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Old 08-10-2012, 08:00 AM   #411
Aaron Lengel
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Re: Stop Anthos from Taking over CrossFit

Quote:
Originally Posted by Russell Berger View Post
The video in question is really easy to find. Putting your questions about it in this thread and asking us to weigh in is easy. Why is it so important that we allow you to include a link to what is obviously deceptive propaganda?

If you have a legitimate question about a claim this video makes post it here. Let's just start with the "better offer" claim Lauren makes. I've been given permission to publish our offers to Lauren. Here is the timeline from our accountant:

"December 13th meeting: Proposal was given to Lauren for $1.5M for 15 years My understanding was they would get back to Harvey in three weeks.


March, 2012
We all met in Harveys office and from there a letter was sent requesting a response to our offer made in December by April 16th.

April 16:
We received a counter proposal with three options. I had numerous discussions with Lauren and that we were leaning toward option one: $17.5MM over 5 Years Tax Free. Lauren seemed very pleased as this met with her objective to have a shorter payment schedule. THERE WAS NEVER A PROPOSAL THAT SHE DESIRED ALL CASH UP FRONT!

June 4th:
We countered with on Option one to ladder the payments each year as follows: $1.5M. $2.5M, $3.5M, $4.5M AND $5.5M for a total of $17.5M.

June 18th:
We received a rejection of that offer from Grace Park and also that the original three proposals were being withdrawn.

I later met with Lauren and asked why they didn't submit total cash payment upfront...her comment was we didn't think you would be able to come up with the cash. So will you take cash from us and she said no I can't due to the definitive agreement she signed with Anthos."

Note, all of our payments to her would have been TAX FREE. She is currently taking a payment of 20 million (that we would have gladly met to counter Anthos had we been given the chance) and her 20 million is subject to a 40% capital gains tax.

So if you still think this was just about the money...
Quote:
Originally Posted by Lauren's email
Some have claimed that I made the decision to sell my 50% interest in CrossFit for personal, rather than business, reasons. Some have said that I even rejected better offers from Greg. These claims are just not true It is true that I have a definitive agreement subject to court approval to sell my interest in CrossFit to Anthos for $20 million upfront. After discussing the matter with advisors, and considering multiple factors, I came to the conclusion that the Anthos deal was a better offer. While I would like to provide the details of Greg's offers, this requires permission from Greg to provide those details, and I have not yet received that permission.
In the video Lauren goes on to say she and her financial adviser didn't feel Greg's offer was in the same universe...

This is so messy!!! Based on information released, Lauren comes across as a vindictive liar (not a personal attack, just my assessment of the information released). Compare this to Greg sitting with a group of people having what appears to be an honest conversation and I can't help but sympathize with the man. Honestly all this just makes me feel really bad for Greg. I couldn't imagine pouring my heart into something with another person and having them turn around and do what Lauren is doing. Absolutely mind boggling...
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Old 08-10-2012, 08:41 AM   #412
Russell Greene
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Re: Stop Anthos from Taking over CrossFit

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Originally Posted by Patrick McCarty View Post
Steve, very well said. And it does not have to be a criticism of CFHQ to state that realistically, the company has grown beyond the point of the current leadership to manage it. That, unfortunately, sometimes happens when businesses explode in growth. It's why corporations that were started by a couple of upstarts end up with Boards of Directors and CEOs, etc.

Is it possible, and is it heresy, to ask the question - might a corporate partner who specializes in growth, vision, and profitability actually be a potentially good merger? Is there something the affiliates are overlooking by slamming their doors and saying "no thanks"? IS there room for growth, professionally and corporately?

I am just asking the question. But I think if the answer is "no - we're fine. Everything is fine. There is NOTHING that needs to be improved.." then we're being naive as a community.
Patrick,

No one is claiming that CrossFit HQ is perfect. I wonder, however, why you think that Anthos is capable of doing a better job than the man, and his staff, who built this company and achieved incredible growth during one of the worst economic climates in recent history. The number of CrossFit affiliates has approximately doubled in the past 18 months. The CrossFit Games went from the Castro ranch to running on ESPN2 and setting record Home Depot Center tennis stadium crowds in just a couple years. During this entire time, could anyone make the argument that fewer people are getting less fit, or having less fun doing it, than they were earlier?

Now, as for Anthos, I think Bryan Kelly's June 22, 2011 email says more than enough:

"While I respect your position that an equity investment in Crossfit Inc is not possible, I implore you--for both Greg's sake and Crossfit's--to find another way to address what I believe to be over the long-run a very risky, unstable 50-50 ownership structure.

While I find your loyalty to Lauren admirable, the the realist in me believes that the passage of time and offers for large sums of money will make this situation precarious to say the least. We all agree that Crossfit is destined for tremendous growth and this growth will almost certainly be accompanied by offers to purchase all or part of the Company. The last situation you want to find yourself in is one in which an investor/company you do not trust convinces Lauren to sell her share (while I will never approach Lauren out of respect for you, don't expect others to hesitate to do so) and then you are stuck in a 50-50 ownership structure with a 3rd party who possesses the ability to create gridlock. You can partially address this risk via a simple operating agreement that at a minimum: 1) provides Greg with sole decision-making authority, and 2) provides the Company with a right of first refusal should either party desire to sell shares (this will not prevent her from selling, but will give you some control over determining who the stake is sold to). Thanks again for your time and for including me in the NE Games this past weekend - what a great experience!"

