PLANET FITNESS, INC., 10-K filed on 3/1/2021
Annual Report
v3.20.4
Cover Page - USD ($)
$ in Billions
12 Months Ended
Dec. 31, 2020
Feb. 22, 2021
Jun. 30, 2020
Document Information [Line Items]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2020    
Current Fiscal Year End Date --12-31    
Document Transition Report false    
Entity File Number 001-37534    
Entity Registrant Name PLANET FITNESS, INC.    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 38-3942097    
Entity Address, Address Line One 4 Liberty Lane West    
Entity Address, City or Town Hampton    
Entity Address, State or Province NH    
Entity Address, Postal Zip Code 03842    
City Area Code 603    
Local Phone Number 750-0001    
Title of 12(b) Security Class A common stock, $0.0001 Par Value    
Trading Symbol PLNT    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Public Float     $ 4.8
Documents Incorporated by Reference Portions of the Definitive Proxy Statement for the registrant’s 2021 Annual Meeting of Stockholders to be held May 3, 2021, are incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.    
Amendment Flag false    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Entity Central Index Key 0001637207    
Class A Common Stock      
Document Information [Line Items]      
Entity Common Stock, Shares Outstanding   83,079,078  
Class B Common Stock      
Document Information [Line Items]      
Entity Common Stock, Shares Outstanding   3,473,075  
v3.20.4
Consolidated balance sheets - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 439,478 $ 436,256
Restricted cash 76,322 42,539
Accounts receivable, net of allowance for bad debts of $7 and $111 at December 31, 2020 and 2019, respectively 16,447 42,268
Inventory 473 877
Prepaid expenses 11,881 8,025
Other receivables 16,754 9,226
Income tax receivable 5,461 947
Total current assets 566,816 540,138
Property and equipment, net 160,677 145,481
Right-of-use assets, net 164,252 155,633
Intangible assets, net 217,075 233,921
Goodwill 227,821 227,821
Deferred income taxes 511,200 412,293
Other assets, net 1,896 1,903
Total assets 1,849,737 1,717,190
Current liabilities:    
Current maturities of long-term debt 17,500 17,500
Accounts payable 19,388 21,267
Accrued expenses 22,042 31,623
Equipment deposits 795 3,008
Deferred revenue, current 26,691 27,596
Payable pursuant to tax benefit arrangements, current 0 26,468
Other current liabilities 25,479 18,016
Total current liabilities 111,895 145,478
Long-term debt, net of current maturities 1,676,426 1,687,505
Borrowings under Variable Funding Notes 75,000 0
Lease liabilities, net of current portion 167,910 152,920
Deferred revenue, net of current portion 32,587 34,458
Deferred tax liabilities 881 1,116
Payable pursuant to tax benefit arrangements, net of current portion 488,200 400,748
Other liabilities 2,511 2,719
Total noncurrent liabilities 2,443,515 2,279,466
Commitments and contingencies (note 17)
Stockholders’ equity (deficit):    
Accumulated other comprehensive income 27 303
Additional paid in capital 45,673 29,820
Accumulated deficit (751,578) (736,587)
Total stockholders’ deficit attributable to Planet Fitness, Inc. (705,869) (706,455)
Non-controlling interests 196 (1,299)
Total stockholders’ deficit (705,673) (707,754)
Total liabilities and stockholders’ deficit 1,849,737 1,717,190
Class A Common Stock    
Stockholders’ equity (deficit):    
Common stock, value 8 8
Class B Common Stock    
Stockholders’ equity (deficit):    
Common stock, value $ 1 $ 1
v3.20.4
Consolidated balance sheets (Parenthetical) - USD ($)
shares in Thousands, $ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Current assets:    
Accounts receivable, allowance for bad debts $ 7 $ 111
Class A Common Stock    
Stockholders’ equity (deficit):    
Common stock, par value (in usd per share) $ 0.0001 $ 0.0001
Common stock, shares authorized (in shares) 300,000 300,000
Common stock, shares issued (in shares) 82,821 78,525
Common stock, shares outstanding (in shares) 82,821 78,525
Class B Common Stock    
Stockholders’ equity (deficit):    
Common stock, par value (in usd per share) $ 0.0001 $ 0.0001
Common stock, shares authorized (in shares) 100,000 100,000
Common stock, shares issued (in shares) 3,722 8,562
Common stock, shares outstanding (in shares) 3,722 8,562
v3.20.4
Consolidated statements of operations - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Revenue:      
Revenue $ 406,618 $ 688,803 $ 572,898
Operating costs and expenses:      
Cost of revenue 70,955 194,449 162,646
Store operations 87,797 86,108 75,005
Selling, general and administrative 68,585 78,818 72,446
National advertising fund expense 61,255 50,153 42,619
Depreciation and amortization 53,832 44,346 35,260
Other loss 4,434 1,846 878
Total operating costs and expenses 346,858 455,720 388,854
Income from operations 59,760 233,083 184,044
Other income (expense), net:      
Interest income 2,937 7,053 4,681
Interest expense (82,117) (60,852) (50,746)
Other income (expense), net 4,903 (6,107) (6,175)
Total other expense, net (74,277) (59,906) (52,240)
Income (loss) before income taxes (14,517) 173,177 131,804
Provision for income taxes 687 37,764 28,642
Net income (loss) (15,204) 135,413 103,162
Less net income (loss) attributable to non-controlling interests (213) 17,718 15,141
Net income (loss) attributable to Planet Fitness, Inc. $ (14,991) $ 117,695 $ 88,021
Class A Common Stock      
Net income (loss) per share of Class A common stock:      
Basic (usd per share) $ (0.19) $ 1.42 $ 1.01
Diluted (usd per share) $ (0.19) $ 1.41 $ 1.00
Weighted-average shares of Class A common stock outstanding:      
Basic (shares) 80,303,277 82,976,620 87,235,021
Diluted (shares) 80,303,277 83,619,180 87,674,903
Franchise      
Revenue:      
Revenue $ 206,156 $ 277,582 $ 224,140
Franchise | Franchise      
Revenue:      
Revenue 162,159 223,139 175,314
Franchise | Commission income      
Revenue:      
Revenue 696 4,288 6,632
Franchise | National advertising fund revenue      
Revenue:      
Revenue 43,301 50,155 42,194
Corporate-owned stores      
Revenue:      
Revenue 117,142 159,697 138,599
Equipment      
Revenue:      
Revenue $ 83,320 $ 251,524 $ 210,159
v3.20.4
Consolidated statements of comprehensive income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]      
Net income (loss) including non-controlling interests $ (15,204) $ 135,413 $ 103,162
Net income (loss) including non-controlling interests      
Unrealized gain on interest rate caps, net of tax 0 0  
Unrealized gain on interest rate caps, net of tax     989
Foreign currency translation adjustments (276) 209 (200)
Total other comprehensive income (loss), net (276) 209 789
Total comprehensive income (loss) including non-controlling interests (15,480) 135,622 103,951
Less: total comprehensive income (loss) attributable to non-controlling interests (213) 17,718 15,189
Total comprehensive income (loss) attributable to Planet Fitness, Inc. $ (15,267) $ 117,904 $ 88,762
v3.20.4
Consolidated statements of cash flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Cash flows from operating activities:      
Net income (loss) $ (15,204) $ 135,413 $ 103,162
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation and amortization 53,832 44,346 35,260
Amortization of deferred financing costs 6,411 5,454 3,400
Amortization of favorable leases and asset retirement obligations 57 237 375
Amortization and settlement of interest rate caps 0 0 1,170
Deferred tax expense 7,213 21,625 23,933
(Gain) loss on re-measurement of tax benefit arrangement (5,949) 5,966 4,765
Provision for bad debts (74) 87 19
(Gain) loss on disposal of property and equipment (107) (159) 462
Loss on extinguishment of debt 0 0 4,570
Other (494) (472) 578
Loss on reacquired franchise rights 0 1,810 360
Equity-based compensation 4,777 4,826 5,479
Changes in operating assets and liabilities:      
Accounts receivable 23,611 (895) (1,923)
Due from related parties 0 0 3,020
Inventory 404 4,244 (2,430)
Other assets and other current assets (2,676) (3,198) 5,778
Accounts payable and accrued expenses (10,938) (6,268) 14,506
Other liabilities and other current liabilities 4,384 1,687 (2,835)
Income taxes (4,461) 6,231 194
Payments pursuant to tax benefit arrangements (26,621) (24,998) (30,493)
Equipment deposits (2,212) (4,900) 1,410
Deferred revenue (2,842) 11,452 9,640
Deferred rent 2,027 1,823 3,999
Net cash provided by operating activities 31,138 204,311 184,399
Cash flows from investing activities:      
Additions to property and equipment (52,560) (57,890) (40,860)
Acquisitions of franchises 0 (52,613) (45,752)
Proceeds from sale of property and equipment 282 109 196
Purchase of intellectual property 0 (300) 0
Net cash used in investing activities (52,278) (110,694) (86,416)
Cash flows from financing activities:      
Proceeds from issuance of long-term debt 75,000 550,000 1,200,000
Proceeds from issuance of Class A common stock 2,571 2,863 1,209
Principal payments on capital lease obligations (165) (93)  
Principal payments on capital lease obligations     (47)
Repayment of long-term debt (17,500) (12,000) (712,469)
Payment of deferred financing and other debt-related costs 0 (10,577) (27,133)
Repurchase and retirement of Class A common stock 0 (458,166) (342,383)
Dividend equivalent paid to members of Pla-Fit Holdings (234) (243) (957)
Distributions to members of Pla-Fit Holdings (1,822) (7,436) (8,300)
Net cash provided by financing activities 57,850 64,348 109,920
Effects of exchange rate changes on cash and cash equivalents 295 691 (844)
Net increase in cash, cash equivalents and restricted cash 37,005 158,656 207,059
Cash, cash equivalents and restricted cash, beginning of period 478,795 320,139 113,080
Cash, cash equivalents and restricted cash, end of period 515,800 478,795 320,139
Supplemental cash flow information:      
Net cash paid (refund received) for income taxes (2,157) 10,001 5,016
Cash paid for interest 75,629 53,713 38,624
Non-cash investing activities:      
Non-cash additions to property and equipment $ 1,172 $ 2,827 $ 5,451
v3.20.4
Consolidated statement of changes in equity - USD ($)
$ in Thousands
Total
Cumulative Effect, Period of Adoption, Adjustment
Accumulated other comprehensive income (loss)
Additional paid-in capital
Accumulated deficit
Accumulated deficit
Cumulative Effect, Period of Adoption, Adjustment
Non-controlling interests
Class A Common Stock
Class A Common Stock
Common Stock
Class B Common Stock
Class B Common Stock
Common Stock
Beginning balance (shares) at Dec. 31, 2017                 87,188,000   11,193,000
Beginning balance at Dec. 31, 2017 $ (136,937) $ (9,192) $ (648) $ 12,118 $ (130,966) $ (9,192) $ (17,451)   $ 9   $ 1
Net income (loss) 103,162       88,021   15,141        
Equity-based compensation expense 5,479     5,482 (3)            
Repurchase and retirement of common stock (shares)               (824,312) (5,431,000)   (9,000)
Repurchase and retirement of common stock (342,383)     719 (342,383)   (719)        
Exchanges of Class B common stock (shares)                 1,736,000   (1,736,000)
Exchanges of Class B common stock 0   1 (3,067)     3,066        
Tax benefit arrangement liability and deferred taxes arising from secondary offerings and other exchanges 3,271     3,271              
Exercise of stock options and vesting of restricted share units (shares)                 91,000    
Exercise of stock options and vesting of restricted share units 1,209     1,209              
Forfeiture of dividend equivalents 113       113            
Distributions paid to members of Pla-Fit Holdings (8,300)           (8,300)        
Other comprehensive income (loss) 789   741       48        
