Clubs operated at beginning of period
New clubs opened or acquired
Clubs refranchised (1)
Clubs acquired from franchisees
Clubs operated at end of period
Total clubs:
Clubs operated at beginning of period
New clubs opened or acquired
Clubs debranded, sold or consolidated (2)
Clubs operated at end of period
(1) The term “refranchised” refers to corporate-owned clubs which were sold to an existing franchisee group.
(2) The term “debranded” refers to a franchisee-owned club whose right to use the Planet Fitness brand and marks has been terminated in accordance with the franchise agreement. We retain the right to prevent debranded clubs from continuing to operate as fitness centers. The term “consolidated” refers to the combination of a franchisee’s club with another club located in close proximity with our prior approval. This often coincides with an enlargement, re-equipment and/or refurbishment of the remaining club.
Same club sales
Same club sales refers to year-over-year sales comparisons for the same club sales base of both corporate-owned and franchisee-owned clubs. We define the same club sales base to include those clubs that have been open and for which monthly membership dues have been billed for longer than 12 months. We measure same club sales based solely upon monthly dues billed to members of our corporate-owned and franchisee-owned clubs.
Several factors affect our same club sales in any given period, including the following:
• the number of clubs that have been in operation for more than 12 months;
• the percentage mix and pricing of PF Black Card and standard Classic Card memberships in any period;
• growth in total net memberships per club;
• consumer recognition of our brand and our ability to respond to changing consumer preferences;
• overall economic trends, particularly those related to consumer spending;
• our and our franchisees’ ability to operate clubs effectively and efficiently to meet consumer expectations;
• marketing and promotional efforts;
• local competition;
• trade area dynamics; and
• opening of new clubs in the vicinity of existing locations.
We present same club sales as compared to the same period in the prior year for all clubs that have been open and for which monthly membership dues have been billed for longer than 12 months, beginning with the 13th month and thereafter, as applicable. Same club sales of our international clubs are calculated on a constant currency basis, meaning that we translate the current year’s same club sales of our international clubs at the same exchange rates used in the prior year. Since opening new clubs is a significant component of our revenue growth, same club sales is only one measure of how we evaluate our performance.
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Clubs acquired from or sold to franchisees are removed from the franchisee-owned or corporate-owned same club sales base, as applicable, upon the ownership change and for the 12 months following the date of the ownership change. These clubs are included in the corporate-owned or franchisee-owned same club sales base, as applicable, beginning with the 13th month after the acquisition or sale. These clubs remain in the system-wide same club sales base in all periods. The following table shows our same club sales:
Years Ended December 31,
Same club sales growth:
Franchisee-owned clubs
Corporate-owned clubs
System-wide clubs
Number of clubs in same club sales base:
Franchisee-owned clubs
Corporate-owned clubs
Total clubs
Net member growth
Net member growth refers to the net change in total members in relation to total clubs over time. We capture all membership changes daily through our point-of-sale system. We monitor a combination of membership growth, average members per club, average monthly dues and transfers from or to an individual club location. We seek to make it simple for members to join, whether online, through our mobile application or in-club, and, while some memberships require a cancellation fee, we offer, and require our franchisees to offer, a non-committal membership option. This approach to memberships is part of our commitment to appeal to a broad population, inclusive of all fitness levels from beginners to athletes. As a result, we do not rely upon membership attrition as an operating metric in assessing our performance. We primarily attribute our membership growth to the continued net member growth in existing clubs as well as the growth of our system-wide club base.
Average royalty fee percentages for the franchisee-owned clubs
The average royalty fee percentage represents royalties collected by us from our franchisees as a percentage of the monthly membership dues and annual fees that are billed by the franchisees to their member base. We have varying royalty fee structures with our franchisee base, ranging from a tiered monthly fee to a royalty of 7.0% of total monthly dues and annual membership fees across our franchisee base. Our royalty fee in the U.S. and Canada has increased over time to a current rate of 7.0% and 6.59%, respectively, for new franchisees. Our average royalty rate was 6.7% and 6.6% as of December 31, 2025 and 2024, respectively.
PF Black Card penetration percentage
Our PF Black Card penetration percentage represents the number of our recurring billing members that have opted to enroll in our PF Black Card membership program as a percentage of our total recurring billing membership base. PF Black Card members pay higher monthly membership dues than our standard Classic Card membership and receive additional benefits for these additional fees. These benefits include access to all of our clubs system-wide, guest privileges and access to exclusive areas in our clubs that provide amenities such as water massage beds and chairs, massage chairs, tanning equipment and more. We view PF Black Card penetration percentage as a critical metric in assessing the performance and growth of our business. Our PF Black Card penetration percentage was 66.5% and 63.9% as of December 31, 2025 and 2024, respectively.
