The CF Finances Thread

[Steve Romer]

Originally Posted by Ganine Vanalst

I don't think we're happy enough. I'll teach ya to be happy:

Happy Happy Joy Joy

(Oh, not w/f/s)

Ban them!!! hahahaha!!!!!!!!!!!!!!!!

Funny and annoying all at the same time.

[Shane Skowron]

Originally Posted by Brad Miles

Glassman says in the video in the beginning here are some numbers 500,000 journal subscriptions. 500,000x $25= $12,500,000

http://www.youtube.com/watch?v=sUj5YAnA0bQ sfw the evolution

No he's talking about what he wants.

That's hilarious, though. He seriously thinks he can get 500,000 journal subscriptions? That's a quarter of the circulation size of the Wall Street Journal. Think about that for a second.

If the forum membership is any indication of Journal subscription, the current subscription number is well under 25,000, perhaps a tenth of that.

[Justin Herring]

Originally Posted by George Mounce

CrossFit hate never gets out of hand. If you don't care and don't want to be part of the process of looking into how they run their finances, then it seems you don't want to help Parker. That is fine, and your choice. But don't sit here and troll the thread to try and turn it away from what he is trying to do. That is the mod's decision on whether they want it on their forum.

This isn't even close to the hate, go to IGX, and you'll see there is a heck of a lot more to this over the years.

Hey, I think how Crossfit Inc is run is an interesting topic. Once upon a time I was a management consultant, and I think how companies and markets operate is an intrinsically interesting subject.

It looks like Parkers original estimate needs to be modified to include: 1) more costs to operate a cert (airfare, hotel), 2) not all non-Level I certs sell out, 3) HQ overhead costs (facilities, however modest, accounting, legal, etc). HQ may have only 8 employees, but when you add it up, including travel, benefits, salary, it could easily be $1 million. Plus they may have more than 8 by now. Also, the CF Games have to be a source of profit this year, but probably drive up the payroll too.

That said, per the first post in this thread, this is apparently an exercise to uncover a "control fraud." That is silly. Greg Glassman doesn't need to rig the company rules or embezzle. He owns the company.

[Patrick Donnelly]

Originally Posted by Justin Herring

It looks like Parkers original estimate needs to be modified to include: 1) more costs to operate a cert (airfare, hotel), 2) not all non-Level I certs sell out, 3) HQ overhead costs (facilities, however modest, accounting, legal, etc). HQ may have only 8 employees, but when you add it up, including travel, benefits, salary, it could easily be $1 million. Plus they may have more than 8 by now. Also, the CF Games have to be a source of profit this year, but probably drive up the payroll too.

Just throwing this out there, but I heard that the Games last year lost $300k. I'd like to see the math on how that happened, haha.

[Ganine Vanalst]

Originally Posted by Justin Herring

Trademarks are about brands.

Not that it would change your points at all, but it seems like CrossFit would be more of a "service mark" and not a "trademark." From the United States Patent and Trademark office:

What is a trademark?

A trademark includes any word, name, symbol, or device, or any combination, used, or intended to be used, in commerce to identify and distinguish the goods of one manufacturer or seller from goods manufactured or sold by others, and to indicate the source of the goods. In short, a trademark is a brand name.


What is a service mark?

A service mark is any word, name, symbol, device, or any combination, used, or intended to be used, in commerce, to identify and distinguish the services of one provider from services provided by others, and to indicate the source of the services.

Originally Posted by Justin Herring

The fact that crossfit is a big financial success is not surprising, it isn't a secret, and it isn't nefarious. People get rich every day in this country selling everything under the sun.

I agree that making money in and of itself is not bad. More power to anyone who comes up with a great idea and gets rich as hell off of it. It does seem like it's human nature to want to tear down people who have done well out of jealousy, envy, etc.

In my opinion, CF making money, even a lot of money, isn't the problem, it's the deception, hyperbole, hypocrisy, intimidation, character assassination, deflection from the truth, double standards, misrepresentation, and lack of true concern for its customers (both the end user's of the "program" and the affiliates) that is the problem.

Originally Posted by Brandon Oto

Really interesting and tasteful work, Parker.

I agree with Brandon, Parker, that it is interesting information you've gathered, although I personally don't think it is applicable to CF's business model.

I think a lot of the recent events have been good to help expose and bring to light more of the cult-like dynamics of the organization. The organization is showing its true colors more clearly as time goes on and people will either open their eyes to the truth or continue to deny/ignore it, but you can't make people see what they don't want to see or admit what they don't want to admit. And many do see but don't care because they feel it is worth it to them from a business perspective.

Other than my attempt above at comic relief from the absurdity that is CF that is all I've got to contribute. Be thankful you weren't delusional enough to take the bait and affiliate like some of us stupnagles (is that how you spell stupnagle???).

