It’s a sign of the times where there may seem to be a lot going on, where little is happening. For most fitness pros, it’s like treading water, and for some, it’s like treading water with a weighted vest.
CrossFit Affiliates Blindly Going Forward
CrossFit affiliates have breathed a sigh of relief since the whirlwind of crazy that evolved out of Greg Glassman being Greg Glassman turned into an acquisition by an actual business guy who loves CrossFit and has a private equity firm at his back.
The good news is - really, it is good news - competent management can only make things better for CrossFit affiliates. Roza, the incoming CEO, has a pedigree, experience, and actual ground-level awareness as an affiliate owner.
The good news is that there is every likelihood that CrossFit will thrive, straight out of the gate, as a business. We expect that there will be a frenetic pace of organization and business development in the first 100 days of the new regime and a lot of announcements and noise around wins and successes for the company.
Frankly, that’s the private equity way. Which is where the uncertainty lies for affiliates because, well, they own nothing of CrossFit and are beholden to it totally as long as they keep the brand name above their door.
If it was us, instead of talking about plans for the Open or Games, we’d be asking questions like this:
How long do you plan to keep the existing affiliate programs in place?
Can you guarantee that our fees will remain the same for a period of time and if yes then for how long?
Will you share the ownership structure, deal structure, and the debt that will be placed on the company?
Private equity companies usually acquire companies with a view to flipping them for sale within a 3-5 year time frame so, what is the strategy for the investors to get their money out of the company?
Will you be looking to acquire any affiliates, other companies in the same category (eg, competitors or suppliers), or any other fitness brands?
What is the strategy for growing CrossFit affiliate business from the point of view of existing affiliates, and how will that differ from other growth imperatives for management?
Who will be on the Board of Directors of the company under new ownership?
How much notice will you give affiliates of any material changes to the affiliate organization whether it is pricing or requirements?
Berkshire Partners has an investment in Implus, which has a numer of fitness brand products such as RockTape, are there any expected synergies that have been discussed or planned for in this acquisition?
We’d want to know what the plan is for affiliation and the growth of affiliation revenues because that is all that matters to us. Yeah, yeah, CrossFit is a community but so is every branch of yoga, so are intra-mural softball games, so are Bronies and so is Weight Watchers. Any time you have a bunch of sheep corralled into buying into a corporate cashflow pipeline, you can have a community. It is one of the insane aspects of modern individualism that so many people feel a desperate need to align themselves with a corporation as a sense of belonging. But we digress.
The thing is, private equity isn’t touchy feely. Berkshire Partners, the money guys behind this acquisition, have struggled in the fitness space, chiefly with Implus where a recent management change belied the fact that they couldn’t sell the company on their terms when they tried to a few years ago. So, we expect that there are a whole lot of things that could be happening to redefine CrossFit as a business.
Eric Roza’s CrossFit Sanitas is a 10,000 sq ft facility that looks very much like a number of suburban fitness centers with childcare, fitness diagnostics, proper changing rooms, and a clean, bright welcoming look. It doesn’t look anything like 80% of the CrossFits most people come across. So, is that the model for future affiliates? Does CrossFit want to own its affiliates or have a bigger stake, and focus on those that are already big? Maybe there is a technology component or an operational development that can allow a more active affiliate pipeline connecting CrossFit HQ to affiliates, creating new opportunities and revenue streams.
Affiliates need to ask the questions now, and not stop until they are satisfied that they know what will happen to them. Most affiliate owners are not suited franchise owners or operators of a mid-market gym, for example. If that’s where the market takes CrossFit, they should be prepared.
Whatever the strategy may be, CrossFit will, no doubt, be aggressive in its growth and business operations. It’s just a question of who gets to be a part of that success going forward. It is naive to assume that everyone that is onboard now can be along for the ride.
Crunch, Gold’s, Equinox, LA Fitness, Orange Theory, SoulCycle, YogaWorks, these are all pretty good fitness industry brands, too. Doesn’t mean there’s anything there that anyone reading this would want to get into but that may end up being the future of CrossFit, too. The gym industry is no different than the restaurant business: the concepts don’t change much but the floor plans and ambience do. Think with your head, and not your heart because while Glassman was around, being all emotional, you could get away with an emotional response but that approach won’t serve you well with corporate CrossFit.
Didactic Dumbassery
On the future, post-Covid
I don’t think we’re going to see any wholesale change in attitude whatsoever when we get to the other side of this, hopefully sooner rather than later. It won’t be business as usual, but I think the smart companies are realizing that trends – like the impact on traditional retail – that existed pre-Covid have been accelerated dramatically. Every business, no matter who runs it, faces ongoing change. The only constant of business is change. The only constant in life is change.
Stop talking about politics, elections, lockdown laws, masks and everything else that seems to dominate your thoughts. It is all non-productive. Almost like talking about how much stronger a client would be if they could do a bodyweight back squat when they live in an apartment complex and have a couple of 25 lbs dumbbells, a yoga mat, and $35 in their checking account.
Do what you have to with what you have. When it comes to macroeconomics, epidemiology, the stock market, and the theory of relativity most everyone is a dumbass, and if they are writing long screeds on social media they are just practicing didactic dumbassery.
You have a business to deal with and that’s where 100% of your energies should be focussed. Success will come because you will not be phased or dissuaded by obstacles or setbacks. It’s what you tell your trainees every damn day. It’s no difference in business.
You don’t like lockdowns? Nothing you can do about it.
You don’t like social distancing in your gym? Nothing you can do about it.
You don’t like the way the world is going? None of your paying customers give a hoot what you like.
You don’t like change? Suck it up, buttercup, that’s all there is in business.
With the exception of those who have a net worth of $5 million and qualify as rich, everyone is in the same boat as you; people are worried about getting sick, about losing their jobs, about the economy, about the election and on, and on, and on.
Show consistency in seeking out opportunities to make your business more successful and leave the didactic dumbassery to the business owners who are happier putting their energy there.
The Art of Renegotiation
You may feel compelled to stay the course and see things through, you may be hurting and wanting to throw out everything and start afresh or, you may need some help figuring out how to reorganize your business. The one outstanding requirement in every case is the need to renegotiate.
You need to renegotiate your relationship with your clients, your suppliers, and your landlord. Renegotiation is a more difficult act of artistry than negotiation because you are hemmed in before you even begin the process and unable to do the one thing that should drive your negotiation powers: the ability to walk away from a deal.
Most people are not geared up to negotiate contracts, let alone renegotiate, cannot afford a lawyer or counsel to do it for them, and may not even have a clear understanding of their rights. Big companies do it all the time because they have leverage. The existing lockdowns and economic situation also provide leverage. It’s an arduous task but we can do our best to help, and we do have legal counsel who will support any suppositions we provide.
Send an email to info at breakingmuscle dot com. Put Renegotiation in the subject line. Tell us about your renegotiation problem, or a related problem that you want to see discussed, and we will write about that in the next newsletter. You will remain anonymous unless you request otherwise. Keep fighting for your business.