Non-GAAP Financial Measures
We refer to Adjusted EBITDA, four-wall Adjusted EBITDA, Royalty adjusted four-wall EBITDA, Adjusted net income and Adjusted net income per share, diluted as we use these measures to evaluate our operating performance and we believe these measures are useful to investors in evaluating our performance. Adjusted EBITDA, four-wall Adjusted EBITDA, Royalty adjusted four-wall EBITDA, Adjusted net income and Adjusted net income per share, diluted, as presented in this Form 10-K, are supplemental measures of our performance that are neither required by, nor presented in accordance with GAAP and should not be considered as substitutes for GAAP metrics such as net income or any other performance measures derived in accordance with GAAP. Also, in the future we may incur expenses or charges such as those added back to calculate Adjusted EBITDA, Adjusted net income and Adjusted net income per share, diluted. Our presentation of Adjusted EBITDA, four-wall Adjusted EBITDA, Royalty adjusted four-wall EBITDA, Adjusted net income and Adjusted net income per share, diluted should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
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We define Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, as adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing performance of the Company’s core operations. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of certain expenses and other items that we believe reduce the comparability of our underlying core business performance from period to period and is therefore useful to our investors. Our Board of Directors also uses Adjusted EBITDA as a key metric to assess the performance of management. Our CODM also uses Segment Adjusted EBITDA, which is Adjusted EBITDA specific to each of our three reportable segments, to assess the financial performance of and allocate resources to our segments in accordance with ASC 280, Segment Reporting . Corporate overhead costs not directly attributable to any individual segment are not allocated to the three segments and are included in Corporate and Other Adjusted EBITDA within Adjusted EBITDA.
Four-wall Adjusted EBITDA is an assessment of our average corporate-owned club-level profitability for clubs included in the same-club-sales base, which includes local and national advertising expense and adjusts for certain administrative and other items that we do not consider in our evaluation of individual club-level performance. Royalty adjusted four-wall EBITDA then applies the current royalty rate to our four-wall Adjusted EBITDA. Accordingly, we believe that Royalty adjusted four-wall EBITDA is comparable to a franchise club under our current franchise agreement and is useful to investors to assess the operating performance of an average club in our system. Management also uses such metrics in assessing club-level operating performance over time.
Adjusted net income assumes that all net income is attributable to Planet Fitness, Inc., which assumes the full exchange of all outstanding Holdings Units for shares of Class A common stock of Planet Fitness, Inc., adjusted for certain non-cash and other items that we do not believe directly reflect our core operations. Adjusted net income per share, diluted, is calculated by dividing Adjusted net income by the total weighted-average shares of Class A common stock outstanding plus any dilutive options and restricted stock units as calculated in accordance with GAAP and assuming the full exchange of all outstanding Holdings Units and corresponding Class B common stock as of the beginning of each period presented. We believe Adjusted net income and Adjusted net income per share, diluted, supplement GAAP measures and enable us to more effectively evaluate our performance period-over-period.
Reconciliations of Non-GAAP Financial Measures
A reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA is set forth below:
Years Ended December 31,
(in thousands)
Net income
Interest income
Interest expense
Provision for income taxes
Depreciation and amortization
EBITDA
Severance costs (1)
Executive transition costs (2)
Loss on adjustment of allowance for credit losses on held-to-maturity investment
Dividend income on held-to-maturity investment
Insurance recovery (3)
Lease closure expenses, net (4)
Tax benefit arrangement remeasurement (5)
Gain on sale of corporate-owned clubs (6)
Amortization of basis difference of equity-method investments (7)
Other (8)
Adjusted EBITDA
(1) Represents severance related expenses recorded in connection with a reduction in force.
(2) Represents certain expenses recorded in connection with the departure of the former Chief Executive Officer, including costs associated with the search for, and stock-based compensation associated with certain equity awards granted to, the Company’s Chief Executive Officer and retention payments for certain key employees through the Chief Executive Officer transition.
(3) Represents insurance recoveries, net of costs incurred.
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(4) Represents lease termination costs, impairment charges, and loss on disposal of property and equipment from the closure of our Florida Corporate Support Center located in Orlando, Florida.
(5) Represents a loss related to the adjustment of our tax benefit arrangements primarily due to changes in our deferred state tax rate.
(6) Represents a gain on the sale of eight corporate-owned clubs to a franchisee.
(7) Represents the Company’s pro-rata portion of the basis difference related to intangible asset amortization expense in its equity method investees, which is included within losses from equity-method investments, net of tax on our consolidated statements of operations.
(8) Represents certain other gains and charges that we do not believe reflect our underlying business performance.
A reconciliation of net income, the most directly comparable GAAP measure, to Adjusted net income and the computation of Adjusted net income per share, diluted, are set forth below:
Years Ended December 31,
(in thousands, except per share data)
Net income
Provision for income taxes
Severance costs (1)
Executive transition costs (2)
Loss on adjustment of allowance for credit losses on held-to-maturity investment
Dividend income on held-to-maturity investment
Insurance recovery (3)
Lease closure expenses, net (4)
Tax benefit arrangement remeasurement (5)
Gain on sale of corporate-owned clubs (6)
Amortization of basis difference of equity-method investments (7)
(1) Represents severance related expenses recorded in connection with a reduction in force.
(2) Represents certain expenses recorded in connection with the departure of the former Chief Executive Officer, including costs associated with the search for, and stock-based compensation associated with certain equity awards granted to, the Company’s Chief Executive Officer and retention payments for certain key employees through the Chief Executive Officer transition.
