october 20, 2015 new orleans, la.• updated ada/fa/fdd • developed policies & procedures •...
TRANSCRIPT
October 20, 2015New Orleans, La.
Brian BelmontEVP Franchise Operations and Development
Dave LeonFAC Chairman
POS System Transition• Planet Fitness has supported 4 different POS systems in
the last three years
Twin Oaks2013
Visionary2014
PILOT (Jonas/ABC)
September 2014
System Migration 2015ABC Financial
FAC, PFIFA, PFHQ Collaborative Effort• The FAC, PFIFA, and PFHQ unified to negotiate the best
POS solution for all parties, including updated pricing
POS Pricing Negotiation• Visionary Fees:
• $0.20 per origination• $1.00 ACH return fee
• ABC Fees:• $0.185 per origination• $0.75 ACH return fee
• Through negotiation with franchisee involvement ABC pricing is lower than initial proposal and lower than Visionary pricing
Collaboration of Corporate and Franchisees via Signed MOU• The FAC worked tirelessly with PFIFA and Corporate to
realign the interests of all parties• Through good faith negotiations, the FAC, PFIFA and
Corporate signed a Memorandum of Understanding• Updated ADA/FA/FDD• Developed Policies & Procedures• Attained seat at the table for future negotiations
Equipment Negotiation Team Contract Updates
• Three-year deal includes 3% discount on current costs with option to achieve additional 1% in year 3 if target volumes are met
• Extended warranty = 1.5% value
• Standard enhanced asset management components = 1.5% value
Equipment Type
Under Current Warranty Under New Warranty
Parts Labor Parts LaborTreadmills 3 3 4 4Ellipticals 2 1 4 1Bikes 2 1 4 1PowerMills 3 3 4 4
LF Connect Current cost Per piece of cardio
New cost per piece of cardio
$213 $118• Assists with preventive maintenance• Automatic service requests• Real time usage to guide re-equips• Assists with rotating cardio to spread usage• Connectivity for members• Ability to link to future PF App• Mote no longer purchased
FAC Meeting with Corporate• PFHQ now evaluating business year-over-year basis vs.
month-to-month• Results show an increase in average member joins per month
with execution of national offer/unified messaging • Working together with Corporate to:
• Align all monthly promotions to impact each 17th monthly draft• Increase national digital marketing support through NAF• Tactically promote as a national brand and leverage scale• Determine flexible options regarding specific offers surrounding
the January national sale
Black Card Negotiation Team Meeting & Organization• Representatives from the FAC, PFIFA and PFHQ
organized to shape the Black Card Amenity Strategy• Focused on:
• Gathering metrics• Refining vendor asks• Leveraging marketing• Facilitating new amenity trials• Enhancing Black Card Spa Area Layouts
New FAC Committees• Canadian Committee• Brand Excellence Review
Committee• Focus on creating a consistent
brand that’s built to last• Amended BER to focus on club
operations separately from build out requirements
• Clubs will receive an operations score, facility score and overall score
Ben HeiderscheidtFAC Marketing Chairman
Marketing Update
Marketing New Directions• DMA Coop Template Now Available • Resources specifically devoted to metrics at PF Corp• Marketing Plan designed to impact monthly EFT • NAF funds to be used for digital programs
Kevin JostFAC Tech
FAC-TECH CommitteeFAC-TECH
PF HQ
Corey Benish
John Hatch Chris Lavoie
Randy Rybeck Adam Henker
Franchisee Representation
Dave Leon Kevin Jost
Steve Eddleston Trey Owen
PMC Program Managers Dan Hill (Q1-Q2)
FAC TECH Selects ABC Financial• November 2014: FAC Tech unanimously selected ABC
Financial and made the recommendation to Corporate to move forward with an accelerated migration of all Zees
• Successfully assisted in the migration of 909 clubs off of Visionary and onto ABC
Migration Month Groups ClubsRecurring Billing Members (Oct)
Pilot 1 - Sep 3 22,530Pilot 2 - Nov 7 53,898Wave 1 - Dec 9 103 797,439Wave 2 - Jan 21 220 1,331,893Wave 3 - Feb 41 277 1,542,548Wave 4 - Mar 105 273 1,685,448Compete clubs - Apr 1 (new) 26 90,436Grand Total 176 909 5,524,192
FAC TECH Moves to Planetize ABC• After successfully migrating all clubs to ABC, FAC TECH
recognized the need to “Planetize” the ABC Financial POS System