Ending balance (shares) at Dec. 31, 2018                 83,584,000   9,448,000
Ending balance at Dec. 31, 2018 (382,789) $ (1,713) 94 19,732 (394,410) $ (1,713) (8,215)   $ 9   $ 1
Net income (loss) 135,413       117,695   17,718        
Equity-based compensation expense 4,826     4,826              
Repurchase and retirement of common stock (shares)               (2,272,001) (6,086,000)    
Repurchase and retirement of common stock (458,166)     488 (458,165)   (488)   $ (1)    
Exchanges of Class B common stock (shares)                 886,000   (886,000)
Exchanges of Class B common stock 0     (1,172)     1,172        
Tax benefit arrangement liability and deferred taxes arising from secondary offerings and other exchanges 3,156     3,156              
Exercise of stock options and vesting of restricted share units (shares)                 141,000    
Exercise of stock options and vesting of restricted share units 2,790     2,790              
Forfeiture of dividend equivalents 6       6            
Distributions paid to members of Pla-Fit Holdings (7,436)           (7,436)        
Non-cash adjustments to VIEs (4,050)           (4,050)        
Other comprehensive income (loss) 209   209                
Ending balance (shares) at Dec. 31, 2019               78,525,000 78,525,000 8,562,000 8,562,000
Ending balance at Dec. 31, 2019 (707,754)   303 29,820 (736,587)   (1,299)   $ 8   $ 1
Net income (loss) (15,204)       (14,991)   (213)        
Equity-based compensation expense 4,777     4,777              
Repurchase and retirement of common stock (shares)                 (667,000)    
Repurchase and retirement of common stock 0     (2,879)     2,879        
Exchanges of Class B common stock (shares)                 4,840,000   (4,840,000)
Exchanges of Class B common stock 0     (1,526)     1,526        
Tax benefit arrangement liability and deferred taxes arising from secondary offerings and other exchanges $ 12,779     12,779              
Exercise of stock options and vesting of restricted share units (shares) 76,402               123,000    
Exercise of stock options and vesting of restricted share units $ 2,702     2,702              
Distributions paid to members of Pla-Fit Holdings (1,822)           (1,822)        
Non-cash adjustments to VIEs (875)           (875)        
Other comprehensive income (loss) (276)   (276)                
Ending balance (shares) at Dec. 31, 2020               82,821,000 82,821,000 3,722,000 3,722,000
Ending balance at Dec. 31, 2020 $ (705,673)   $ 27 $ 45,673 $ (751,578)   $ 196   $ 8   $ 1
v3.20.4
Business organization
12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business organization Business organization
Planet Fitness, Inc. (the “Company”), through its subsidiaries, is a franchisor and operator of fitness centers, with approximately 13.5 million members and 2,124 owned and franchised locations (referred to as stores) in all 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico and Australia as of December 31, 2020.
The Company serves as the reporting entity for its various subsidiaries that operate three distinct lines of business:
Licensing and selling franchises under the Planet Fitness trade name;
Owning and operating fitness centers under the Planet Fitness trade name; and
Selling fitness-related equipment to franchisee-owned stores.
In 2012 investment funds affiliated with TSG Consumer Partners, LLC (“TSG”), purchased interests in Pla-Fit Holdings.
The Company was formed as a Delaware corporation on March 16, 2015 for the purpose of facilitating an initial public offering (the “IPO”) and related transactions in order to carry on the business of Pla-Fit Holdings, LLC and its subsidiaries (“Pla-Fit Holdings”). As of August 5, 2015, in connection with the recapitalization transactions, the Company became the sole managing member and holder of 100% of the voting power of Pla-Fit Holdings. Pla-Fit Holdings owns 100% of Planet Intermediate, LLC which has no operations but is the 100% owner of Planet Fitness Holdings, LLC, a franchisor and operator of fitness centers. With respect to the Company, Pla-Fit Holdings and Planet Intermediate, LLC, each entity owns nothing other than the respective entity below it in the corporate structure and each entity has no other material operations.
The Company is a holding company whose principal asset is a controlling equity interest in Pla-Fit Holdings. As the sole managing member of Pla-Fit Holdings, the Company operates and controls all of the business and affairs of Pla-Fit Holdings, and through Pla-Fit Holdings, conducts its business. As a result, the Company consolidates Pla-Fit Holdings’ financial results and reports a non-controlling interest related to the portion of Holdings Units not owned by the Company.
During the years ended December 31, 2020, 2019 and 2018, certain Continuing LLC Owners have exercised their exchange rights and exchanged 4,839,866, 885,810 and 1,736,020 Holdings Units, respectively, for 4,839,866, 885,810 and 1,736,020 newly-issued shares of Class A common stock, respectively. Simultaneously, and in connection with these exchanges, 4,839,866, 885,810 and 1,736,020 shares of Class B common stock were surrendered by the Continuing LLC Owners that exercised their exchange rights and canceled during the years ended December 31, 2020, 2019 and 2018, respectively. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 4,839,866, 885,810 and 1,736,020 Holdings Units during the years ended December 31, 2020, 2019 and 2018, respectively, increasing its total ownership interest in Pla-Fit Holdings.
As of December 31, 2020, the Company held 100% of the voting interest, and approximately 95.7% of the economic interest in Pla-Fit Holdings and the Continuing LLC Owners held the remaining 4.3% economic interest in Pla-Fit Holdings. As future exchanges of Holdings Units occur, the economic interest in Pla-Fit Holdings held by Planet Fitness, Inc. will increase.
v3.20.4
Summary of significant accounting policies
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Summary of significant accounting policies Summary of significant accounting policies
(a) Basis of presentation and consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All significant intercompany balances and transactions have been eliminated in consolidation.
As discussed in Note 1, Planet Fitness, Inc. consolidates Pla-Fit Holdings. The Company also consolidates entities in which it has a controlling financial interest, the usual condition of which is ownership of a majority voting interest. The Company also considers for consolidation certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary of a VIE is considered to possess the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the rights to receive benefits from the VIE that are significant to it. The principal entities in which the Company possesses a variable interest include franchise entities and certain other entities. The Company is not deemed to be the primary beneficiary for Planet Fitness franchise entities. Therefore, these entities are not consolidated.
The results of the Company have been consolidated with Matthew Michael Realty LLC (“MMR”), PF Melville LLC (“PF Melville”), and Planet Fitness NAF, LLC (the “NAF”) based on the determination that the Company is the primary beneficiary with respect to these VIEs. MMR and PF Melville are real estate holding companies that derive a majority of their financial support from the Company through lease agreements for corporate stores. See Note 3 for further information related to the Company’s VIEs. The NAF is an advertising fund on behalf of which the Company collects 2% annually of gross monthly membership fees from franchisees, in accordance with the provisions of the franchise agreements, and uses the amounts received to increase sales and further enhance the public reputation of the Planet Fitness brand. See Note 4 for further information related to the NAF.
(b) Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the consolidated financial statements include revenue recognition, valuation of equity-based compensation awards, the evaluation of the recoverability of goodwill and long-lived assets, including intangible assets, the present value of lease liabilities, income taxes, including deferred tax assets and liabilities and reserves for unrecognized tax benefits, and the liability for the Company’s tax benefit arrangements.
(c) Concentrations
Cash and cash equivalents are financial instruments, which potentially subject the Company to a concentration of credit risk. The Company invests its excess cash in several major financial institutions, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Company maintains balances in excess of these limits, but does not believe that such deposits with its banks are subject to any unusual risk.
The credit risk associated with trade receivables is mitigated due to the large number of customers, generally our franchisees, and their broad dispersion over many different geographic areas. We do not have any concentrations with respect to our revenues.
The Company purchases equipment, both for corporate-owned stores and for sales to franchisee-owned stores from various equipment vendors. For the year ended December 31, 2020, purchases from two equipment vendors comprised 48% and 40%, respectively, of total equipment purchases. For the year ended December 31, 2019 purchases from three equipment vendors comprised 48%, 35% and 12%, respectively, of total equipment purchases. For the year ended December 31, 2018 purchases from two equipment vendor comprised 76% and 13%, respectively, of total equipment purchases.
The Company, including the NAF, uses various vendors for advertising services. For the year ended December 31, 2020, purchases from one vendor comprised 71% of total advertising purchases. For the year ended December 31, 2019 purchases from two vendor comprised 38% and 15%, respectively, of total advertising purchases, and for the year ended December 31, 2018 purchases from one vendor comprised 65% of total advertising purchases (see Note 4 for further discussion of the NAF).
(d) Cash, cash equivalents and restricted cash
The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash held within the NAF is recorded as a restricted asset (see Note 4).
In accordance with the Company’s securitized financing facility, certain cash accounts have been established in the name of Citibank, N.A. (the “Trustee”). The Company holds restricted cash which primarily represents cash collections held by the Trustee, which includes interest, principal, and commitment fee reserves. As of December 31, 2020, the Company had restricted cash held by the Trustee of $60,314. Restricted cash has been combined with cash and cash equivalents when reconciling the beginning and end of period balances in the consolidated statements of cash flows.
(e) Revenue from contracts with customers
The Company’s revenues are comprised of franchise revenue, equipment revenue, and corporate-owned stores revenue.
Franchise revenue
Franchise revenues consist primarily of royalties, NAF contributions, initial and successor franchise fees and upfront fees from area development agreements (“ADAs”), transfer fees, equipment placement revenue, other fees and commission income. 
The Company’s primary performance obligation under the franchise license is granting certain rights to use the Company’s intellectual property, and all other services the Company provides under the ADA and franchise agreement are highly interrelated, not distinct within the contract, and therefore accounted for under ASC 606 as a single performance obligation, which is satisfied by granting certain rights to use our intellectual property over the term of each franchise agreement.