(3) Represents insurance recoveries, net of costs incurred.
(4) Represents lease termination costs, impairment charges, and loss on disposal of property and equipment from the closure of our Florida Corporate Support Center located in Orlando, Florida.
(5) Represents a loss related to the adjustment of our tax benefit arrangements primarily due to changes in our deferred state tax rate.
(6) Represents a gain on the sale of eight corporate-owned clubs to a franchisee.
(7) Represents the Company’s pro-rata portion of the basis difference related to intangible asset amortization expense in its equity method investees, which is included within losses from equity-method investments, net of tax on our consolidated statements of operations.
(8) Represents certain other gains and charges that we do not believe reflect our underlying business performance.
(9) Represents a loss on extinguishment of debt as a result of the repayment of the 2022-1 Class A-2-I notes prior to the anticipated repayment date.
(10) Includes $10.6 million for the year ended December 31, 2024 of amortization for intangible assets recorded in connection with the 2012 Acquisition, other than favorable leases. During the fourth quarter of 2024, the intangible assets recorded in connection with the 2012 Acquisition became fully amortized. Also includes $36.7 million and $38.6 million for the years ended December 31, 2025 and 2024, respectively, of amortization for intangible assets created in connection with historical acquisitions of franchisee-owned clubs. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with GAAP, in each period.
(11) Represents corporate income taxes at an assumed effective tax rate of 26.0% and 25.9% for the years ended December 31, 2025 and 2024, respectively, applied to adjusted income before income taxes.
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(12) Assumes the full exchange of all outstanding Holdings Units and corresponding shares of Class B common stock for shares of Class A common stock of Planet Fitness, Inc.
A reconciliation of net income per share, diluted, to Adjusted net income per share, diluted, is set forth below:
(in thousands, except per share amounts)
Net income
Weighted Average Shares
Net income per share, diluted
Year Ended December 31, 2025
Net income attributable to Planet Fitness, Inc. (1)
Net income attributable to non-controlling interests (2)
Net income
Adjustments to arrive at adjusted income before income taxes (3)
Adjusted income before income taxes
Adjusted income taxes (4)
Adjusted net income
Year Ended December 31, 2024
Net income attributable to Planet Fitness, Inc. (1)
Net income attributable to non-controlling interests (2)
Net income
Adjustments to arrive at adjusted income before income taxes (3)
Adjusted income before income taxes
Adjusted income taxes (4)
Adjusted net income
(1) Represents net income attributable to Planet Fitness, Inc. and the associated weighted average shares of Class A common stock outstanding (see Note 15 to our consolidated financial statements included elsewhere in this form 10-K).
(2) Represents net income attributable to non-controlling interests and the assumed exchange of all outstanding Holdings Units and corresponding shares of Class B common stock for shares of Class A common stock of Planet Fitness, Inc. as of the beginning of the period presented.
(3) Represents the total impact of all adjustments identified in the adjusted net income table above to arrive at adjusted income before income taxes.
(4) Represents corporate income taxes at an assumed effective tax rate of 26.0% and 25.9% for the years ended December 31, 2025 and 2024, respectively, applied to adjusted income before income taxes.
A reconciliation of the Corporate-owned clubs Segment Adjusted EBITDA to four-wall Adjusted EBITDA to Royalty adjusted four-wall EBITDA, is set forth below:
Year Ended December 31, 2025
(in thousands)
Revenue
Adjusted EBITDA
Adjusted EBITDA Margin
Corporate-owned clubs segment
New clubs (1)
Selling, general and administrative (2)
Impact of eliminations (3)
Purchase accounting adjustments (4)
Four-wall
Royalty adjustment (5)
Royalty adjusted four-wall
( 1) Includes the impact of clubs open less than 13 months and those which have not yet opened.
(2) Reflects administrative costs attributable to the Corporate-owned clubs segment but not directly related to club operations.
(3) Reflects certain intercompany charges and other fees which are eliminated in consolidation.
(4) Represents the impact of certain purchase accounting adjustments associated with the 2012 Acquisition and our historical acquisitions of franchisee-owned clubs. These are primarily related to fair value adjustments to deferred rent.
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(5) Includes the effect of royalties at a rate of 7.0% on gross monthly and annual membership billings as if the clubs were similar to a franchisee-owned club at the current franchise royalty rate.
Results of Operations
Comparison of the years ended December 31, 2025 and December 31, 2024
The following table sets forth a comparison of our consolidated statements of operations in dollars and as a percentage of total revenue:
Years Ended December 31,
(in thousands)
Amount
% of Total Revenues
Amount
% of Total Revenues
Revenue:
Franchise
National advertising fund revenue
Franchise segment
Corporate-owned clubs
Equipment
Total revenue
Operating costs and expenses:
Cost of revenue
Club operations
Selling, general and administrative
National advertising fund expense
Depreciation and amortization
Other (gain) loss, net
Total operating costs and expenses
Income from operations
Other income (expense), net:
Interest income
Interest expense
Other expense, net
Total other expense, net
Income before income taxes
Provision for income taxes
Losses from equity-method investments, net of tax
Net income
Less net income attributable to non-controlling interests
Net income attributable to Planet Fitness, Inc.