• Together with Corporate, FAC TECH implemented a Product Management Committee to give a voice to franchisees while innovating, designing, and implementing the necessary development efforts
• PMC members gathered at PFHQ in February 2015 for a PMC Boot Camp to kick off the development initiative
Product Management CommitteeProduct
Management Committee
PF HQ
Product Manager:
Adam Henker
Product Manager: John
Hatch
Departmental Business Analysts
Franchise Ops
Corporate Ops Marketing
Legal Back Office
Retail
FAC-TECH (Franchisee
Representation)
POS Specialist: Stella
Giangregorio
POS Specialist: Jennifer Rowe
Jason Frick Jessica Miller
Julie Fredette Valerie Gerace
ABC Financial
ABC Development
Team
PMC Development Accomplishments• Custom “Planetized” Reporting
• EFT Allocation Report (Phase 1)• MTD Production Report• Membership Sales Stats Report• Daily Dashboard Report• EFT Reconciliation Report
• Standardized Amenity List• 13 Best Practices published to Franchise Management• ACH Restriction in MiCO• Club Account Balance POS Alert• Club Account Restricted to Credit Card Only• Pending Draft POS Alert• Custom Online Join Solution• Franchise Management 3.0 Testing• Full Service Pilot
FAC TECH Approves Club Account Solution• In March 2015, FAC TECH facilitated a Club Account Billing
Solution Pilot• Provides a method to only draft current month’s dues
• Sweeps past due invoices into Club Account before the next month’s draft• Helps to reduce the number of members falling into R-Mode (active but
non-billing status)• More consistent with PF’s brand
• Member experience is consistent• Compliant with payment processing regulations
• After two months of successful pilot data showing a 22% higher collection rate, FAC TECH approved the Club Account Billing Solution which was implemented system-wide during the May 2015 draft cycle
June 2015 Mini Huddles• FAC TECH worked with ABC and Corporate to complete
a six-city tour to provide franchisees with training on the ABC system
• Huddles provided franchisees with a direct line of contact to ABC and focused on a comprehensive training that touched on the concerns voiced during the migration
• Feedback from the Huddles has been incorporated into the development schedule
Custom Online Join Solution September 2015 • PF Developed a custom, online join solution that put the
control over design, messaging, tracking and processing of online joins back in the hands of Planet Fitness
• FAC TECH Participated in preliminary testing and provided input that led to a full rollout on 9/17/2015
• The online join solution will soon be available for in-club tablet joins
Full Service Pilot September 2015• ABC and PF moved forward with the Proof of Concept
phase of the ABC Full Service Pilot• ABC will attempt to contact members who hard decline after
monthly and annual draft events in order to update their billing information and return them to draft status
• Communications begin on each individual member’s hard decline date• SMS Text (1, 5 and 35 Days after Hard Decline)• Email (10 and 40 Days after Hard Decline)• Letter (21 and 45 Days after Hard Decline)• Outbound Call (10 and 40 Days after Hard Decline)
PCI Compliance and EMV (“Chip & PIN”) Update
• PCI Compliance• We continue to work directly with ABC and Trustwave to further improve the
quarterly and annual PCI certification process• As of 10/2/2015 all clubs were required to be compliant with PCI
certifications at all locations. This includes• Submitting SAQ (Self-Assessment Questionnaire) through Trustwave• Quarterly Scans approved through Trustwave• All staff involved in POS transactions are certified in the PFU PCI Training Course
• EMV Update• PFHQ and ABC have reached an interim agreement indemnifying all PF
locations until ABC has successfully demonstrated full compliance with all EMV requirements
• We encourage all zees to carefully monitor and manage their hard declines and quickly respond to any Primary Account Number (PAN) changes not addressed in the Account Updater
FAC TECH Focus and Future Plans• Future Development:
• Mobile App – we continue to work with PFHQ to pilot new functionality
• PF Active – 5 clubs are piloting a PF Branded wearable solution• CRM Development – FAC TECH continues to provide feedback in
