CrossFit’s extremely lucrative business plan is also deceptively simple
CrossFit’s extremely lucrative business plan is also deceptively simple
Submitted by Professor Ben-Joseph on Thu, 2015-07-23 09:38
“I don’t understand CrossFit’s business plan,” my middle-aged friend said,
looking up from the floor where he lay next to a barbell, panting in a pool of
his own sweat. Like many of the former athletes, weekend warriors, and
get-in-shape hopefuls who have flooded to this cult-like fitness program, my
friend was caught up in the hype but still unsure how and why he was paying 10
times the cost of a traditional gym.
He’s hardly alone. As some of the “fittest people on Earth” converge on Los
Angeles for the CrossFit Games, it’s hard not to admire what the fitness
phenomenon has become. Over the last three years, CrossFit has
tripled its number of gyms around the world and seen competitors increase
20-fold in its flagship five-week Open event—held at the end of February of
every year—which winnows the field from hundreds of thousands to the final 40.
These last men and women standing compete in
the CrossFit Games, which began Tuesday, July 21 and will finish up on July
Created by Santa
Cruz personal trainer Greg Glassman 15 years ago, CrossFit’s strange fitness
subculture offers an intense promise to new converts. With a background in
gymnastics and an interest in weightlifting, Glassman was fixated on creating a
fitness program that was measurable, observable, and repeatable with an
engineer’s precision. The
result has not only spawned nearly 12,000 small CrossFit-affiliated
“boxes,” as the franchised gyms are called, but an entire sport: the
so-called sport of fitness. Reebok, for one, has since bought into the idea, and
Glassman now presides over the entire affair with FIFA-like domination.
Though not a tech company, CrossFit’s success is tied directly to the birth of
the web era and the growth of mobile media. In the beginning, CrossFit gained
converts by posting daily workouts on a no-frills website. It still does, but
now those daily workouts are also mobile-friendly and broadcast to CrossFit’s 864,000
followers on Instagram.Super-charged by social, CrossFit has an Uber-like
emphasis on letting its affiliates bear the capital costs while Glassman keeps
the ideas and image of the sport tightly within his own grasp. Whether
purposefully or through a fortuitous accident, Glassman’s diffuse, no-frills
business model has transformed a bunch of fitness nuts lifting tires in their
garages into a brand Forbes
estimated is now worth $4 billion. And the juggernaut shows no signs of
slowing down anytime soon.
The first key to Glassman’s success is his promotional prowess. CrossFit
maintains a sophisticated video production operation in the Santa Cruz
headquarters that exploits the power of social media and regularly pumps out a
broad range of videos. Some are multi-part documentaries dramatizing the Games
and the story behind each event. Others provide personal vignettes of CrossFit
athletes that would make American TV sports legend Roone Arledge proud. Some of
these videos simply document the proper technique for an exercise or Open event.
Taken together, the video operation has created a pantheon of characters who
epitomize CrossFit’s stated values of humility, self-challenge, and communal
But while social media may be the lifeblood of the CrossFit enterprise, its
rabid participants are the beating heart of Glassman’s business plan. Many of
the numerous CrossFit boxes around the world started in garages, as like-minded
enthusiasts gathered to try their luck at the website’s daily workout. Those
casual groups eventually sought out Glassman for training and legitimacy.
Which leads us to the actual money. Glassman’s privately-owned business makes
its money in three ways: $3,000 affiliate fees for the nearly 12,000 boxes
around the world; $1,000-a-head seminars for anyone wanting to be a CrossFit
instructor or affiliate holder; and its lucrative Reebok partnership, which
includes sponsorship of the games and licensed apparel. In 2012, CrossFit
said it was grossing $40 million a year and predicted that that would double
every 18 months.
On that trajectory, CrossFit HQ, the comparatively small organization that
devises the workouts, trains the coaches, certifies affiliates, manages
partnerships and, now, produces a great deal of original video content, could be
making upwards of $160 million today. Such estimates—as a privately held company
CrossFit does not have to disclose its financials—are based on the amount of
money 12,000 boxes should be bringing in affiliate fees (up to $36 million a
year) combined with training revenue. To keep pace with demand, CrossFit needs
to train tens of thousands of new coaches a year. With 252 locations offering
courses, certifications could bring many tens of millions of dollars more.
And that’s not including Reebok. Considering all of the Reebok shoes, shorts and
sports bras that get sold, along with the television revenue from ESPN and the
entry fees from the CrossFit games, a $160 million projection for 2015 seems
Glassman’s original insight was to control what was important to him and let
others deal with the rest. CrossFit may have made Glassman rich, but he’s left
plenty on the table for everyone else, not just the shoe companies. Acting a bit
like the Grateful Dead which famously
allowed anyone to record their concerts and sell the tapes, Glassman has
created a broad CrossFit ecosystem.
Another huge part of CrossFit’s appeal has been its ability to scale. For its
maniacal following of military personnel, firefighters and team athletes, the
jump from fitness lover to affiliate owner is not that difficult. Once a
prospective box owner has completed his or her certification, the barriers to
entry are quite low. CrossFit gyms are called boxes to emphasize their low-tech
bias. Many are opened in former industrial settings, within garage or
loading-bay doors for example, offering access to fresh air.
Start-up costs are so low, in fact, that few box owners took Reebok up on its
offer to provide cheap financing in exchange for the Reebok name. Still, the
economics of CrossFit make it unlikely that gym ownership will be a path to
financial independence. Most boxes offer monthly memberships for somewhere
around $200 per month with additional discounts for long-term commitments and
for active military, police, fire personnel, and teachers. This means that a box
owner with 100-150 members may not clear a six-figure income after expenses.
Benefits are another issue entirely. Many box owners, like
my coach at Empire State CrossFit, Daniel Stearns, are former personal
trainers whose income was limited by either the number of hours they could
schedule or the wealth of their clientele. For those trainers, CrossFit’s class
format—where they are no longer towel-toting cheerleaders—has been liberating as
well as enriching.
Not to mention that the program’s emphasis on community has been
a boon for its homegrown PR efforts. CrossFit box owners are rewarded for their
mastery of social media. Like a multi-level marketing scheme, much of CrossFit’s
training revenue comes from former students who want to open their own boxes.
That growth has been good for Crossfit and great for the growth of the games.
CrossFitters—whose first rule, it is often said, is never to stop talking about
CrossFit—are eager to post their accomplishments on Facebook, Twitter and
The sport has also spawned more than its share of Instagram stars: Two winners
of last year’s games—Camille
LeBlanc-Bazinet and Rich
Froning—have 600,000 followers and over 450,000 followers, respectively. And
Instagram has also made stars of some of the sport’s more photogenic but perhaps
less accomplished athletes like Lauren
Fisher (398,000 followers) and Brooke
Ence (154,000 followers).
Today’s CrossFit athletes are sponsored by a wide array of equipment, apparel,
and supplement manufacturers. These stars, in turn, employ a growing list of
influential coaches and movement specialists. As “the sport of fitness” gains
more adherents and hopefuls, websites, clinics, and seminars are multiplying
into a virtuous cycle.
Sharing a messianic desire to change the world like so many of his tech
entrepreneur peers, Glassman’s CrossFit is inseparable from the birth of our
modern, decentralized media landscape. Its growth tracks the growth of social
media and mobile technology, making CrossFit’s business both a platform for
other entrepreneurs and a dynamic, lucrative ecosystem as a whole.