Revenue
Total revenues were $1.3 billion in the year ended December 31, 2025, compared to $1.2 billion in the year ended December 31, 2024, an increase of $142.5 million, or 12.1%.
Franchise segment revenue was $468.0 million in the year ended December 31, 2025, compared to $423.2 million in the year ended December 31, 2024, an increase of $44.7 million, or 10.6%.
Franchise revenue was $381.0 million in the year ended December 31, 2025, compared to $344.3 million in the year ended December 31, 2024, an increase of $36.7 million, or 10.6%. Included in franchise revenue are the following:
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Years Ended December 31,
(in thousands)
$ Change
% Change
Royalty revenue
Franchise and other fees
Placement revenue
HVAC revenue
Total franchise revenue
Of the $28.4 million increase in royalty revenue, $16.7 million was attributable to a franchise same club sales increase of 6.8%, $7.1 million was attributable to new clubs opened since January 1, 2024 before moving into the same club sales base and $4.6 million was from higher royalties on annual fees. The $7.8 million increase in franchise and other fees was primarily attributable to higher join fees, commission income and PF Perks revenue and the $2.1 million increase in placement revenue was primarily attributable to higher replacement equipment placements. Also impacting franchise revenue was a $1.6 million decrease in revenue associated with the sale of HVAC units to franchisees.
National advertising fund revenue was $87.0 million in the year ended December 31, 2025, compared to $78.9 million in the year ended December 31, 2024, an increase of $8.1 million, or 10.2%. This increase was primarily attributable to $5.6 million from higher same club sales and new clubs opened since January 1, 2024 and $2.3 million from the collection of national advertising fund revenue on annual fees.
Corporate-owned clubs segment revenue was $546.1 million in the year ended December 31, 2025, compared to $502.3 million in the year ended December 31, 2024, an increase of $43.8 million, or 8.7%. This increase was primarily attributable to $28.1 million of higher revenue from the corporate-owned clubs in the same club sales base, of which $21.1 million was attributable to a same clubs sales increase of 6.0%, $3.6 million was attributable to higher other fees and $3.4 million was attributable to higher annual fee revenue. Additionally, $15.7 million was from new clubs opened and acquired since January 1, 2024 before moving into the same club sales base.
Equipment segment revenue was $310.1 million in the year ended December 31, 2025, compared to $256.1 million in the year ended December 31, 2024, an increase of $54.0 million, or 21.1%. This increase was primarily attributable to $47.4 million of higher revenue from equipment sales to existing franchisee-owned clubs and $6.6 million of higher revenue from equipment sales to new franchisee-owned clubs.
Cost of revenue
Cost of revenue, which primarily relates to our equipment segment, was $230.3 million in the year ended December 31, 2025, compared to $197.1 million in the year ended December 31, 2024, an increase of $33.2 million, or 16.8%. This increase was primarily attributable to higher equipment sales to existing and new franchisee-owned clubs, as described above.
Club operations
Club operations expense, which relates to our Corporate-owned clubs segment, was $318.5 million in the year ended December 31, 2025 compared to $290.5 million in the year ended December 31, 2024, an increase of $28.0 million, or 9.7%. This increase was primarily attributable to $15.9 million from new clubs opened since January 1, 2024 before moving into the same club sales base, consisting of $8.0 million from clubs located domestically and $7.9 million from clubs located in Spain, all of which have opened since January 1, 2024, and $12.2 million from clubs included in our same club sales base as a result of higher operating costs.
Selling, general and administrative
Selling, general and administrative expense was $137.6 million in the year ended December 31, 2025, compared to $129.1 million in the year ended December 31, 2024, an increase of $8.5 million, or 6.6%. This increase was primarily attributable to $9.6 million of higher payroll costs and $3.4 million of higher costs primarily related to professional and consulting fees and travel expenses partially offset by $4.8 million of lower marketing expenses.
National advertising fund expense
National advertising fund expense was $87.6 million in the year ended December 31, 2025, compared to $79.0 million in the year ended December 31, 2024, an increase of $8.6 million, or 10.8%. This increase was primarily a result of higher advertising and marketing expenditures attributable to higher national advertising revenue, as described above.
Depreciation and amortization
Depreciation and amortization expense was $155.8 million in the year ended December 31, 2025, compared to $160.3 million in the year ended December 31, 2024, a decrease of $4.6 million, or 2.8%. This decrease was primarily attributable to a
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decrease in amortization expense as a result of certain intangible assets becoming fully amortized during the fourth quarter of 2024, partially offset by an increase in depreciation expense primarily from new clubs opened since January 1, 2024.
Other (gain) loss, net
Other (gain) loss, net was a $0.4 million gain in the year ended December 31, 2025, compared to a $1.3 million loss in the year ended December 31, 2024. The decrease was primarily attributable to a $6.4 million gain on the sale of corporate-owned clubs and a $1.6 million gain on insurance proceeds, both in 2025, partially offset by a $4.4 million of higher allowance for expected credit losses on the Company’s held-to-maturity debt security, a $1.3 million charge on the closure of its Florida Corporate Support Center located in Orlando, Florida in 2025, and $0.6 million of lower gain on the sale of property and equipment.