[Parker Willis]

Just to clarify, none of my posts were accusing anyone of fraud. I simply felt that the passage from the book had an eerily similar overtone to CF practices, and posted it for anyone to read. I have stated that I don't think CF is a Ponzi scheme. Something, somewhere seems suspicious (in my opinion) and I would like to check it out, to satisfy my own curiosity. I think those invested in CF (affiliates, certified trainers) would be wise to do the same. I'll be doing my best to collect the facts first and then come to any conclusions. In short, I'd like to know how CF runs itself, and how money flows around the enterprise.
Justin, I agree with you. Do you have any clue as to how I would modify those numbers, or could you get some numbers somehow, which could be verified? Does HQ pay hotel and plane tix? I'm not looking to argue with anyone, but I got that "53 average cert participants" number by averaging the count of the 5 most recent certs as posted on crossfit.com. The numbers ranged from 62 down to 38. Do you have a more appropriate number I might use?

[Emily Mattes]

A question for the lawyers:

If Crossfit were to go to court to defend the brand name, would that make them open to being considered a franchise or something by the IRS? Or are those totally different issues?

[Jonathan Yoon]

Originally Posted by Emily Mattes

A question for the lawyers:

If Crossfit were to go to court to defend the brand name, would that make them open to being considered a franchise or something by the IRS? Or are those totally different issues?

Not a lawyer, but I've talked about this before with a few lawyers about this.

Answer: Yes, if the opposing party makes the franchise/affiliate thing apart of their argument.

[Justin Herring]

Originally Posted by Parker Willis

Do you have any clue as to how I would modify those numbers, or could you get some numbers somehow, which could be verified? Does HQ pay hotel and plane tix? I'm not looking to argue with anyone, but I got that "53 average cert participants" number by averaging the count of the 5 most recent certs as posted on crossfit.com. The numbers ranged from 62 down to 38. Do you have a more appropriate number I might use?

53 sounds like a good estimate for Level I certs. Let me take a 1-minute stab:

1. My Lev I had 7-8 trainers that I remember (Budding, Sherwood, Wolf, Gilson, Jeff & Maggie from CF Fairfax, another guy maybe from HQ, and I think I'm missing a trainer). Airfare/hotel for the group (2 were local from Fairfax) probably comes in at a couple of thousand.

As an aside, the Crossfit Greyskull guys were at my cert. I remember the owner and his girlfriend/assistant-coach because they were very friendly and wearing/selling some cool "Greyskull' shirts I almost bought. The woman was a firebreather, and she absolutely destroyed the workouts. They were talking about how they had just gotten started training suburban housewives (and that watching their kids while they trained was an important part of the business model) and now clients were starting to bring their husbands. They were serious crossfit koolaid drinkers even by the standards of a cert. How things change...

For non-level one certs, just assume 40 attendees on average? Also, for certs with SME experts, they probably get more than the trainers. I'm sure Martone/Rip/Wolf/etc got more than $400 for running their own certs.

For the games: you can go to the website and see how many people are competing at regionals. Assume 1 spectator for every attendee. Assume 5 times as many people at the Sectionals and 1 spectator for every 2 attendees (too many for the Sectionals?). I don't know what the costs are--do they have paid staff? Need equipment? Pay the host site? Food?

The Games themselves are tough. Revenue is from sponsors and spectators. I have no idea of the cost structure for an event like that.

I would assume CFHQ has about $1.5 million in fixed overhead, including salaries and stuff.

That is all off the top of my head. Feel free to pick it apart.

[Justin Herring]

Originally Posted by Emily Mattes

A question for the lawyers:

If Crossfit were to go to court to defend the brand name, would that make them open to being considered a franchise or something by the IRS? Or are those totally different issues?

I know zilch about franchise law, but I just read the wikipedia entry. (love that wiki). That doesn't count as legal research, but it doesn't look to me like affiliates are anything like franchises.

Correct me if I'm wrong, but thought you get three things for being an affiliate:

1. Right to use the crossfit brand.
2. Read/post on affiliate board and invitation to affiliate gathering.
3. Opportunity to use their group insurance thing, whatever that is worth.

Am I missing anything? #1 seems like the only thing that matters. A license to use a brand is a pretty far cry from a franchise, as far as I know.

Why does it matter? Why would the IRS want to tax HQ for the revenue of an affiliate that doesn't go to HQ?

Originally Posted by Jonathan Yoon

Not a lawyer, but I've talked about this before with a few lawyers about this.

Answer: Yes, if the opposing party makes the franchise/affiliate thing apart of their argument.

There is a legal principle that if you successfully assert something in your defense or for your own benefit in a legal proceeding, you can't latter deny that same thing when it becomes advantageous to do so. In other words, you can't tell Court #1 X on Monday, win because of that, and go tell Court #2 not-X on Tuesday. (If you lose in Court #1 then usually you can go assert not-X latter down the road.) As with all legal principles, there are exceptions.

I'm still not clear on why HQ would want to claim affiliates are franchises.