Royalties, including franchisee contributions to national advertising funds, are calculated as a percentage of franchise monthly dues and annual fees over the term of the franchise agreement. Under our franchise agreements, advertising contributions paid by franchisees must be spent on advertising, marketing and related activities. Initial and successor franchise fees are payable by the franchisee upon signing a new franchise agreement or successor franchise agreement, and transfer fees are paid to the Company when one franchisee transfers a franchise agreement to a different franchisee. Our franchise royalties, as well as our NAF contributions, represent sales-based royalties that are related entirely to our performance obligation under the franchise agreement and are recognized as franchise sales occur.
Initial and successor franchise fees, as well as transfer fees, are recognized as revenue on a straight-line basis over the term of the respective franchise agreement. Our ADAs generally consist of an obligation to grant geographic exclusive area development rights. These development rights are not distinct from franchise agreements, so upfront fees paid by franchisees for exclusive development rights are deferred and apportioned to each franchise agreement signed by the franchisee. The pro-rata amount apportioned to each franchise agreement is accounted for identically to the initial franchise fee.
The Company is generally responsible for assembly and placement of equipment it sells to U.S. based franchisee-owned stores. Placement revenue is recognized upon completion and acceptance of the services at the franchise location.
The Company recognizes commission income from certain of its franchisees’ use of certain preferred vendor arrangements. Commissions are recognized when amounts have been earned and collectability from the vendor is reasonably assured.
Online member join fees are paid to the Company by franchisees for processing new membership transactions when a new member signs up for a membership to a franchisee-owned store through the Company’s website. These fees are recognized as revenue as each transaction occurs.
Billing transaction fees are paid to the Company by certain of its franchisees for the processing of franchisee membership dues and annual fees through the Company’s third-party hosted point-of-sale system and are recognized as revenue as they are earned.
Equipment revenue
The Company sells and delivers equipment purchased from third-party equipment manufacturers to U.S. based franchisee-owned stores. Revenue is recognized upon transfer of control of ordered items, generally upon delivery to the customer, which is when the customer obtains physical possession of the goods, legal title is transferred, the customer has all risks and rewards of ownership and an obligation to pay for the goods is created. Franchisees are charged for all freight costs incurred for the delivery of equipment. Freight revenue is recorded within equipment revenue and freight costs are recorded within cost of revenue. In most instances, the Company recognizes equipment revenue on a gross basis as management has determined the Company to be the principal in these transactions. Management determined the Company to be the principal in the transaction because the Company controls the equipment prior to delivery to the final customer as evidenced by its pricing discretion over the goods, inventory transfer of title and risk of loss while the inventory is in transit, and having the primary responsibility to fulfill the customer order and direct the third-party vendor.
Corporate-owned stores revenue
The following revenues are generated from stores owned and operated by the Company.
Membership dues revenue
Customers are offered multiple membership choices varying in length. Membership dues are earned and recognized over the membership term on a straight-line basis.
Enrollment fee revenue
Enrollment fees are charged to new members at the commencement of their membership. The Company recognizes enrollment fees ratably over the estimated duration of the membership life, which is generally two years.
Annual membership fee revenue
Annual membership fees are annual fees charged to members in addition to and in order to maintain low monthly membership dues. The Company recognizes annual membership fees ratably over the 12-month membership period.
Retail sales
The Company sells Planet Fitness branded apparel, food, beverages, and other accessories. The revenue for these items is recognized at the point of sale.
Sales tax
All revenue amounts are recorded net of applicable sales tax.
(f) Deferred revenue
Franchise deferred revenue results from initial and successor franchise fees and ADA fees paid by franchisees, as well as transfer fees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement. Deferred revenue is also recognized in our Corporate-owned stores segment for cash received from members for enrollment fees, membership dues and annual fees for the portion not yet earned based on the membership period.
(g) Cost of revenue
Cost of revenue consists primarily of direct costs associated with equipment sales (including freight costs) and the cost of retail merchandise sold in corporate-owned stores. Costs related to retail merchandise sales were immaterial in all periods presented. Rebates from equipment vendors where the Company has recognized the related equipment revenue and costs are recorded as a reduction to the cost of revenue.
(h) Store operations
Store operations consists of the direct costs related to operating corporate-owned stores, including our store management and staff, rent expense, utilities, supplies, maintenance, and local advertising.
(i) Selling, general and administrative
Selling, general and administrative expenses consist of costs associated with administrative and franchisee support functions related to our existing business as well as growth and development activities. These costs primarily consist of payroll, IT related, marketing, legal and accounting expenses. These expenses include costs related to placement services of $3,341, $7,063, and $5,397, for the years ended December 31, 2020, 2019 and 2018, respectively.
(j) Accounts receivable
Accounts receivable is primarily comprised of amounts owed to the Company resulting from equipment, placement, and commission revenue. The Company evaluates its accounts receivable on an ongoing basis and may establish an allowance for doubtful accounts based on collections and current credit conditions. Accounts are written off as uncollectible when it is determined that further collection efforts will be unsuccessful. Historically, the Company has not had a significant amount of write-offs.
(k) Leases and asset retirement obligations
Topic 842 - Leases
We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), from ASC Topic 840, Leases (the “Previous Standard”) on January 1, 2019 using the effective date as our date of initial application. Our Financial Statements reflect the application of ASC 842 guidance beginning in 2019, while our consolidated financial statements for prior periods were prepared under the guidance of Previous Standards. Upon transition to the new guidance on January 1, 2019, the Company recognized approximately $130,000 of operating lease liabilities. Additionally, the Company recorded ROU assets in a corresponding amount, net of amounts reclassified from other assets and liabilities, including deferred rent, tenant improvement allowances, and favorable lease assets, as specified by the new lease guidance. In connection with the election of the hindsight practical expedient related to reassessing lease terms for existing leases as of January 1, 2019, the Company recorded a cumulative transition adjustment of $1,713, net of tax, which is reflected as an adjustment to January 1, 2019 stockholders’ deficit.
Our transition to ASC 842 represents a change in accounting principle. The standard is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.
Significant Lease Accounting Policies under ASC 842
The Company leases space to operate corporate-owned stores, equipment, office, and warehouse space. We currently lease our corporate headquarters and all but one of our corporate-owned stores. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for fixed lease and non-lease components together as a single, combined lease component. Variable lease costs, which may include common area maintenance, insurance, and taxes are not included in the lease liability and are expensed in the period incurred.
Our corporate-owned store leases generally have remaining terms of one to ten years, and typically include one or more renewal options, with renewal terms that can generally extend the lease term from three to ten years or more. The exercise of lease renewal options is at our sole discretion. The Company includes options to renew in the expected term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
At the inception of each lease, we determine its appropriate classification as an operating or financing lease. The majority of our leases are operating leases. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease right of use (“ROU”) assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs and lease incentives. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases based upon interpolated rates using our Notes.
The Company has an immaterial amount of non-real estate leases that are accounted for as finance leases under ASC 842, which is similar to the accounting for capital leases under the Previous Standard.
Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our ROU asset related to the lease. These tenant incentives are amortized as reduction of rent expense over the lease term.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Lease Accounting Policies under Previous Standards, prior to January 1, 2019 if different than under ASC 842
The Company recognizes rent expense related to leased office and operating space on a straight-line basis over the term of the lease. The difference between rent expense and rent paid, if any, as a result of escalation provisions and lease incentives, such as tenant improvements provided by lessors, and is recorded as deferred rent in the Company’s consolidated balance sheets.
Asset retirement obligations
In accordance with ASC Topic 410, Asset Retirement and Environmental Obligations, the Company establishes assets and liabilities for the present value of estimated future costs to return certain leased facilities to their original condition. Such assets are depreciated on a straight-line basis over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration costs.
(l) Property and equipment
Property and equipment is recorded at cost and depreciated using the straight-line method over its related estimated useful life. Leasehold improvements are amortized over the shorter of the expected lease term or the estimated useful life of the related asset, whichever is shorter. Upon sale or retirement, the asset cost and related accumulated depreciation are removed from the respective accounts, and any related gain or loss is reflected in the consolidated statements of operations. Ordinary maintenance and repair costs are expensed as incurred. The estimated useful lives of the Company’s fixed assets by class of asset are as follows:
 Years
Buildings and building improvements
20–40
Information technology and systems
3-5
Furniture and fixtures5
Leasehold improvementsUseful life or term of lease
whichever is shorter
Fitness equipment
5–7
Vehicles5