Interest income
Interest income was $23.0 million in the year ended December 31, 2025, compared to $23.1 million in the year ended December 31, 2024, a decrease $0.1 million, or 0.5%.
Interest expense
Interest expense primarily consists of interest on long-term debt as well as the amortization of deferred financing costs.
Interest expense was $108.2 million in the year ended December 31, 2025, compared to $100.0 million in the year ended December 31, 2024, an increase of $8.2 million, or 8.2%. This increase was primarily attributable to a higher principal balance and blended interest rate on our indebtedness related to the issuance of the Company’s fixed rate senior secured notes in June 2024.
Other expense, net
Other expense, net was a $0.5 million expense for both the years ended December 31, 2025 and 2024.
Provision for income taxes
Income tax expense was $85.9 million for the year ended December 31, 2025, compared to $68.4 million for the year ended December 31, 2024, an increase of $17.4 million, or 25.5%. This increase is primarily attributable to our higher income before taxes in the current year compared to the prior year.
The Company’s effective tax rate was 27.8% for the year ended December 31, 2025, compared to 27.7% in the prior year. The increase in the effective income tax rate was primarily attributable to the sale of certain of our corporate-owned clubs offset by the remeasurement of deferred tax assets.
Losses from equity-method investments
Losses from equity-method investments were $2.8 million in the year ended December 31, 2025, compared to $4.0 million in the year ended December 31, 2024, a decrease of $1.2 million, or 29.7%. This decrease was primarily attributable to improved operating results from both of the Company’s equity-method investments. The Company has incurred losses on its equity method investments to date primarily as a result of the investees, who are franchisee operators of Planet Fitness clubs, opening new clubs in each period and due to the accounting for basis differences in accordance with the equity method of accounting. For additional information, see Note 7 to the consolidated financial statements.
Segment Adjusted EBITDA
Franchise
Franchise Segment Adjusted EBITDA was $336.6 million in the year ended December 31, 2025, compared to $301.1 million in the year ended December 31, 2024, an increase of $35.5 million, or 11.8%. This increase was primarily attributable to higher franchise and NAF revenue of $36.7 million and $8.1 million, respectively, and $1.4 million of lower other expense, net, partially offset by $8.6 million of higher NAF expense and $1.9 million of higher selling, general and administrative expense.
Corporate-owned clubs
Corporate-owned clubs Segment Adjusted EBITDA was $206.3 million in the year ended December 31, 2025, compared to $188.8 million in the year ended December 31, 2024, an increase of $17.6 million, or 9.3%. This increase was primarily attributable to $14.6 million from the corporate-owned same club sales increase of 6.0%, $3.9 million of lower selling, general and administrative expenses and $3.1 million from new clubs located domestically opened since January 1, 2024 before moving into the same club sales base. This increase was partially offset by $3.5 million of lower Adjusted EBITDA from new clubs located in Spain, all of which have opened since January 1, 2024.
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Equipment
Equipment Segment Adjusted EBITDA was $94.5 million in the year ended December 31, 2025, compared to $71.8 million in the year ended December 31, 2024, an increase of $22.7 million, or 31.6%. This increase was primarily driven by higher equipment sales to existing and new franchisee-owned clubs, as described above.
Liquidity and Capital Resources
As of December 31, 2025, we had $345.7 million of cash and cash equivalents, $106.8 million of short-term marketable securities, $88.3 million of long-term marketable securities and $66.3 million of restricted cash.
We require cash principally to fund day-to-day operations, to finance capital investments, to service our outstanding debt and tax benefit arrangements and to address our working capital needs. Based on our current level of operations, we believe that our available cash balance, the cash generated from operations, and amounts available under our Variable Funding Notes will be adequate to meet the above needs for at least the next 12 months. Our ability to continue to fund these items could be adversely affected by the occurrence of any of the events described under “Risk Factors.” There can be no assurance that our business will generate sufficient cash flows from operations or otherwise to enable us to service our indebtedness, including our Securitized Senior Notes, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.
Summary of Cash Flows
Years Ended December 31,
(in thousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of foreign exchange rates on cash
Net increase in cash, cash equivalents and restricted cash
Operating activities
Net cash provided by operating activities of $418.4 million for the year ended December 31, 2025 was primarily attributable to $220.3 million of net income and $238.5 million of adjustments to reconcile net income to net cash provided by operating activities, primarily consisting of depreciation and amortization, deferred tax expense, equity-based compensation expense, amortization of deferred financing costs, loss on extinguishment of debt and other adjustments, partially offset by $40.4 million of working capital cash outflows. The working capital cash outflows were primarily attributable to a decrease in the tax benefit arrangement liability as a result of payments made during 2025, an increase in other assets and other current assets primarily from other receivables and general prepaid expenses, and a decrease in deferred revenue. The working capital cash outflows was partially offset by an increase in lease incentives primarily from new corporate-owned clubs in 2025, an increase in equipment deposits, a decrease in accounts receivable primarily from collections during the period and an increase in accounts payable and accrued expenses primarily from an increase in payables related to equipment orders.
