The worrying struggles faced by Peloton Interactive are well-publicized. The once-thriving fitness equipment maker and content enterprise is now dealing with weaker demand, declining sales, and ongoing net losses. It's difficult to know if the situation will turn around. And shares are currently down 97% from their peak price.

If you're looking to gain exposure to the fitness industry, perhaps there's another business to consider. Compared to Peloton, it has a far superior business model that has already been proven to work. I'm talking about Planet Fitness (PLNT -1.72%).

Brick-and-mortar still dominates

The rise of online shopping has certainly had a negative impact on brick-and-mortar retailers, but it hasn't been as alarming a situation when it comes to fitness studios. Just in the last four years, a period that included the pandemic, inflationary pressures, and higher interest rates, Planet Fitness opened over 500 net new gyms. And as of Dec. 31, there were 2,575 locations in total.

The business operates a franchise model, with only 256 of these locations actually owned by the company. This means there are outside investors who front the start-up capital and pay fees for the right to open Planet Fitness locations. It's asset-light, freeing up company capital, which leads to the generation of positive free cash flow.

Another factor to think about is Planet Fitness's scale. At those 2,575 gym locations I mentioned, there are a combined 18.7 million members. This allows the company to keep its cheapest monthly membership fee at $10. The low price attracts the casual gym-goer, who might only visit a few times a month, but who is unwilling to cancel because they convince themselves that they'll stick with their fitness plan. Plus, Planet Fitness requires members to visit their home gym to cancel, adding some friction to the mix.

This business model is superior to Peloton's. Peloton spends heavily on research and development, as well as production capacity efforts, to design and manufacture expensive hardware. In other words, it's very capital-intensive. This might have worked when demand was booming during the depths of the pandemic, but in recent times, it has led to financial weakness.

Peloton's leadership team is trying to transition the company to a subscription model, leaning on its digital app. The problem here, though, is that the business needs users to stay engaged so they remain members. If they give up on their workout routines, canceling the membership is as easy as the tap of a button. This explains the high churn rate of 7.2%.

Look at the financials

Peloton was founded in 2012, meaning that there was really no better decade for the business to expand in than throughout the bulk of the 2010s. It was easy to access cheap capital to fuel growth, and both the economy and stock market were doing well. This bullish backdrop meant that Peloton didn't need to generate profits to please its investors.

Now that we are in tighter conditions, perhaps the market over the rest of this decade will favor companies that are in strong financial positions. Planet Fitness definitely wins this battle when it goes head-to-head against Peloton.

Peloton reported $653 million in operating losses in calendar 2023, compared to total revenue of $2.7 billion. Planet Fitness, on the other hand, produced $273 million in operating income on $1.1 billion of overall sales. One is clearly superior when we focus on the income statement.

Consequently, the fitness studio chain is the safer investment for those looking to gain exposure to the industry. It is consistently profitable and operates a scalable business model. And I believe that if we look out over the next five years, there's a much higher probability that its shares will be the bigger winner.