the development of a highly scalable, efficient, and accurate Corporate franchise management function
• FOCUS: POS Standardization• In order to continue to lead the way in innovation, FAC TECH is
asking all franchisees to adopt the published Best Practices and Brand Standard Operating Procedures published
• For the first time, we have full custody of our data and we need the data to be structured, standardized and adopted
Stella Giangregorio and Jennifer RowePMC
Product Management Committee Process (PMC)
Franchisee Input
Ideas Portal
Mini-Huddles
Direct contact with Program
Managers
Ideas Review and
Prioritization
PMC Discussion
Best Practice Development
& PMC Review
Best Practice/SOP
Release
Published Best Practices/SOPs• Collecting Balances at the Front Desk• Info Calls and Missed Tours• Club Account Billing Solution• Club Account Operations• Offer Management• Upgrades Downgrades Rewrites• Reciprocal Member Details• Collections Checklist and Script• Guest Conversion• Managing the Agreement Queue• Alternate Payment Method Set Up Guide and Script• Paperless Guest Sign-in Procedure• BC Guest Sample Waiver for ABC Draft
Dave LeonFAC Chairman
FAC Board Member Recognition2012-2015
FAC Board NomineesDave Leon
Lynne Brick
Chris Klebba
Bryan Rishforth
Shane McGuiness
Franchisee Call to Action
Creating a Strong Security Program1. Security awareness is the foundation of
our program
2. PCI compliance layers on top to build good behaviors
3. Breach preparedness helps us respondin a coordinated way
There is no greater risk to the PF brand than a breach!
Contact [email protected]
Franchise Management• Franchise Management 3.0 will serve as a consolidated
business portal to grow and manage business:• Real Estate• PF University• Brand Excellence• Buxton• ADA Pipeline
Trey OwenPFIFA President
Our MissionTo defend, protect and enhance the business
interests and equity of all members
PFIFA Board of Directors• Trey Owen, President• Ben Heiderscheidt, VP• Pete Hopkins, Secretary• Kevin Fagan, Treasurer• CJ Bouchard• Mike Cleary• Stanley DeMartinis Jr.
• Kevin Jost• Brian Kablik• Dave Leon• Sharree Ryder• Toni Rufo• Steve Thomas
2014-2015 Accomplishments• Formation, structure and operations• Negotiations on your behalf
• Memorandum of Understanding – Seat at Table• FA/ADA/FDD changes
• Membership growth• Communications• Franchisee Equity Fund
Current PFIFA CommitteesHouse Committees• Membership• Nominating• Budget & Finance• Communications• Governance• Elections
Ad-Hoc/Working Committees• Legal• Supply Chain• Brand Ownership
Our MembershipA national association representing 81% of
franchised clubs
We’ve come a long way…• Membership increased by 75%
• 454 clubs in 2014• 795 clubs in 2015• 42 new ownership groups joined at 2015 renewal
Visit PFIFA in the trade booth #137 to learn more about membership
Communications• Quarterly Geared Up magazine• Weekly News You Can Use emails• Annual Products & Services Directory• Email updates from President and Committee Chairs• Website with members-only materials and discussion
forum• www.pffranchisee.org
2014 Financial ResultsAudited Statement of Financial Position
Current assets $274,674
Current liabilities $273,682
Net Assets $992
81%
19%
Revenue
Membership Dues
Franchisee EquityFund
11%
39%26%
5%17%
2%
ExpensesFormation /GovernanceSpecial Projects
Legal
Operations - G&A
Operations - ED
Income Tax
Franchisee Equity Fund• Established in 2014• Funds comprised of a portion of membership dues• Serves as a rainy day fund to use for special issues on
behalf of the entire membership• R&D, Public Relations, Growth Initiatives• Funds are not used for PFIFA operations
Current fund balance $80,100 and growing…
Look Forward…Growing the Brand Together• Reducing club operating expenses• Reducing club build expenses• Increasing member sales• Decreasing member attrition• In-club innovation/improvement• Creating value outside the four walls= Sustainable growth model
Genesis of the Purchasing Co-Op• Costs to build and operate clubs continue to rise• PFIFA survey responses indicated purchasing co-op is a
top priority • Professional supply chain allows PF ecosystem to
negotiate competitive pricing and streamline distribution at a lower cost
• Many franchise systems with majority franchisee-owned locations have independent national cooperatives