(m) Advertising expenses
The Company expenses advertising costs as incurred. Advertising expenses, net of amounts reimbursed by franchisees, are included within store operations and selling, general and administrative expenses and totaled $15,132, $13,749, and $12,101 for the years ended December 31, 2020, 2019 and 2018, respectively. See Note 4 for discussion of the national advertising fund.
(n) Goodwill, long-lived assets, and other intangible assets
Goodwill and other intangible assets that arise from acquisitions are recorded in accordance with ASC Topic 350, Intangibles—Goodwill and Other. In accordance with this guidance, specifically identified intangible assets must be recorded as a separate asset from goodwill if either of the following two criteria is met: (1) the intangible asset acquired arises from contractual or other legal rights; or (2) the intangible asset is separable. Intangibles are typically trade and brand names, customer relationships, and reacquired franchise rights. Transactions are evaluated to determine whether any gain or loss on reacquired franchise rights, based on their fair value, should be recognized separately from identified intangibles. Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination.
Goodwill and indefinite-lived intangible assets are not amortized, but are reviewed annually for impairment or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have an indefinite life are amortized over their estimated useful lives on either a straight-line or accelerated basis as deemed appropriate, and are reviewed for impairment when events or circumstances suggest that the assets may not be recoverable.
The Company performs its annual test for impairment of goodwill and indefinite lived intangible assets on December 31 of each year. The annual goodwill test begins with a qualitative assessment, where qualitative factors and their impact on critical inputs are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company determines that a reporting unit has an indication of impairment based on the qualitative assessment, it is required to perform a quantitative assessment. Any impairment loss would be recognized in an amount equal to the excess of the carrying value of the goodwill over the implied fair value of the goodwill. During the periods presented, the Company did not need to proceed beyond the qualitative analysis, and no goodwill impairments were recorded.
For indefinite lived intangible assets, the impairment assessment consists of comparing the carrying value of the asset to its estimated fair value. To the extent that the carrying value exceeds the fair value of the asset, an impairment is recorded to reduce the carrying value to its fair value. The Company is also permitted to make a qualitative assessment of whether it is more likely than not an indefinite lived intangible asset’s fair value is less than its carrying value prior to applying the quantitative assessment. If based on the Company’s qualitative assessment it is not more likely than not that the carrying value of the asset is less than its fair value, then a quantitative assessment is not required.
During the periods presented, the Company did not need to proceed beyond the qualitative analysis, and determined that no impairment charges were required.
The Company applies the provisions of ASC Topic 360, Property, Plant and Equipment, which requires that long-lived assets, including amortizable intangible assets, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for impairment, then assets are required to be grouped and evaluated at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to the undiscounted future net cash flows expected to be generated by the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There were no assets that were impaired during any of the periods presented.
(o) Income taxes
The Company accounts for income taxes using the asset and liability method. 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.
Planet Fitness, Inc. is the sole managing member of Pla-Fit Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Pla-Fit Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Pla-Fit Holdings is passed through to and included in the taxable income or loss of its members, including Planet Fitness, Inc. following the recapitalization transactions, on a pro rata basis. Planet Fitness, Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income of Pla-Fit Holdings. The Company is also subject to taxes in foreign jurisdictions.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be 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 (see Note 16).
(p) Tax benefit arrangements
The Company’s acquisition of Holdings Units in connection with the IPO and future and certain past exchanges of Holdings Units for shares of the Company’s Class A common stock (or cash at the option of the Company) are expected to produce and have produced favorable tax attributes. In connection with the IPO, the Company entered into two tax receivable agreements. Under the first of those agreements, the Company generally is required to pay to certain existing and previous equity owners of Pla-Fit Holdings, LLC who are unaffiliated with TSG (the “TRA Holders”) 85% of the applicable tax savings, if any, in U.S. federal and state income tax that the Company is deemed to realize as a result of certain tax attributes of their Holdings Units sold to the Company (or exchanged in a taxable sale) and that are created as a result of (i) the sales of their Holdings Units for shares of 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, the Company generally is required to pay to the Direct TSG Investors 85% of the amount of tax savings, if any, that the Company is deemed to realize as a result of the tax attributes of the Holdings Units held in respect of the Direct TSG Investors’ interest in the Company, which resulted from the Direct TSG Investors’ purchase of interests in Pla-Fit Holdings in 2012, and certain other tax benefits. Under both agreements, the Company generally retains the benefit of the remaining 15% of the applicable tax savings.
Based on current projections, the Company anticipates having sufficient taxable income to utilize these tax attributes and receive corresponding tax deductions in future periods. Accordingly, as of December 31, 2020 the Company has recorded a liability of $488,200 payable to the TRA Holders under the tax benefit obligations, representing approximately 85% of the calculated tax savings based on the original basis adjustments the Company anticipates being able to utilize in future years. Changes in the projected liability resulting from 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 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. 
(q) Fair value
ASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The carrying value and estimated fair value of long-term debt as of December 31, 2020 and December 31, 2019 were as follows:
December 31, 2020December 31, 2019
Carrying value
Estimated fair value(1)
Carrying value
Estimated fair value(1)
Long-term debt$1,717,500 $1,699,749 $1,735,000 $1,765,805 
Variable Funding Notes$75,000 $75,000 $— $— 
(1) The Company’s Variable Funding Notes are a variable rate loan and the fair value of this loan approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. The estimated fair value of our fixed rate long-term debt is estimated primarily based on current bid prices for our long-term debt. Judgment is required to develop these estimates. As such, the fair value of our long-term debt is classified within Level 2, as defined under U.S. GAAP.
As a result of the COVID-19 pandemic, the fair value of our long-term debt has fluctuated significantly during the year ended December 31, 2020 and may continue to fluctuate based on market conditions and other factors, including changes in the target federal funds rate.
(r) Financial instruments
The carrying values of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value because of the short-term nature of these instruments.
(s) Derivative instruments and hedging activities
The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. For derivatives designated in hedging relationships, changes in the fair value are either offset through earnings against the change in fair value of the hedged item attributable to the risk being hedged or recognized in accumulated other comprehensive income, to the extent the derivative is effective at offsetting the changes in cash flows being hedged until the hedged item affects earnings.
The Company only enters into derivative contracts that it intends to designate as a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). For all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions. For derivative instruments that are designated and qualify as part of a cash flow hedging relationship, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. See Note 10 for further information.
(t) Equity-based compensation
The Company has an equity-based compensation plan under which it receives services from employees and directors as consideration for equity instruments of the Company. The compensation expense is determined based on the fair value of the award as of the grant date. Compensation expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are satisfied. For awards with graded vesting, the fair value of each tranche is recognized over its respective vesting period. The Company accounts for forfeitures as they occur by reversing compensation cost for unvested awards when the award is forfeited. See Note 14 for further information.
(u) Business combinations
The Company accounts for business combinations using the purchase method of accounting which results in the assets acquired and liabilities assumed being recorded at fair value.
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, including trade names, member relationships and re-acquired franchise rights, deferred revenue and favorable and unfavorable leases.
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. The valuation includes assumptions related to the projected attrition and renewal 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 an estimation of future royalty income and related expenses associated with existing franchise contracts at the acquisition date. For re-acquired franchise rights with terms that are either favorable or unfavorable (from the Company’s perspective) to the terms included in the Company’s 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. Subsequent to the adoption of ASC 842 on January 1, 2019, these are recorded as a component of the ROU asset and prior to the adoption of ASC 842 were recorded as intangible assets. Deferred revenue is valued based on estimated costs to fulfill the obligations assumed, plus a normal profit margin. No deferred revenue amounts are recognized for enrollment fees in the Company’s business combinations as there is no remaining obligation.
The Company considers its trade and brand name intangible assets to have an indefinite useful life, and, therefore, these assets are not amortized but rather are tested for impairment annually as discussed above. Amortization of re-acquired franchise rights and franchisee relationships is recorded over the respective franchise terms using the straight-line method which the Company believes approximates the period during which the related benefits are expected to be received. Member relationships are amortized on an accelerated basis based on expected attrition. Favorable and unfavorable operating leases are amortized into rental expense over the lease term of the respective leases using the straight-line method.
(v) Guarantees
The Company, as a guarantor, is required to recognize, at inception of the guaranty, a liability for the fair value of the obligation undertaken in issuing the guarantee. See Note 3 and Note 17 for further discussion of such obligations guaranteed.
(w) Contingencies