Net cash provided by operating activities of $343.9 million for the year ended December 31, 2024 was primarily attributable to $174.2 million of net income and $234.2 million of adjustments to reconcile net income to net cash provided by operating activities, primarily consisting of depreciation and amortization, deferred tax expense, stock-based compensation expense, amortization of deferred financing costs, loss on extinguishment of debt and other adjustments, partially offset by $64.6 million of working capital cash outflows. The working capital cash outflows were primarily attributable to a decrease in the tax benefit arrangement liability as a result of payments made during 2024, an increase in accounts receivable due to higher equipment sales to existing franchisee-owned clubs, and an increase in other assets and other current assets primarily from other receivables and general prepaid expenses. The working capital cash outflow was partially offset by an increase in accounts payable and accrued expenses primarily from an increase in payables related to equipment orders, an increase in leases primarily from new corporate-owned clubs in 2024, and an increase in deferred revenue primarily from increased annual billings revenue.
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Investing activities
For the year ended December 31, 2025, net cash used in investing activities was $160.2 million compared to $208.7 million in the year ended December 31, 2024, a decrease of $48.5 million. This decrease was primarily attributable to maturities of marketable securities, net of purchases of $37.2 million, proceeds from the sale of corporate-owned clubs of $21.6 million, and insurance proceeds of $2.1 million, partially offset by higher capital expenditures of $8.6 million and higher cash used for acquisitions of $— million. Capital expenditures for the years ended December 31, 2025 and 2024 were as follows:
Years Ended December 31,
(in thousands)
New corporate-owned clubs
Existing corporate-owned clubs
Information systems
Corporate and all other
Total capital expenditures
Financing activities
For the year ended December 31, 2025, net cash used in financing activities was $198.1 million compared to net cash used in financing activities of $105.0 million in the year ended December 31, 2024, an increase of $93.1 million. This increase was primarily attributable to an increase in cash used for share repurchases in 2025 of $200.2 million and a decrease in cash provided by the proceeds from the issuance of Class A common stock from option exercises of $20.0 million, partially offset by an increase in net cash provided from long-term debt of $125.4 million, consisting of a $177.1 million decrease in the repayment of long-term debt, a $50.0 million decrease in borrowings, and a $1.8 million increase in the payment of deferred financing costs.
Securitized Financing Facility
Planet Fitness Master Issuer LLC (the “Master Issuer”), a limited-purpose, bankruptcy remote, wholly-owned indirect subsidiary of Pla-Fit Holdings, LLC, is the master issuer of outstanding senior secured notes under a securitized financing facility that was entered into in August 2018.
In June 2024, the Master Issuer completed a refinancing transaction with respect to this facility under which the Master Issuer issued the Series 2024-1 Class A-2 Notes with initial principal amounts totaling $800 million. The net proceeds from the sale of the Series 2024-1 Class A-2 Notes were used to repay in full the Master Issuer’s outstanding Series 2018-1 Class A-2-II Notes, including the payment of transaction costs. The remaining funds were used, together with cash on hand, to fund a $280 million accelerated share repurchase agreement.
In December 2025, the Master Issuer completed a refinancing transaction with respect to this facility under which the Master Issuer issued the Series 2025-1 Class A-2 Notes with initial principal amounts totaling $750 million. The net proceeds from the sale of the Series 2025-1 Class A-2 Notes were used to repay in full the Master Issuer’s outstanding Series 2022-1 Class A-2-I Notes, including the payment of transaction costs. The remaining funds were used, together with cash on hand, to fund a $350 million accelerated share repurchase agreement.
In February 2022 and December 2025, the Master Issuer also issued the Series 2022-1 Class A-1 Notes and the Series 2025-1 Class A-1 Notes, both of which allow for the drawing of up to $75 million of Variable Funding Notes (the “2022 Variable Funding Notes” and “2025 Variable Funding Notes”), including letters of credit facilities. The 2022 and 2025 Variable Funding Notes are both undrawn as of December 31, 2025.
Except as noted above, there were no material changes to the terms of any debt obligations in the year ended December 31, 2025. The Company was in compliance with its debt covenants as of December 31, 2025. See Note 10 to the consolidated financial statements contained in Item 8 herein for further information related to our long-term debt obligations.
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Share Repurchase Program
2022 share repurchase program
On November 4, 2022, the Company’s board of directors approved a share repurchase program of up to $500.0 million. During the year ended December 31, 2023, the Company repurchased and retired 1,698,753 shares of Class A common stock for a total cost of $125.0 million. A share repurchase excise tax of $1.0 million was also incurred as a result of new legislation that went into effect beginning in 2023.