• Identified proven expert in supply chain management
Supply Chain Services• Professional supply chain management company• Industry-renowned supply chain experts• Relationships with more than 300 suppliers,
manufacturers and distributors worldwide• Current clientele:
• 7,000+ BURGER KING restaurants in U.S. and Canada• 2,000 locations from other brands
• Derive income as a small % of savings delivered• SCS agreed to provide exclusive representation to PF in
fitness space
How We Save• Supply Chain Services has identified potential savings:
• Club Build = $50,000 per location• Recurring Operating Expenses = $25,000 per location
• Complete supply chain process:• Purchasing• Contract negotiation• Distribution and logistics• Global sourcing and fulfillment
Increasing Our Competitive Advantage Together• Understanding the need to keep PFHQ whole on revenue streams• Collaboration between PFHQ, the FAC and PFIFA on initial list of
products and services • PFHQ will continue to approve products, services and suppliers• Open to all franchisee-owned clubs and corporately-owned clubs• The Co-op will be owned by member clubs• Co-op funds after expenses will be rebated back to member clubs• Transparency is a key element• Bi-product of process is brand consistency
PFIFA Franchisee Convention:Connecting Members, Ideas and Opportunities
• Expert speakers on owner-specific topics• Best practice collaboration at the owner-owner level• Networking opportunities• One-on-one time with system suppliers• Beautiful resort almost exclusively reserved for PF
attendees
Get Involved• Board of Director Elections
• Five seats open next year – October 2016• More Work is Needed
• Co-op• Increasing revenue• Retention• Maintaining unit economics• Planetized innovation• Affinity programs• Community/charity
Increasing Revenue
Retention
PlanetizedInnovation
Maintaining Unit
Economics
Affinity Programs
Co-op
Community/Charity
Symphony of Activity = Long-Term Success
Pete HopkinsPFIFA Legal Committee Chairman
Review of the 2015 ADA Highlights• 6-month Grace Period and Paid 6-month Grace Period
• Royalty and Fees set for 2 years for new ADAs
• Eliminate personal guaranty in exchange for affiliate guaranty
• Limitation of Cross-Default (3 strike policy i.o. cross default for uncured default)
• ROFO on ADA territory after successful completion of schedule
Implementation: Side Letter AgreementsCorporate attempted to create an addendum for each standard version of an ADA, but substantial variation in drafting made this impractical and too time consuming
In consultation with Dady & Gardner, Corporate drafted a Side Letter Agreement for ADA holders
ADA Side Letter AgreementsIf you are current in your development schedule and not previously amended for non-compliance with your development schedule, then deal economics do not matter and you will receive an ADA Side Letter Agreement from Corporate granting you:• 6-month Grace Period & 6-month Paid Grace Period
Eligibility• General Release of Claims will be required
ADA Side Letter AgreementsIn addition to receiving the Grace Periods, if you agree to modify your ADA to increase/decrease your territory, change the number of clubs to be opened, accelerate your development schedule, and/or move to current economic terms, Corporate has indicated it would work with you to revise your existing ADA to address a number of the new provisions found in the 2015 ADA, potentially including:
• 6-month Grace Period and Paid 6-monthGrace Period• Royalty and Fees set for 2 years for new ADAs• Eliminate personal guaranty• Limitation of Cross-Default• ROFO on ADA territory after successful completion of schedule• General Release of Claims will be required
Review of 2015 FA Highlights (Retroactive regardless of year executed or deal economics subject to general release of claims)
• Critical transfer modifications• limits to ROFR (estate planning, etc.)• clarity on costs• Limits on when transfer bumps royalty to then-current
• Revamped Successor Rights• Substantially complied rather than full compliance• Up to two successor franchises• Reasonable remodel/relocation requirements
• Mutual release at renewal not just Zee release and process for existing disputes to continue
