CrossFit, LLC price hike - What if?

@zongruger
There was one affiliate over in Africa that had to reach out to Hiller because they were struggling with fees and what not.
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Yeah, I know the story ('we dont want a reach around, just to talk') and generally the problem. That is one of the reasons I started thinking along these lines. Faul have jut said that growing the number of affiliates is not a focus priority now.

And that could be real, because unless they
  • decrease the affiliate fee (or adjust it to a local equivalent that is affordable)
  • have the affiliates decrease their prices
  • spend a ton of money locally to advertise CF
what else can they really do to grow the affiliate chain?

Or go the opposite direction: accept that the number of boxes won't really increase globally (or even shrink) and extract more from existing partners. Obviously it is a very fine balancing act. But it could be a case of having premium products and premium customers that won't really care what the price is.

With all that said, I never really believed that CF could grow any more. All they own is the brand name (and top of the mind awareness, but how can they monetize that really?)

Anybody could offer producta and services without using the brand name. And they do:
  • Gyms (e.g. NCFIT)
  • Competitor programming, camps
  • Affiliate programming
  • General programming for avarage folks (gym or home focus)
  • Certifications (e.g. OPEX)
How come for example that the owners of the CrossFit Games don't have a competitor training program service!?
 
@grace4nan The best way to find out all these answers, in my opinion, is to use those support groups CFHQ has in regional areas to contact local owners. Get a feel for what the affiliates are feeling right now with inflation being high and the possibility of increasing cost from the top. If you got the majority coming back to Faul saying an increase is going to kill us then I think you got to side with your people versus money. For now.

I mentioned this in another post earlier this week that CF growing isn't HQ's problem but the affiliate owner problem. Sure it would be nice to get some advertising and some other things. If I remember was it on Sevan or Hiller youtube that a guy had a sign out in public saying one week free? That's how you do it, that's how you spread the word. Owners need to get creative and sell there box to everyone. So it's not that CF can't grow or won't grow, it's when can we get affiliate owners off the couch and out of the box and into the public?
 
@zongruger This doesn’t work

Let’s say I own a box. CF toilet swimmer

And let’s say I hit the streets with some flair and get 350 members. Then I invest in my coaches and make them all better. Everybody gets paid right? Win win right? WRONG!

Here’s how it plays out: a coach leaves and starts their own box .7 miles away. They undercut me on price and take 1/3 of the members because
  • 1) it’s cheaper
  • 2) the new box is closer to some peoples homes
  • 3) she was already coaching them anyway so they trust her and she’s good because I paid for her to attend 6 workshops and 4 Certs plus coaching for a year at my gym
The crossfit business doesn’t work. You can’t expect differentiated effort or pricing power for a commodity product.

The reason owners don’t hit the streets is because of what I just described. That’s a real example of market forces, not Greg’s “cream rises to the top” bullshit
 
@thunderstruck I disagree. I think maybe your statement hold truth if you’re in a small town with very little competition or the owners don’t like each other.

But what I’ve seen in my area is gyms raising prices to align with competition in the area. Not exactly matching dollar for dollar but coming close. No ones pricing anyone out. I’ve also seen coaches come and go and never once taking any sort of percentage of the current customers. Maybe a couple if that.

I can count 5 gyms within 4 miles of my house. All of which would be good places to join. One of them actually holds classes on gymnastics and teaches other gyms. Another gym is Games affiliated and heavy on competitions but there’s zero hard feelings for those that want that.

If what you say is actually going on then that’s a major problem with those owners.
 
@zongruger You’re proving my point. Eventually the cannibalization stops and an equilibrium is reached. You shouldn’t have 5 gyms that close.

CrossFit is the only gym business that charges premium membership prices for low end facilities and accommodations. $200 a month for a warehouse with no climate control and bare bones (if any) amenities.

What you should have in the market is one or two extremely well equipped boxes: space for multiple classes, rooms for specialty classes, coaches who can specialize, nice showers, laundry service, employees who make real incomes, locker rooms and changing areas, maybe a daycare, athletic training area for other sports, cafe, the kind of stuff you’d see in Lifetime Fitness, which is the same price as CF.

The low affiliate fee is the reason for the high membership cost and facilities. In your market, the customers lose and HQ wins. This is one k a few reasons crossfit is smaller than it was 5 years ago
 
@thunderstruck Like I said gyms that close together all comes down to population and the size of classes at the box. If I were to combine the 6 gyms in my 5 mile radius it would be mass chaos in every class. You’d have to build just for the parking alone. And building is going to cost a butt load more and be more of a headache then renting.

Smaller gyms is better for everyone.
 
@zongruger
guy had a sign out in public
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Hiller's friend.

So it's not that CF can't grow or won't grow, it's when can we get affiliate owners off the couch and out of the box and into the public?
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I guess that's what HQ is trying to do to some extent (small business best practices) so as to
  1. not lose existing affiliates
  2. ideally get more money from them
Why would Faul want 25% more clients for them and suggest monthly fee increases for them otherwise? The same analogy at the box level as what I'm suggesting HQ wants to do.
 
@grace4nan I think that's the best way to go about this, small business mindset. CFHQ just keeps putting out courses and offer open lines of communication. Along with a professional media team. Once you get the affiliates out of the box and see increases then lets revisit the idea of increasing fees.
 
Another thought:

What if CF did away with the requirement that the license holder has to be certified? And only the coaches are required to be L1/L2 and the company owner could be any business person. Maybe allow/encourage to put affiliates inside globo gyms too (better facilities, combined offers).
 
@grace4nan Yes, I don't know if you're aware but inflation has been going on for a couple of years now. So yes, all the prices of everything will go up.
 
@grace4nan It’s interesting, but for increasing affiliate fees only generates shorts term income without solving any of the broader problems at the CrossFit affiliates.

They can increase open fees all they want, but there’s already a lot of people who won’t pay 20 dollars let alone 25 or more. Increasing that price is just one more reason for people not to sign up. Plus, HQ used open sign up as a metric for advertising and partnership deals. The number of open participants, aside from income generated, is important for those other revenue streams.

Affiliate owners would lose their minds over the last one. One of the biggest pros of opening a CrossFit gym is the low financial barrier of entry and overhead. These are small businesses where good coaches are hard to find and keep. Adding requirements for coaching certification could make or break a lot of gyms.
 
@chickenlittle
One of the biggest pros of opening a CrossFit gym is the low financial barrier of entry and overhead.
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But isn't it the beauty of this plan (and that's why I think it's possible) that with the 14,000 units CF only has to raise the annual fee by the equivalent 1-2 monthly client fees per gym and they have millions more in the bank.

They have sneakily increased the 'Open' fee in a way as well already, because for the same fee you now only get 3 weeks and you have to pay more to go on to the QF.
 
@grace4nan That beauty is only from the perspective of CrossFit and doesn’t account for the fact that you might lose affiliates over time. You’re doing all your math assuming the 14,000 number will remain. What if increase drop it to 13,000? That has to be accounted for when doing financial models.

The open fee isn’t he same as the price. We can argue this all day, but at its core it’s still 20 dollars. And at the end of the day your have to account for less people signing up because it costs more.
 
@chickenlittle Obviously, but still, I think this is the direction of the new owners, especially before they will sell it again.

And what if they don't change anything and it will not grow in numbers either (affiliates, participation, etc.)?

And good that someone reminded me of the grandfathered in price. Just because Glassman said so X number of years ago, and because it didn't matter to him financially. This could be the first to go.
 
Yesterday on Sevan's it was commented that the affiliate fee will be $4,000 from Jan 1.

Anybobody has confirmation of that?
 
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