On June 12, 2024, the Company entered into a $280.0 million accelerated share repurchase agreement (the “2024 ASR Agreement”) with Citibank, N.A. (the “Bank”). Pursuant to the terms of the 2024 ASR Agreement, on June 14, 2024, the Company paid the Bank $280.0 million in cash and received 3,090,507 shares of the Company’s Class A common stock, which were retired, and the Company recorded an increase to accumulated deficit of $224.0 million, representing 80% of the total 2024 ASR Agreement value based on the closing price of the Company’s Class A common stock on the commencement date of the transaction. Final settlement of the 2024 ASR Agreement occurred on September 16, 2024. At final settlement, the Bank delivered 668,432 additional shares of the Company’s Class A common stock, which were retired by the Company. The final number of shares repurchased was determined based on the volume-weighted average stock price of the Company’s Class A common stock of $76.88 during the term of the transaction, less a discount and subject to adjustments pursuant to the terms and conditions of the 2024 ASR Agreement. The 2024 ASR Agreement had been evaluated as an unsettled forward contract indexed to our Class A common stock, with $56.0 million classified as an increase to accumulated deficit at the original date of payment.
Additionally, the Company repurchased and retired 313,834 shares of Class A common stock for a total cost of $20.0 million during the year ended December 31, 2024. A share repurchase excise tax of $2.5 million was recorded in connection with the Company’s share repurchases during the year ended December 31, 2024.
2024 share repurchase program
On June 13, 2024, the Company’s board of directors approved a share repurchase program of up to $500.0 million (the “2024 Share Repurchase Program”) to replace the 2022 share repurchase program, contingent upon the completion of the 2024 ASR Agreement. The 2024 Share Repurchase Program became effective on September 16, 2024 upon the completion of the 2024 ASR Agreement.
On December 12, 2025, the Company entered into a $350.0 million accelerated share repurchase agreement (the “2025 ASR Agreement”) with the Bank. Pursuant to the terms of the 2025 ASR Agreement, on December 16, 2025, the Company paid the Bank $350.0 million in cash and received 2,548,234 shares of the Company’s Class A common stock, which were retired, and the Company recorded an increase to accumulated deficit of $280.0 million, representing 80% of the total 2025 ASR Agreement value based on the closing price of the Company’s Class A common stock on the commencement date of the transaction.
Subsequent to the year ended December 31, 2025, final settlement of the 2025 ASR Agreement occurred on January 12, 2026, where the Bank delivered 754,644 additional shares of the Company’s Class A common stock, and which were retired by the Company. The final number of shares repurchased was determined based on the volume-weighted average stock price of the Company’s Class A common stock of $108.76 during the term of the transaction, less a discount and subject to adjustments pursuant to the terms and conditions of the 2025 ASR Agreement.
Additionally, the Company repurchased and retired 1,502,411 shares of Class A common stock for a total cost of $150.0 million during the year ended December 31, 2025. A share repurchase excise tax of $4.2 million was recorded in connection with the Company’s share repurchases during the year ended December 31, 2025.
The timing of purchases and amount of stock repurchased will be subject to the Company’s discretion and will depend on market and business conditions, the Company’s general working capital needs, stock price, applicable legal requirements and other factors. Our ability to repurchase shares at any particular time is also subject to the terms of the Indenture governing the Securitized Senior Notes. Purchases may be effected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing. The Company may terminate the program at any time.
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Contractual Obligations and Commitments
The following table presents contractual obligations and commercial commitments as of December 31, 2025.
(in thousands)
Short Term
Long Term
Total
Long-term debt (1)
Interest on long-term debt (2)
Obligations under tax benefit arrangements (3)
Operating and finance leases
Advertising commitments (4)
Purchase obligations (5)
Total contractual obligations
(1) Long-term debt payments include scheduled principal payments only.
(2) Interest on long-term debt is based on the contractual interest rate through the anticipated repayment dates of the outstanding senior secured notes.
(3) Timing of payments under tax benefit arrangements is estimated.
(4) Advertising purchase commitments include commitments for the NAFs.
(5) Purchase obligations consists of open purchase orders primarily related to equipment to be sold to franchisees. For the majority of our equipment purchase obligations, our policy is to require the franchisee to provide us with either a deposit or proof of a committed financing arrangement.
Off-Balance Sheet Arrangements
As of December 31, 2025, our off-balance sheet arrangements consisted of guarantees of lease agreements for certain franchisees. Our maximum total commitment under these agreements is approximately $3.7 million and would only require payment upon default by the primary obligor. The estimated fair value of these guarantees at December 31, 2025 was not material, and no accrual has been recorded for our potential obligation under these arrangements. In 2019, in connection with a real estate partnership, the Company began guaranteeing certain leases of its franchisees up to a maximum period of 10 years, with earlier expiration dates if certain conditions are met. See Note 17 to our consolidated financial statements included elsewhere in this Form 10-K for more information regarding these operating leases and guarantees.
Critical Accounting Policies and Estimates
Our discussion and analysis of operating results and financial condition are based upon our consolidated financial statements included elsewhere in this Form 10-K. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates. While estimates and judgments are applied in arriving at many reported amounts, we believe that the following critical accounting estimates involve a higher degree of judgment and complexity.
Business combinations
We account for business combinations using the purchase method of accounting which results in the assets acquired and liabilities assumed being recorded at fair value at the date of acquisition. The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed will be recognized as goodwill.