The Company records estimated future losses related to contingencies when such amounts are probable and estimable. The Company includes estimated legal fees related to such contingencies as part of the accrual for estimated future losses.
(x) Reclassifications
Certain amounts have been reclassified to conform to current year presentation.
(y) Recent accounting pronouncements
In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, Leases, in February 2016. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new guidance requires lessees to recognize the assets and liabilities on the balance sheet for the rights and obligations created by leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Leases will be classified as finance or operating, with the classification affecting the pattern and classification of expense recognition within the income statement. The Company adopted the new standard on January 1, 2019 and used the effective date as our date of initial application. See above for lease accounting policies and Note 7.
The FASB issued ASU No. 2017-4, Simplifying the Test for Goodwill Impairment, in January 2017. This guidance eliminates the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The Company adopted the new guidance on January 1, 2020, with no material impact on the Company’s consolidated financial statements.
The FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, in August 2018. The guidance helps align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted the new guidance on January 1, 2020, with no material impact on the Company’s consolidated financial statements.
The FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, in December 2019. The guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This guidance will be effective for fiscal years beginning after December 15, 2020, including interim periods within that year. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.
v3.20.4
Variable interest entities
12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Variable interest entities Variable interest entities
The carrying values of VIEs included in the consolidated financial statements as of December 31, 2020 and December 31, 2019 are as follows:
 December 31, 2020December 31, 2019
 AssetsLiabilitiesAssetsLiabilities
PF Melville$2,523 $— $2,682 $— 
MMR$2,099 — $2,206 — 
Total$4,622 $— $4,888 $— 
The Company also has variable interests in certain franchisees mainly through the guarantee of lease agreements up to a maximum period of ten years with earlier expiration dates possible if certain conditions are met. The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $7,842 and $10,309 as of December 31, 2020 and 2019, respectively.
The amount of the Company’s maximum obligation represents a loss that the Company could incur from the variability in credit exposure without consideration of possible recoveries through insurance or other means. In addition, the amount bears no relation to the estimated fair value of the guarantees, which is not material.
v3.20.4
National advertising fund
12 Months Ended
Dec. 31, 2020
Related Party Transactions [Abstract]  
National advertising fund National advertising fundOn July 26, 2011, the Company established the NAF for the creation and development of marketing, advertising, and related programs and materials for all Planet Fitness stores located in the United States and Puerto Rico. On behalf of the NAF, the Company collects approximately 2% annually of gross monthly membership billings from franchisees, in accordance with the provisions of the franchise agreements, which is reflected as NAF revenue on the consolidated statements of operations (see Note 2). The Company also contributes 2% annually of monthly membership billings from stores owned by the Company to the NAF, which is reflected in store operations expense in the consolidated statements of operations. The use of amounts received by the NAF is 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. The Company consolidates and reports all assets and liabilities held by the NAF within the consolidated financial statements. Amounts received or receivable by NAF are reported as restricted assets and restricted liabilities within current assets and current liabilities on the consolidated balance sheets. The Company records all revenues of the NAF within franchise revenue and all expenses of the NAF within the operating expenses on the consolidated statements of operations. The Company provides administrative services to the NAF and charges the NAF a fee for providing those services. These services include accounting, information technology, data processing, product development, legal and administrative support, and other operating expenses, which amounted to $793, $2,177 and $2,472 for the years ended December 31, 2020, 2019 and 2018, respectively. Fees paid to the Company by the NAF are reflected as expense in the NAF expense line, and reflected as a corresponding reduction in general and administrative expenses in the consolidated statements of operations.
v3.20.4
Acquisition
12 Months Ended
Dec. 31, 2020
Business Combinations [Abstract]  
Acquisition Acquisition
New Jersey Acquisition
On December 16, 2019, the Company purchased from one of its franchisees certain assets associated with twelve franchisee-owned stores in New Jersey for a cash payment of $37,812. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $1,810. The loss incurred reduced the net purchase price to $36,002. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.
The purchase consideration was allocated as follows:
Amount
Fixed assets$3,044 
Reacquired franchise rights9,480 
Customer relationships940 
Favorable leases, net1,508 
Reacquired area development rights90 
Other assets314 
Goodwill21,069 
Liabilities assumed, including deferred revenues(443)
$36,002 
The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.
The acquisition was not material to the results of operations of the Company.
Maine Acquisition
On May 30, 2019, the Company purchased from one of its franchisees certain assets associated with four franchisee-owned stores in Maine for a cash payment of $14,801. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.
The purchase consideration was allocated as follows:
Amount
Fixed assets$999 
Reacquired franchise rights6,740 
Customer relationships30 
Unfavorable leases, net(140)
Other assets78 
Goodwill7,239 
Liabilities assumed, including deferred revenues(145)
$14,801 
The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.
The acquisition was not material to the results of operations of the Company.
Colorado Acquisition
On August 10, 2018, the Company purchased from one of its franchisees certain assets associated with four franchisee-owned stores in Colorado for a cash payment of $17,249. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $10, which has been reflected in other operating costs in the consolidated statements of operations. The loss incurred reduced the net purchase price to $17,239. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.
The purchase consideration was allocated as follows:
Amount
Fixed assets$3,873 
Reacquired franchise rights4,610 
Customer relationships140 
Favorable leases, net80 
Other assets143 
Goodwill8,476 
Liabilities assumed, including deferred revenues(83)
$17,239 
The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.
The acquisition was not material to the results of operations of the Company.
Long Island Acquisition
On January 1, 2018, the Company purchased from one of its franchisees certain assets associated with six franchisee-owned stores in New York for a cash payment of $28,503. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $350, which has been reflected in other operating costs in the consolidated statements of operations. The loss incurred reduced the net purchase price to $28,153. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.
The purchase consideration was allocated as follows:
Amount
Fixed assets$4,672 
Reacquired franchise rights7,640 
Customer relationships1,150 
Favorable leases, net520 
Reacquired area development rights150 
Other assets275 
Goodwill14,056 
Liabilities assumed, including deferred revenues(310)
$28,153 
The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.
The acquisition was not material to the results of operations of the Company.
v3.20.4
Property and equipment
12 Months Ended
Dec. 31, 2020
Property, Plant and Equipment [Abstract]  
Property and equipment Property and equipment
Property and equipment as of December 31, 2020 and 2019 consists of the following: 
 December 31, 2020December 31, 2019
Land$1,341 $1,341 
Equipment57,687 51,039 
Leasehold improvements115,619 97,977 
Buildings and improvements8,589 8,589 
Furniture & fixtures23,836 19,129 
Information technology and systems assets48,552 35,419 
Other2,615 2,192 
Construction in progress10,158 3,416 
 $268,397 $219,102 
Accumulated depreciation(107,720)(73,621)
Total$160,677 $145,481 
The Company recorded depreciation expense of $36,943, $27,987, and $19,540 for the years ended December 31, 2020, 2019 and 2018, respectively.
v3.20.4
Leases
12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases Leases
The Company leases space to operate corporate-owned stores, equipment, office, and warehouse space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for fixed lease and non-lease components together as a single, combined lease component. Variable lease costs, which may include common area maintenance, insurance, and taxes are not included in the lease liability and are expensed in the period incurred.
Our corporate-owned store leases generally have remaining terms of one to ten years, and typically include one or more renewal options, with renewal terms that can generally extend the lease term from three to ten years or more. The exercise of lease renewal options is at our sole discretion. The Company includes options to renew in the expected term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease ROU assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs and lease incentives. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases based upon interpolated rates using our Class A-2 Notes. ROU assets are assessed for impairment in accordance with our long-lived asset impairment policy, which is performed annually, or whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable.
The Company has certain non-real estate leases that are accounted for as finance leases under ASC 842, which is similar to the accounting for capital leases under the previous standard. These leases are immaterial, and therefore the Company has not included them in them in the tables below, except for their location on the consolidated balance sheet.
Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our ROU asset related to the lease. These tenant incentives are amortized as reduction of rent expense over the lease term.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
For periods prior to January 1, 2019, the Company recognized rent expense related to leases on a straight-line basis over the term of the lease. The difference between rent expense and rent paid, if any, as a result of escalation provisions and lease incentives, such as tenant improvements provided by lessors, was recorded as deferred rent in the Company’s consolidated balance sheets.
LeasesClassificationDecember 31, 2020December 31, 2019
Assets
Operating lease assetsRight of use asset, net$164,252 $155,633 
Finance lease assetsProperty and equipment, net of accumulated depreciation306 309 
Total lease assets$164,558 $155,942 
Liabilities
Current:
OperatingOther current liabilities$19,544 $16,755 
Noncurrent:
OperatingLease liabilities, net of current portion167,910 152,920 
FinancingOther liabilities327 333 
Total lease liabilities$187,781 $170,008 
Weighted-average remaining lease term (years) - operating leases8.78.6
Weighted-average discount rate - operating leases5.1 %5.0 %