Review of 2015 FA Highlights (Retroactive regardless of year executed or deal economics subject to general release of claims)
• Local Advertising• Measure compliance quarterly not monthly• DMA calculation (not club specific)• Alternative Marketing Plan
• Modified pre-sale marketing requirements
• Modified Corporate’s rights related to use of 10% of club space
• More Franchisee-friendly re-equip requirements (time and standards)
Review of 2015 FA Highlights (Retroactive regardless of year executed or deal economics subject to general release of claims)
• Added Franchisee right to terminate w/o financial penalty if not performing well financially
• Modified Corporate’s right to terminate:• Extended cure periods• Cure option if unique to owner and owner removed• Limited Corporate’s right to implement increased royalty as
alternative to termination• Eliminated your indemnification of Corporate’s negligent actions
• Corporate is explicitly required to provide notice of Changes to Method of Operations
Review of 2015 FA Highlights (Retroactive regardless of year executed or deal economics subject to general release of claims)
• Increased development time
• Remodel protections
• Clarified 90% EFT requirements and Corporate’s right to collect Royalty
• Clarified costs related to breach/identity theft/etc.
• Clarified definition of EFT and Royalty EFT (not an expansion)
Side Letter Agreement for FA –Applicable to All FA’s
Irrespective of the deal economics of your FA and subject to a general release of claim, all franchisees will receive a Side Letter Agreement granting you these modified provisions detailed in the previous four slides.
Side Letter Agreement for FA –FA’s on Current Economic Terms
If your FA is on current economic terms and subject to a general release of claim, you will receive a Side Letter Agreement granting you the provisions in the next slide.
Review of 2015 FA Highlights (Retroactive if FA contains Current Economic Terms; subject to general release of claims)
• Transfer w/o requirement to go to then-current economic terms
• Royalty rate increase requires two year lead time w/r/t renewals
• Personal Guaranty burn off right
• Significant modification of cross default rights• Existing – One strike, strike being only a default• New – Three strikes, each strike being a termination
“Appendix H”• New initiative from Corporate to streamline the FA drafting
process• Specific to ADA holders• No more redlining of standard FA’s• Appendix H will list provisions unique to ADA • Urge you to seek counsel to ensure you preserve your
rights as part of your ADA or customs and practices
Next Steps…Corporate’s legal team will be sending out these agreements later in October and early November. Our goal is full implementation by the end of the year.
Although we all believe that the Side Letter Agreements will likely offer better rights to franchisees who signed the standard form of FAs and ADA (i.e., you did not negotiate individual sections), the Side Letter Agreements may not be appropriate for every franchisee (particularly for franchisees with heavily negotiated FAs and ADAs). Further, because Corporate is requiring that certain MOU provisions related to product re-equips, definitions of EFT, and the right to collect payments on certain excessive pre-pay amounts will control, even if the franchisee has more favorable terms, you need to carefully read, review, and understand the content of the Side Letter Agreements prior to deciding whether to sign.
Toni RufoPFIFA Board of Directors Elections Committee
PFIFA Board of Directors SlateCJ Bouchard
Kevin Fagan
Tim Kelleher
Jason Price
Trey Owen and Ben HeiderscheidtPFIFA President and Vice President
Departing Board MembersThank you for your service
• Kevin Jost• Dave Leon
Please enjoy a 10 minute break
Contribute to Geared Up• We welcome your submissions for every issue of Geared Up.• Fundraising events, club openings, staff achievements, club
best practices – we want to hear about it all!• Submit a completed article or a member of the editorial staff
can conduct an interview and write it for you.• It’s easy to do:
• Email [email protected]• Call 678-797-5160• Submit via www.pffranchisee.org through the Communications/Geared Up page
Q&A