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Planet Fitness is widely known as being an accepting gym for people just starting their fitness journey. In fact, the company has even characterized itself as “The Judgement Free Zone.” Dorsey notes that shares of PLNT are up by about 350% since its initial public offering (IPO) in 2015. Meanwhile, a 40x forward earnings multiple may imply that investors believe the stock has growth potential, although Dorsey certainly thinks different.
Dorsey submitted many Freedom of Information Act (FOIA) requests and discovered a pattern of “overbilling, fraudulent transactions, excessive fees, and uncancellable memberships.” Let’s get into the details.
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Many complaints unveiled by the FOIA requests involve difficulties with cancelling subscriptions, ignored in-person cancellation attempts and unreasonable fees. Dorsey adds that Planet Fitness may be doing this on purpose in order to take advantage of new gym-goers.
Planet Fitness’ cancellation process is severely outdated. Dorsey notes that the only way to cancel a membership is to go to the gym where the membership was originally initiated and request a cancellation or to send a letter explaining the cancellation.
Unhappy customers could request a refund with their credit card provider. However, it appears that Plant Fitness is one step ahead because it only allows direct access to checking accounts and debit cards as forms of payment. Dorsey explains that checking accounts usually do not have a dispute feature or a feature to block future payments.
Meanwhile, even sending a cancellation letter to Planet Fitness may not be as easy as it seems. According to a complaint dated October 2020, a member sent Planet Fitness a cancellation letter dated Sept. 23. The member was stilled charged an annual fee of $39 on Oct. 1. The company then “gave a song and dance about a third party biller and [said] they could not refund it locally.”
This isn’t an isolated situation. Dorsey provides evidence of several members who have dealt with the same situation.
Planet Fitness has not yet responded to the allegations.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.