For the years ended December 31, 2020 and 2019, the components of lease cost were as follows:
December 31, 2020December 31, 2019
Operating lease cost$26,255 $20,635 
Variable lease cost10,324 8,323 
Total lease cost$36,579 $28,958 

Rental expense was $24,900 for the year ended December 31, 2018.

The Company’s costs related to short-term leases, those with a duration between one and twelve months, were immaterial.

Supplemental disclosures of cash flow information related to leases were as follows:
December 31, 2020December 31, 2019
Cash paid for lease liabilities$24,091 $19,502 
Operating assets obtained in exchange for operating lease liabilities$33,140 $43,016 
As of December 31, 2020, maturities of lease liabilities were as follows:
Amount
2021$28,405 
202228,803 
202328,367 
202426,844 
202526,087 
Thereafter95,872 
Total lease payments$234,378 
Less: imputed interest46,597 
Present value of lease liabilities$187,781 

As of December 31, 2020, operating lease payments exclude approximately $20,027 of legally binding minimum lease payments for leases signed but not yet commenced.
Leases Leases
The Company leases space to operate corporate-owned stores, equipment, office, and warehouse space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for fixed lease and non-lease components together as a single, combined lease component. Variable lease costs, which may include common area maintenance, insurance, and taxes are not included in the lease liability and are expensed in the period incurred.
Our corporate-owned store leases generally have remaining terms of one to ten years, and typically include one or more renewal options, with renewal terms that can generally extend the lease term from three to ten years or more. The exercise of lease renewal options is at our sole discretion. The Company includes options to renew in the expected term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease ROU assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs and lease incentives. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases based upon interpolated rates using our Class A-2 Notes. ROU assets are assessed for impairment in accordance with our long-lived asset impairment policy, which is performed annually, or whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable.
The Company has certain non-real estate leases that are accounted for as finance leases under ASC 842, which is similar to the accounting for capital leases under the previous standard. These leases are immaterial, and therefore the Company has not included them in them in the tables below, except for their location on the consolidated balance sheet.
Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our ROU asset related to the lease. These tenant incentives are amortized as reduction of rent expense over the lease term.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
For periods prior to January 1, 2019, the Company recognized rent expense related to leases on a straight-line basis over the term of the lease. The difference between rent expense and rent paid, if any, as a result of escalation provisions and lease incentives, such as tenant improvements provided by lessors, was recorded as deferred rent in the Company’s consolidated balance sheets.
LeasesClassificationDecember 31, 2020December 31, 2019
Assets
Operating lease assetsRight of use asset, net$164,252 $155,633 
Finance lease assetsProperty and equipment, net of accumulated depreciation306 309 
Total lease assets$164,558 $155,942 
Liabilities
Current:
OperatingOther current liabilities$19,544 $16,755 
Noncurrent:
OperatingLease liabilities, net of current portion167,910 152,920 
FinancingOther liabilities327 333 
Total lease liabilities$187,781 $170,008 
Weighted-average remaining lease term (years) - operating leases8.78.6
Weighted-average discount rate - operating leases5.1 %5.0 %

For the years ended December 31, 2020 and 2019, the components of lease cost were as follows:
December 31, 2020December 31, 2019
Operating lease cost$26,255 $20,635 
Variable lease cost10,324 8,323 
Total lease cost$36,579 $28,958 

Rental expense was $24,900 for the year ended December 31, 2018.

The Company’s costs related to short-term leases, those with a duration between one and twelve months, were immaterial.

Supplemental disclosures of cash flow information related to leases were as follows:
December 31, 2020December 31, 2019
Cash paid for lease liabilities$24,091 $19,502 
Operating assets obtained in exchange for operating lease liabilities$33,140 $43,016 
As of December 31, 2020, maturities of lease liabilities were as follows:
Amount
2021$28,405 
202228,803 
202328,367 
202426,844 
202526,087 
Thereafter95,872 
Total lease payments$234,378 
Less: imputed interest46,597 
Present value of lease liabilities$187,781 

As of December 31, 2020, operating lease payments exclude approximately $20,027 of legally binding minimum lease payments for leases signed but not yet commenced.
v3.20.4
Goodwill and intangible assets
12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and intangible assets Goodwill and intangible assets
A summary of goodwill and intangible assets at December 31, 2020 and 2019 is as follows:
December 31, 2020Weighted
average
amortization
period (years)
Gross
carrying
amount
Accumulated
amortization
Net carrying
Amount
Customer relationships11.0$174,033 (124,907)$49,126 
Reacquired franchise rights8.037,660 (16,311)21,349 
 $211,693 $(141,218)$70,475 
Indefinite-lived intangible:
Trade and brand namesN/A146,600 — 146,600 
Total intangible assets$358,293 $(141,218)$217,075 
Goodwill$227,821 $— $227,821 
 
December 31, 2019Weighted
average
amortization
period (years)
Gross
carrying
amount
Accumulated
amortization
Net carrying
Amount
Customer relationships11.0$174,033 (112,114)$61,919 
Reacquired franchise rights8.037,660 (12,258)25,402 
 $211,693 $(124,372)$87,321 
Indefinite-lived intangible:
Trade and brand namesN/A146,600 146,600 
Total intangible assets$358,293 $(124,372)$233,921 
Goodwill$227,821 $— $227,821 
 
A rollforward of goodwill during the years ended December 31, 2020 or 2019 is as follows:
FranchiseCorporate-owned storesEquipmentTotal
As of December 31, 2018$16,938 $89,909 $92,666 $199,513 
Acquisition of franchisee-owned stores— 28,308 — 28,308 
As of December 31, 2019$16,938 $118,217 $92,666 $227,821 
Acquisition of franchisee-owned stores— — — — 
As of December 31, 2020$16,938 $118,217 $92,666 $227,821 
In connection with the adoption of ASC 842, as of January 1, 2019, the Company has derecognized the favorable leases intangible asset, and the favorable leases balance is now included in the ROU asset, net balance (Note 7). The Company determined that no impairment charges were required during any periods presented, and the increase to goodwill was due to the acquisition of sixteen franchisee-owned stores in 2019 (Note 5).
Amortization expense related to the intangible assets totaled $16,888, $16,359, and $15,720 for the years ended December 31, 2020, 2019 and 2018, respectively. The anticipated annual amortization expense to be recognized in future years as of December 31, 2020 is as follows:
 Amount
2021$16,636 
202216,728 
202316,558 
202414,067 
20253,066 
Thereafter3,420 
Total$70,475 
v3.20.4
Long-term debt
12 Months Ended
Dec. 31, 2020
Debt Disclosure [Abstract]  
Long-term debt Long-term debt
Long-term debt as of December 31, 2020 and 2019 consists of the following:
 December 31, 2020December 31, 2019
2018-1 Class A-2-I notes$562,063 $567,813 
2018-1 Class A-2-II notes610,938 617,187 
2019-1 Class A-2 notes544,500 550,000 
Variable Funding notes75,000 — 
Total debt, excluding deferred financing costs1,792,501 1,735,000 
Deferred financing costs, net of accumulated amortization(23,575)(29,995)
Total debt1,768,926 1,705,005 
Current portion of long-term debt and Variable Funding Note17,500 17,500 
Long-term debt and borrowings under Variable Funding Notes, net of current portion$1,751,426 $1,687,505 
On August 1, 2018, Planet Fitness Master Issuer LLC (the “Master Issuer”), a limited-purpose, bankruptcy remote, wholly-owned indirect subsidiary of Pla-Fit Holdings, LLC, entered into a base indenture and a related supplemental indenture (collectively, the “2018 Indenture”) under which the Master Issuer may issue multiple series of notes. On the same date, the Master Issuer issued Series 2018-1 4.262% Fixed Rate Senior Secured Notes, Class A-2-I (the “2018 Class A-2-I Notes”) with an initial principal amount of $575,000 and 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”) with an initial principal amount of $625,000. In connection with the issuance of the 2018 Notes, the Master Issuer also entered into a revolving financing facility that allows for the incurrence of up to $75,000 in revolving loans and/or letters of credit under the Master Issuer’s Series 2018-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes”). The Company fully drew down on the Variable Funding Notes on March 20, 2020. Outstanding amounts under the Variable Funding Notes bear interest at a variable
rate, which is 2.28% as of December 31, 2020. On December 3, 2019, the Master Issuer issued Series 2019-1 3.858% Fixed Rate Senior Secured Notes, Class A-2 (the “2019 Notes” and, together with the 2018 Notes, the “Notes”) with an initial principal amount of $550,000. The 2019 Notes were issued under the 2018 Indenture and a related supplemental indenture dated December 3, 2019 (together, the “Indenture”). Together the Notes and Variable Funding Notes will be referred to as the “Securitized Senior Notes”.
The Notes were issued in a securitization transaction pursuant to which most of the Company’s domestic revenue-generating assets, consisting principally of franchise-related agreements, certain corporate-owned store assets, equipment supply agreements and intellectual property and license agreements for the use of intellectual property, were assigned to the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly-owned indirect subsidiaries of the Company that act as guarantors of the Securitized Senior Notes and that have pledged substantially all of their assets to secure the Securitized Senior Notes.
Interest and principal payments on the Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the 2018 Notes is in September 2048, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the 2018 Class A-2-I Notes will be repaid in September 2022 and the 2018 Class A-2-II Notes will be repaid in September 2025. The legal final maturity date of the 2019 Notes is in December 2049, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the 2019 Notes will be repaid in December 2029 (together, the “Anticipated Repayment Dates”). If the Master Issuer has not repaid or refinanced the Notes prior to the respective Anticipated Repayment Dates, additional interest will accrue pursuant to the Indenture.
As noted above, the Company borrowed the full $75,000 in Variable Funding Notes on March 20, 2020. The Variable Funding Notes accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S. Dollars, or (iv) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin and as specified in the Variable Funding Notes. There is a commitment fee on the unused portion of the Variable Funding Notes of 0.5% based on utilization. It is anticipated that the principal and interest on the Variable Funding Notes will be repaid in full on or prior to September 2023, subject to two additional one-year extension options. Following the anticipated repayment date (and any extensions thereof) additional interest will accrue on the Variable Funding Notes equal to 5.0% per year.
In connection with the issuance of the 2018 Notes and 2019 Notes, the Company incurred debt issuance costs of $27,133 and $10,577, respectively. The debt issuance costs are being amortized to “Interest expense” through the Anticipated Repayment Dates of the Notes utilizing the effective interest rate method.
The Securitized Senior Notes are subject to 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 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Securitized Senior Notes are in stated ways defective or ineffective, (iv) a cap on non-securitized indebtedness of $50,000 (provided that the Company may incur non-securitized indebtedness in excess of such amount, subject to the leverage ratio cap described below, under certain conditions, including if the relevant lenders execute a non-disturbance agreement that acknowledges the bankruptcy-remote status of the Master Issuer and its subsidiaries and of their respective assets), (v) a leverage ratio cap incurrence test on the Company of 7.0x (calculated without regard for any indebtedness subject to the $50,000 cap) and (vi) covenants relating to recordkeeping, access to information and similar matters.
Pursuant to a parent company support agreement, the Company has agreed to cause its subsidiary to perform each of its obligations (including any indemnity obligations) and duties under the Management Agreement and under the contribution agreements entered into in connection with the securitized financing facility, in each case as and when due. To the extent that such subsidiary has not performed any such obligation or duty within the prescribed time frame after such obligation or duty was required to be performed, the Company has agreed to either (i) perform such obligation or duty or (ii) cause such obligations or duties to be performed on the Company’s behalf.
The Securitized Senior Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, certain manager termination events, an event of default, and the failure to repay or refinance the Notes on the applicable scheduled Anticipated Repayment Dates. The 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 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 accordance with the Indenture, certain cash accounts have been established with the Indenture trustee (the “Trustee”) for the benefit of the trustee and the noteholders, and are restricted in their use. The Company holds restricted cash which primarily represents cash collections held by the Trustee, interest, principal, and commitment fee reserves held by the Trustee related to the Securitized Senior Notes. As of December 31, 2020, the Company had restricted cash held by the Trustee of $60,314, which includes pre-funding of the full principal and interest payments through the March 5, 2021 payment date, and a substantial portion of the June 5, 2021 payment date. Restricted cash has been combined with cash and cash equivalents when reconciling the beginning and end of period balances in the consolidated statements of cash flows.
The proceeds from the issuance of the 2018 Notes were used to repay all amounts outstanding on the Term Loan B under the Company’s prior credit facility. As a result, the Company recorded a loss on early extinguishment of debt of $4,570 within interest expense on the consolidated statements of operations, primarily consisting of the write-off of deferred costs related to the prior credit facility. In connection with the repayment of the Term Loan B, the Company terminated the related interest rate caps with notional amounts totaling $219,837, which had been designated as a cash flow hedge. See Note 10 for more information on the interest rate caps.
Future annual principal payments of long-term debt as of December 31, 2020 are as follows:
 Amount
2021$17,500 
2022568,063 
202386,750 
202411,750 
2025591,438 
Thereafter517,000 
Total$1,792,501 
v3.20.4
Derivative instruments and hedging activities
12 Months Ended
Dec. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative instruments and hedging activities Derivative instruments and hedging activitiesPrior to the August 1, 2018 refinancing transactions described in Note 9, the Company used interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than cash flow hedging. The Company does not speculate using derivative instruments.In order to manage the market risk arising from the previously outstanding term loans, the Company entered into a series of interest rate caps. As of December 31, 2020 and December 31, 2019, the Company had no interest rate cap agreements outstanding. In connection with the issuance of the 2018 Notes, the Company terminated the interest rate caps it had entered into in order to hedge interest expense on its previously outstanding term loans. During 2018, the Company recognized all unrealized gains and losses associated with its then-existing interest rate caps due to either termination or maturity.
v3.20.4
Revenue from contract with customers
12 Months Ended
Dec. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue from contract with customers Revenue from contracts with customers
Contract Liabilities
Contract liabilities consist of deferred revenue resulting from initial and successor franchise fees and ADA fees paid by franchisees, as well as transfer fees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement. Also included are corporate-owned store enrollment fees, annual fees and monthly fees. We classify these contract liabilities as deferred revenue in our condensed consolidated balance sheets. The following table reflects the change in contract liabilities between December 31, 2019 and December 31, 2020:
Contract liabilities
Balance at December 31, 2019
$62,054 
Revenue recognized that was included in the contract liability at the beginning of the year(23,461)
Increase, excluding amounts recognized as revenue during the period20,685 
Balance at December 31, 2020
$59,278 

