Unexpected Leadership Change Sends Shockwaves
In a surprising turn of events, Planet Fitness has announced the removal of its long-serving CEO, Chris Rondeau, a decision that left both investors and employees astounded. This abrupt move was disclosed via a press release on a Friday, resulting in a significant impact on the company’s stock price, which plummeted by nearly 16%, hitting a 52-week low.
Search for New Leadership Begins
Planet Fitness is now actively seeking its next chief executive officer, considering candidates from both internal and external sources. In the interim, the role of CEO will be filled by Craig Benson, a former New Hampshire governor and a longstanding member of the company’s board. Benson’s affiliation with both Planet Fitness and Dunkin’ Donuts as a franchisee, combined with his six-year tenure on Planet Fitness’ board, positions him to lead during this transition.
The Mysterious Departure
The suddenness of Rondeau’s departure has left many questioning the reasons behind this decision, especially following a robust second-quarter earnings report the previous month. Some individuals close to Rondeau only learned of his exit when it was publicly announced, leaving them bewildered. This move was shrouded in secrecy, as a person familiar with the matter shared their insights on the condition of anonymity, emphasizing the unexpected nature of the event.
Analysts Weigh In
William Blair analyst Sharon Zackfia described the news as “abrupt” and suggested that it did not seem to have been planned, citing the company’s cancellation of two scheduled investor conference presentations earlier in the week. She also noted that the decision appeared to be the board’s choice, rather than Rondeau’s own decision.
Planet Fitness’ Vision for the Future
Stephen Spinelli Jr., Chairman of Planet Fitness, explained that the board believed it was the right time for a leadership transition. He emphasized the company’s commitment to enhancing its competitive advantage, leveraging its size and scale, and delivering increased value to shareholders. However, Planet Fitness has chosen not to provide further commentary on this matter, and Chris Rondeau was unavailable for comment.
Rondeau’s Remarkable Journey
Chris Rondeau’s departure marks the end of a remarkable 30-year career at Planet Fitness. He began his journey at the company as a front desk employee at the very first location in Dover, New Hampshire, back when it was owned by founders Michael and Marc Grondahl. Over the years, he ascended the ranks to become CEO in 2013, previously serving as the Chief Operating Officer. Despite stepping down as CEO, Rondeau will continue as a member of the board of directors, offering advisory support to ensure a smooth transition.
Rondeau’s Impact on Planet Fitness
During his tenure as CEO, Rondeau led Planet Fitness through its initial public offering (IPO) and oversaw the expansion of the gym chain from approximately 700 to around 2,400 locations. Under his leadership, the company’s annual revenue grew from about $200 million to a projected $1 billion for the current year, a remarkable achievement.
Scaling Back Amidst Challenges
Despite recent strong sales and profit growth, investors have become cautious regarding Planet Fitness’ equipment placements and franchise expansion plans, both crucial revenue drivers. Rondeau’s announcement in August that the company was reducing its 2023 equipment placement outlook due to higher construction costs and increased interest rates raised concerns. The goal of opening 600 new stores by 2025 may also face delays due to these challenges.
Industry Challenges and Investor Concerns
High construction costs, rising interest rates, and decreased availability of suitable locations for Planet Fitness gyms have all contributed to the company’s challenges. Vacancy rates for the ideal 15,000- to 25,000-square-foot locations have dropped by approximately 16% compared to pre-Covid levels, making it more challenging to secure new leases. These factors have collectively impacted the company’s stock performance, with its value decreasing by about 36% this year, resulting in a market value of approximately $4.4 billion.