CrossFit 2024: increase in affiliate fees

A cold shower, that's how thousands of owners of CrossFit-affiliated gyms around the world greeted the email received on the evening of November 30 from the company's top management. Subject: Significant increase in annual membership fees from 2024.

From the current 3,945 euros per year, it will go to 4,500 euros for each affiliate. An increase of 12% in one fell swoop, communicated without particular preamble to local operators, the beating heart of the CrossFit network since its origin.

The motivations: invest to grow, even at the cost of losing marginal affiliates

In addition to the generic reference to the need to "support growth", CrossFit's announcement goes into detail on three key areas of investment that will benefit from the surplus of fees collected: technology and digitization, marketing campaigns to raise awareness of the brand, tools and training to improve the quality level of the network.

The goal seems clear: to attract a greater volume of potential new members and then direct them to local affiliates where they can carry out training. Invest not only in the quantity but also in the quality of the experience offered in the gym, standardizing the methodologies and skills of CrossFit trainers and coaches.

But is it really just a question of financing the aggressive growth plan outlined by management? Or is there something else behind this move?

The possible scenarios: runaway affiliates or a new growth boom?

The reaction from the network of over 13,000 CrossFit affiliates around the world was not long in coming. On forums and dedicated groups, many owners have expressed discontent and concern about increases considered excessive in times of runaway inflation and operating costs already under pressure.

According to early projections, about 15-20% of affiliated gyms would be at risk of non-renewal of membership in 2024. These are mainly smaller and marginal companies, which were already struggling to remain solvent or attract new customers. The further burden could decree its "death" or at least a repositioning.

On the other hand, with fewer affiliates but a more consistent and quality customer experience, CrossFit LLC may still be able to increase aggregate profits. In addition, a "selection effect" would make the network of gyms even more focused, attractive to new members and easily integrated for potential future buyers.

Goal 2030: a great opportunity or a mere marketing operation?

The stated ambition to double the current 15 million CrossFit practitioners globally by 2030 seems very difficult to achieve in a highly competitive context such as the fitness market. Is it credible or is it just a communication move to generate hype towards possible investors, in view of a future acquisition or IPO?

Berkshire in the field to capitalize on the investment

The Berkshire Hathaway fund holds a significant stake in CrossFit LLC. It is safe to assume that, as an investment fund, Berkshire does not want to remain indefinitely in the shareholder base but to monetize its investment over a medium-term time horizon.

The current crackdown on affiliates and related fees should probably also be read in this light: increasing margins, the scalability of the model and the overall value of the CrossFit network in view of a future sale or listing on the market.

In particular, the strategy could consist of:

  • Increase Revenue – Increasing affiliate fees and investing in marketing/technology to drive member growth aim to increase CrossFit's overall revenues. This makes it financially more attractive as an "asset" to potential buyers.

  • Improve brand quality - Requiring more training/certification for instructors aims to standardize and improve the quality of the CrossFit experience across affiliated gyms. This protects and strengthens the CrossFit brand.

  • Centralize control - Moving to a more "corporate" model where the central company exerts more control over the actions of local affiliates can facilitate future integration into a larger entity if acquired.

In summary, the most likely strategy is to increase the overall value of the business (revenues, brand, organizational structure) to make it a more attractive "product" for an exit of Berkshire Hathaway through acquisition or IPO in a medium-term time horizon (3-5 years).

If at some point the "pressure" of affiliates were to become too strong, a sort of "affiliate buy out" or crowdfunding intended for affiliates only, could also be a smart political move to "calm them down" and keep them aligned with the central strategy. However, this would entail a decentralization of the structure of control and power, thus going in the opposite direction to the strategic one that seems to be the most plausible.

The affiliates "defected" without the CrossFit brand: what future?

What will happen to affiliates who, for various reasons, decide not to renew their CrossFit membership in the face of the consistent increase in fees required? They will find themselves without being able to take advantage of the name and brand awareness generated over the years.

There are essentially four options on the table:

  1. Complete rebranding with new name/identity
  2. Switching to another franchise known in the market
  3. Creation of a new independent network together with other disgruntled ex-affiliates
  4. Return to the single independent gym model

The choice will depend a lot on the characteristics and positioning of each company. Boxes, with a substantial number of loyal customers and sites in strategic locations, have a decent chance of surviving even if they completely overturn their name and concept. For others with a more fragile business, the blow can be fatal.

Perfect, I proceed to develop the final critical analysis section on this CrossFit strategy and the possible future evolutions in the relationship between headquarters and affiliates.

Towards a more "corporate" model: the cultural crossroads

The moves described seem to outline a progressive move of CrossFit from its origins as an innovative and community-based start-up, towards a more structured and "corporate" model of network management.

On the one hand, this can ensure greater efficiency, profitability and attractiveness to potential buyers. On the other hand, there is the risk of distorting the initial spirit of sharing and horizontal relationship that animated affiliates and members.

A difficult cultural crossroads that CrossFit LLC must manage carefully, otherwise there will be even greater tensions and conflicts with that part of the base that feels betrayed in the founding values of the brand.

Sustainability and equity: the challenge to strengthen the relationship

In conclusion, time will tell if this strategy of growing and strengthening centralized control will be successful, to what extent, and at what price in terms of community response.

Much will depend on CrossFit corporate's ability to proactively engage affiliates, communicate transparently, and support the profitability of the business model with fair fees and royalties. Not only shareholder value, but also partnership value. The complex relationship between the centre and the periphery has yet to be rewritten.

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