The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2020. The Company has elected to exclude short term contracts, sales and usage based royalties and any other variable consideration recognized on an “as invoiced” basis.
Contract liabilities to be recognized in:Amount
2021$26,691 
20223,707 
20233,567 
20243,324 
20252,998 
Thereafter18,991 
Total$59,278 
The summary set forth below represents the balances in deferred revenue as of December 31, 2020 and 2019:
 December 31, 2020December 31, 2019
Prepaid membership fees$6,021 $7,231 
Enrollment fees399 915 
Equipment discount4,013 3,796 
Annual membership fees12,506 12,185 
Area development and franchise fees36,339 37,927 
Total deferred revenue59,278 62,054 
Long-term portion of deferred revenue32,587 34,458 
Current portion of deferred revenue$26,691 $27,596 
 
Equipment deposits received in advance of delivery as of December 31, 2020 and 2019 were $795 and $3,008, respectively and are expected to be recognized as revenue in the next twelve months.
v3.20.4
Related party transactions
12 Months Ended
Dec. 31, 2020
Related Party Transactions [Abstract]  
Related party transactions Related party transactions
Activity with franchisees considered to be related parties is summarized below.
 For the Year Ended December 31,
 202020192018
Franchise revenue$1,415 $2,341 $3,179 
Equipment revenue515 3,333 3,977 
Total revenue from related parties$1,930 $5,674 $7,156 
 
Additionally, the Company had deferred ADA revenue from related parties of $182 and $256 as of December 31, 2020 and 2019, respectively.
As of December 31, 2020 and 2019, the Company had $71,416 and $53,491, respectively, payable to related parties pursuant to tax benefit arrangements, see Note 16.
The Company provides administrative services to the NAF and typically charges the NAF a fee for providing those services, but temporarily suspended charging these fees in June 2020 through December 31, 2020 as a result of COVID-19. The services
provided include accounting, information technology, data processing, product development, legal and administrative support, and other operating expenses, which amounted $793, $2,177 and $2,472 for the years ended December 31, 2020, 2019 and 2018, respectively.
A member of the Company’s board of directors, who is also a franchisee, holds an approximate 10.5% ownership of a company that sells amenity tracking compliance software to Planet Fitness stores to which the Company made payments of approximately $196 and $222, during the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, the software was being utilized at 101 and 71 corporate-owned stores, respectively, and approximately 599 and 520 franchise stores, respectively.
For the years ended December 31, 2020, 2019 and 2018, the Company incurred approximately $90, $190 and $0, respectively, which is included within selling, general and administrative expense on the consolidated statements of operations, for corporate travel to a third-party company which is affiliated with our Chief Executive Officer.
In May 2020, the Company provided a short-term loan of approximately $8,950 to its third party payment processor related to amounts drafted by franchisee-owned stores in March 2020 that were not collected as part of the typical monthly process as a result of the impact of COVID-19. The third party payment processor has begun its repayment of this loan and the Company expects repayment will occur over several months. As of December 31, 2020, approximately $4,200 of the loan balance is outstanding and is included within other receivables on the balance sheet.
v3.20.4
Stockholder's equity
12 Months Ended
Dec. 31, 2020
Equity [Abstract]  
Stockholder's equity Stockholder’s equity
Pursuant to the exchange agreement between the Company and the Continuing LLC Owners, the Continuing LLC Owners (or certain permitted transferees thereof) have the right, from time to time and subject to the terms of the exchange agreement, to exchange their Holdings Units, along with a corresponding number of shares of Class B common stock, for shares of Class A common stock (or cash at the option of the Company) on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and similar transactions. In connection with any exchange of Holdings Units for shares of Class A common stock by a Continuing LLC Owner, the number of Holdings Units held by the Company is correspondingly increased as it acquires the exchanged Holdings Units, and a corresponding number of shares of Class B common stock are canceled.
Other Exchanges
In addition to the secondary offerings mentioned above, during the years ended December 31, 2020, 2019 and 2018, respectively, certain Continuing LLC Owners have exercised their exchange right and exchanged 4,839,866, 885,810 and 1,736,020 Holdings Units for 4,839,866, 885,810 and 1,736,020 newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, 4,839,866, 885,810 and 1,736,020 shares of Class B common stock were surrendered by the Continuing LLC Owners that exercised their exchange right and canceled in the years ended December 31, 2020 and 2019, respectively. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 4,839,866, 885,810 and 1,736,020 Holdings Units, during the years ended December 31, 2020, 2019 and 2018 respectively, increasing its total ownership in Pla-Fit Holdings. Future exchanges of Holdings Units by the Continuing LLC Owners will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital on our consolidated balance sheets.
As a result of the recapitalization transactions, the IPO, completion of our secondary offerings, and other exchanges and equity activity, as of December 31, 2020:
the public investors collectively owned 82,821,325 shares of our Class A common stock, representing 95.7% of the voting power in the Company and, through the Company, 95.7% of the economic interest in Pla-Fit Holdings; and
the Continuing LLC Owners collectively hold 3,722,054 Holdings Units, representing 4.3% of the economic interest in Pla-Fit Holdings and 3,722,054 shares of our Class B common stock, representing 4.3% of the voting power in the Company;
Share repurchase programs
2018 share repurchase program
On August 3, 2018, our board of directors approved an increase to the total amount of the previously approved share repurchase program to $500,000.
On November 13, 2018, the Company entered into a $300,000 accelerated share repurchase agreement (the “2018 ASR Agreement”) with Citibank, N.A. (“Citibank”). Pursuant to the terms of the 2018 ASR Agreement, on November 14, 2018, the
Company paid Citibank $300,000 upfront in cash and received 4,607,410 shares of the Company’s Class A common stock, which were retired, and the Company elected to record as a reduction to retained earnings of $240,000. Final settlement of the 2018 ASR Agreement occurred on April 30, 2019. At final settlement, Citibank delivered 524,124 additional shares of the Company’s Class A common stock, based on a weighted average cost per share of $58.46 over the term of the 2018 ASR Agreement, which were retired. This was evaluated as an unsettled forward contract indexed to our own stock, with $60,000 classified as a reduction to retained earnings at the original date of payment.
Additionally, during the years ended December 31, 2019 and 2018, the Company repurchased at market value and retired 2,272,001 and 824,312 shares of Class A common stock for a total cost of $157,945 and $42,090, respectively completing the 2018 share repurchase plan.
2019 share repurchase program
On November 5, 2019, our board of directors approved a share repurchase program of up to $500,000.
On December 4, 2019, the Company entered into a $300,000 accelerated share repurchase agreement (the “2019 ASR Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”). Pursuant to the terms of the 2019 ASR Agreement, on December 5, 2019, the Company paid JPMC $300,000 upfront in cash and received 3,289,924 shares of the Company’s Class A common stock, which were retired, and the Company elected to record as a reduction to retained earnings of $240,000. Final settlement of the ASR Agreement occurred on March 2, 2020. At final settlement, JPMC delivered 666,961 additional shares of the Company’s Class A common stock, based on a weighted average cost per share of $75.82 over the term of the 2019 ASR Agreement, which were retired. This was evaluated as an unsettled forward contract indexed to our own stock, with $60,000 classified as a reduction to retained earnings at the original date of payment.
On March 18, 2020, the Company announced the suspension of its 2019 share repurchase program. If the 2019 share repurchase program is reinstated, 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 reinstate or terminate the program at any time.
Dividends
The Company did not declare or pay any dividends during the years ended December 31, 2020, 2019, or 2018.
Preferred stock
The Company had 50,000,000 preferred stock shares authorized and none issued or outstanding for the years ended December 31, 2020 or 2019.
v3.20.4
Equity-based compensation
12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Equity-based compensation Equity-based compensation
2015 Omnibus Incentive Plan
Stock Options
In August 2015, the Company adopted the 2015 Omnibus Incentive Plan (the “2015 Plan”) under which the Company may grant options and other equity-based awards to purchase up to 7,896,800 shares to employees, directors and officers. Generally, stock options awarded vest annually, on a tranche by tranche basis, over a period of four years with a maximum contractual term of 10 years.
The fair value of stock option awards granted were determined on the grant date using the Black-Scholes valuation model based on the following assumptions:
 Year ended December 31,
 20202019
Expected term (years)(1)
0.25 - 6.25
6.25
Expected volatility(2)
28.5% - 139.8%
28.0% - 28.5%
Risk-free interest rate(3)
0.14% - 1.67%
1.62% - 2.37%
Dividend yield(4)
— %— %
 