The valuation methodologies used are based on the nature of the asset or liability. The significant assets and liabilities measured at fair value include property and equipment, intangible assets, and favorable and unfavorable leases. For the 2012 Acquisition, intangible assets consisted of trade and brand names, member relationships, franchisee relationships related to both our franchise and equipment segments, non-compete agreements, order backlog and favorable and unfavorable leases. For other acquisitions, which consist of acquisitions of clubs from franchisees, intangible assets generally consist of member relationships, re-acquired franchise rights, and favorable and unfavorable leases.
The Company uses a variety of information sources to determine the estimated fair values of acquired assets and liabilities, including third-party valuation experts. The fair value of trade and brand names is estimated using the relief from royalty method, an income approach to valuation, which includes projecting future system-wide sales and other estimates. Membership relationships and franchisee relationships are valued based on an estimate of future revenues and costs related to the respective contracts over the remaining expected lives. Our valuation includes assumptions related to the projected attrition and renewal
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rates on those existing franchise and membership arrangements being valued. Re-acquired franchise rights are valued using an excess earnings approach. The valuation of re-acquired franchise rights is determined using a multi-period excess earnings method under the income approach. For re-acquired franchise rights with terms that are either favorable or unfavorable (from our perspective) to the terms included in our current franchise agreements, a gain or charge is recorded at the time of the acquisition to the extent of the favorability or unfavorability, respectively. Favorable and unfavorable operating leases are recorded based on differences between contractual rents under the respective lease agreements and prevailing market rents at the lease acquisition date, and are recorded as a component of the right-of-use (“ROU”) asset. Real and personal property asset valuation is determined using the replacement cost approach.
Income taxes
Deferred income taxes are recognized for the expected future tax consequences attributable to temporary differences between the carrying amount of the existing tax assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied in the years in which temporary differences are expected to be recovered or settled. The principal items giving rise to temporary differences are the use of accelerated depreciation and certain basis differences resulting from acquisitions and the recapitalization transactions. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
In determining the provision for income taxes, we make estimates and judgments which affect our evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate the carrying value of our deferred tax assets on a quarterly basis. In completing this evaluation, we consider all available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative earnings and losses in the most recent fiscal years, taxable income in prior carryback year(s) if permitted under the tax law, expectations for future pre-tax operating income, the time period over which our temporary differences will reverse, and the implementation of feasible and prudent tax planning strategies. Estimating future taxable income is inherently uncertain and requires judgment.
As of December 31, 2025, we had $405.5 million of net deferred tax assets, net of valuation allowances. We expect to realize future tax benefits related to the utilization of these assets. As of December 31, 2025, the Company has provided a valuation allowance of $10.4 million against the portion of its deferred tax assets for which the Company does not have sufficient positive evidence to support its recoverability.
We recognize the effects of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Tax Benefit Arrangements
As described in Note 16 to the consolidated financial statements included in Part II, Item 8, we are a party to the tax benefit arrangements under which we are contractually committed to pay certain non-controlling interest holders 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of certain transactions. Amounts payable under the tax benefit arrangements are contingent upon, among other things, (i) generation of future taxable income over the term of the tax benefit arrangements and (ii) future changes in tax laws. If we do not generate sufficient taxable income in the aggregate over the term of the tax benefit arrangements to utilize the tax benefits, then we would not be required to make the related payments. Therefore, we would only recognize a liability for tax benefit arrangement payments if we determine it is probable that we will generate sufficient future taxable income over the term of the tax benefit arrangements to utilize the related tax benefits. Estimating future taxable income is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions. As of December 31, 2025, we recognized $415.8 million of liabilities relating to our obligations under the tax benefit arrangements. We concluded that we would have sufficient future taxable income to utilize all of the related tax benefits generated by all transactions that occurred. Changes in the liability resulting from historical exchanges under these tax benefit arrangements may occur based on changes in anticipated future taxable income, changes in applicable tax rates or other changes in tax attributes that may occur and impact the expected future tax benefits to be received by the Company. Changes in the projected liability under these tax benefit arrangements are and will be recorded as a component of other income (expense) each period. The projection of future taxable income involves significant judgment. Actual taxable income may differ from estimates, which could significantly impact the liability under the tax benefit arrangements and the Company’s consolidated results of operations.
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Investments and allowance for expected credit losses
Our held-to-maturity debt security is reported at amortized cost. We reserve for expected credit losses on our held-to-maturity debt securities through the allowance for expected credit losses. The allowance for expected credit losses estimate reflects a lifetime loss estimate and is based on historical loss information for assets with similar risk characteristics, adjusted for management’s expectations. Adjustments for management’s expectations may be based on factors such as investee earnings performance, recent financing rounds at reduced valuations, changes in the regulatory, economic or technological environment of an investee or doubt about an investee’s ability to continue as a going concern. An increase or a decrease in the allowance for expected credit losses is recorded through other gain (loss) as a credit loss expense or a reversal thereof. The allowance for expected credit losses is presented as a deduction from the amortized cost of the held-to-maturity debt securities. A held-to-maturity investment security and its allowance for expected credit losses is written off when deemed uncollectible.