(1)Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method.
(2)Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term.
(3)The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.
(4)Based on an assumed a dividend yield of zero at the time of grant.

A summary of stock option activity for the year ended December 31, 2020: 
 Stock OptionsWeighted average
exercise price
Weighted average remaining contractual term (years)Aggregate intrinsic value
Outstanding at January 1, 2020
957,125 $26.86 
Granted106,064 $63.16 
Exercised(76,402)$21.46 
Forfeited(21,151)$37.19 
Outstanding at December 31, 2020
965,636 $31.05 6.7$44,982 
Vested or expected to vest at December 31, 2020
965,636 $31.05 6.7$44,982 
Exercisable at December 31, 2020
616,473 $23.04 6.2$33,654 

The weighted-average grant date fair value of stock options granted during the year ended December 31, 2020 was $22.51. During the years ended December 31, 2020 and 2019, $2,313 and $2,089, respectively, was recorded to selling, general and administrative expense related to stock options. As of December 31, 2020, total unrecognized compensation expense related to unvested stock options, was $2,039, which is expected to be recognized over a weighted-average period of 1.8 years.
Restricted stock units
During the year ended December 31, 2020, the Company granted 44,564 restricted Class A stock units (“RSUs”) under the 2015 Plan. RSUs granted to members of the Board of Directors vest on the first anniversary of the grant date, provided that the recipient continues to serve on the Board of Directors through the vesting dates. RSUs are also granted to certain employees of the Company and generally vest annually, on a tranche by tranche basis, over a period of four years. RSU awards are valued using the intrinsic value method. 
 Restricted stock unitsWeighted average
fair value
Weighted average remaining contractual term (years)Aggregate intrinsic value
Unvested outstanding at January 1, 2020
75,078 $51.32 
Granted44,564 $63.58 
Vested(28,317)$51.82 
Forfeited(5,294)$53.89 
Unvested outstanding at December 31, 2020
86,031 $57.35 1.8$6,679 
During the years ended December 31, 2020 and 2019, $2,426 and $1,961, respectively, was recorded to selling, general and administrative expense related to RSUs. As of December 31, 2020, total unrecognized compensation expense related to unvested RSUs was $2,155, which is expected to be recognized over a weighted-average period of 1.8 years.
Performance share units
During the year ended December 31, 2020, the Company granted 36,538 restricted Class A performance share units (“PSUs”) under the 2015 Plan. The awards are subject to a set of performance metrics that adjusts the quantity of awards earned from zero up to 200% of the original target quantity depending upon the Company’s results at the end of the three year performance period against the performance metrics. These awards cliff-vest three years from the date of grant, and the Company recognizes compensation expense ratably over the required service period based on its estimate of the number of shares will vest upon achieving the measurement criteria. If there is a change in the estimate of the number of shares that are probable of vesting, the Company will cumulatively adjust compensation expense in the period that the change in estimate is made.
 Performance share unitsWeighted average
fair value
Weighted average remaining contractual term (years)Aggregate intrinsic value
Unvested outstanding at January 1, 2020
31,996 $70.69 
Granted36,538 $64.35 
Vested— $— 
Forfeited(2,905)$68.96 
Unvested outstanding at December 31, 2020
65,629 $67.24 0.0$— 
As a result of COVID-19, the performance metrics related to all outstanding PSU awards have fallen below the minimum threshold and as a result, the Company does not expect any shares to vest. During the years ended December 31, 2020 and 2019, a gain of $355 and expense of $355, respectively, was recorded to selling, general and administrative expense related to these PSUs. As of December 31, 2020, total unrecognized compensation expense related to unvested PSUs was $0.
2018 Employee stock purchase plan
The 2018 Employee Stock Purchase Plan (the “ESPP”), as adopted by the Board of Directors in March 2018, allows eligible employees to purchase shares of the Company’s Class A common stock at a discount through payroll deductions of up to 10% of their eligible compensation, subject to any plan limitations. The ESPP provides for six-month offering periods, and at the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s Class A common stock on the first trading day of the offering period or on the last day of the offering period. As of December 31, 2020, a total of 1,000,000 shares of common stock were authorized and available for the issuance of equity awards under the ESPP. During the year ended December 31, 2020, employees purchased 19,077 shares and $402 was recorded to expense related to the ESPP.
v3.20.4
Earnings per share
12 Months Ended
Dec. 31, 2020
Earnings Per Share [Abstract]  
Earnings per share Earnings per share
Basic earnings per share of Class A common stock is computed by dividing net income or loss attributable to Planet Fitness, Inc. for the years ended December 31, 2020, 2019, and 2018, by the weighted-average number of shares of Class A common stock outstanding during the same periods. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.
Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to Planet Fitness, Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of the Company’s Class B common stock are, however, considered potentially dilutive shares of Class A common stock because shares of Class B common stock, together with the related Holdings Units, are exchangeable into shares of Class A common stock on a one-for-one basis.
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:
Basic net income per share:Year Ended December 31, 2020Year Ended December 31, 2019Year Ended December 31, 2018
Numerator
Net income (loss)$(15,204)$135,413 $103,162 
Less: net income (loss) attributable to non-controlling interests(213)17,718 15,141 
Net income (loss) attributable to Planet Fitness, Inc. - basic & diluted$(14,991)$117,695 $88,021 
Denominator
Weighted-average shares of Class A common stock outstanding - basic80,303,277 82,976,620 87,235,021 
Effect of dilutive securities:
Stock options— 599,425 417,264 
RSUs and PSUs— 43,135 22,618 
Weighted-average shares of Class A common stock outstanding - diluted80,303,277 83,619,180 87,674,903 
Earnings (loss) per share of Class A common stock - basic$(0.19)$1.42 $1.01 
Earnings (loss) per share of Class A common stock - diluted$(0.19)$1.41 $1.00 
Potentially dilutive stock options of 528,464 and restricted stock units of 41,223 for the year ended December 31, 2020 were not included in the computation of diluted loss per share because the inclusion thereof would be antidilutive.
Weighted average shares of Class B common stock of 6,292,971, 8,739,015 and 10,275,077 for the years ended December 31, 2020, 2019 and 2018, respectively, were evaluated under the if-converted method for potential dilutive effects and were determined to be anti-dilutive. Weighted-average stock options outstanding of 162,740, 57,273 and 143,006 for the years ended December 31, 2020, 2019 and 2018, respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive. Weighted average restricted stock units outstanding of 548, 755 and 131, for the year ended December 31, 2020, 2019 and 2018, respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive.
v3.20.4
Income taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
Income (loss) before the provision for income taxes as shown in the accompanying consolidated statements of operations is as follows:
 
 Year Ended December 31,
 202020192018
Domestic$(13,382)$171,970 $128,861 
Foreign(1,135)1,207 2,943 
Total income (loss) before the provision for income taxes(14,517)173,177 131,804 
 
The provision (benefit) for income taxes consists of the following:
 Year Ended December 31,
 202020192018
Current:
Federal$(6,938)$7,359 $178 
State256 8,280 3,586 
Foreign156 500 945 
Total current tax expense(6,526)16,139 4,709 
Deferred:
Federal2,769 23,289 22,757 
State4,530 (1,346)946 
F