To review, Bryan both warned of the risk to Greg of a third party buying Lauren's shares AND promised that he would never do so. This was just over a year ago.
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Old 08-10-2012, 09:34 AM   #413
Tom Nguyen
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Re: Stop Anthos from Taking over CrossFit

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Originally Posted by Russell Greene View Post
Patrick,

No one is claiming that CrossFit HQ is perfect. I wonder, however, why you think that Anthos is capable of doing a better job than the man, and his staff, who built this company and achieved incredible growth during one of the worst economic climates in recent history. The number of CrossFit affiliates has approximately doubled in the past 18 months. The CrossFit Games went from the Castro ranch to running on ESPN2 and setting record Home Depot Center tennis stadium crowds in just a couple years. During this entire time, could anyone make the argument that fewer people are getting less fit, or having less fun doing it, than they were earlier?

Now, as for Anthos, I think Bryan Kelly's June 22, 2011 email says more than enough:

"While I respect your position that an equity investment in Crossfit Inc is not possible, I implore you--for both Greg's sake and Crossfit's--to find another way to address what I believe to be over the long-run a very risky, unstable 50-50 ownership structure.

While I find your loyalty to Lauren admirable, the the realist in me believes that the passage of time and offers for large sums of money will make this situation precarious to say the least. We all agree that Crossfit is destined for tremendous growth and this growth will almost certainly be accompanied by offers to purchase all or part of the Company. The last situation you want to find yourself in is one in which an investor/company you do not trust convinces Lauren to sell her share (while I will never approach Lauren out of respect for you, don't expect others to hesitate to do so) and then you are stuck in a 50-50 ownership structure with a 3rd party who possesses the ability to create gridlock. You can partially address this risk via a simple operating agreement that at a minimum: 1) provides Greg with sole decision-making authority, and 2) provides the Company with a right of first refusal should either party desire to sell shares (this will not prevent her from selling, but will give you some control over determining who the stake is sold to). Thanks again for your time and for including me in the NE Games this past weekend - what a great experience!"

To review, Bryan both warned of the risk to Greg of a third party buying Lauren's shares AND promised that he would never do so. This was just over a year ago.
He actually just promised that he wouldn't approach Lauren... Would you doubt that Lauren approached Anthos when she wanted out?

He then gave some great advice on modifying the operating agreement which Crossfit didn't seem to heed?
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Old 08-10-2012, 12:03 PM   #414
Chris Mason
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Re: Stop Anthos from Taking over CrossFit

At the risk of being redundant, I think most of the discussion here gets away from the end game which will effect all CrossFitters and affiliate owners. Private equity firms have a rule of thumb whereby they like to see a 5x return on investment in a relatively short period of time. That CANNOT happen without major changes to the CrossFit model. Ergo, Anthos buys in and CrossFit will very quickly change significantly. Period, end of story. If you like what you have in CrossFit you should be opposed to this proposed move.
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Old 08-10-2012, 12:10 PM   #415
Steve Kane
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Re: Stop Anthos from Taking over CrossFit

Quote:
Originally Posted by Patrick McCarty View Post
Is it possible, and is it heresy, to ask the question - might a corporate partner who specializes in growth, vision, and profitability actually be a potentially good merger? Is there something the affiliates are overlooking by slamming their doors and saying "no thanks"? IS there room for growth, professionally and corporately?
Bingo - that is what I was getting at. The hard part is I know, from having been in the situation in business before, is that if not managed properly it can feel like a personal attack and/or challenge to your ego. Reality is that under the right circumstances, you free up the leaders to do what they do best (cast vision/program/research/set strategy), and let someone else help with the details/execution. Why do you think big companies have COOs? The CEO comes up with the vision and hands it off to people to do it. Same thing in the military - the Commander sets the tone and the Chief of Staff/XO executes it.

Again this is all based off internet message boards, youtube videos, rumors, and inneundo - but at face value Crossfit is at a crossroads regardless of whether it is Anthos or someone else down the road.
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Old 08-10-2012, 12:47 PM   #416
Russell Greene
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Re: Stop Anthos from Taking over CrossFit

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Originally Posted by Steve Kane View Post
Bingo - that is what I was getting at. The hard part is I know, from having been in the situation in business before, is that if not managed properly it can feel like a personal attack and/or challenge to your ego. Reality is that under the right circumstances, you free up the leaders to do what they do best (cast vision/program/research/set strategy), and let someone else help with the details/execution. Why do you think big companies have COOs? The CEO comes up with the vision and hands it off to people to do it. Same thing in the military - the Commander sets the tone and the Chief of Staff/XO executes it.

Again this is all based off internet message boards, youtube videos, rumors, and inneundo - but at face value Crossfit is at a crossroads regardless of whether it is Anthos or someone else down the road.
Steve,

If you think that Bryan Kelly's plan sounds swell, please go and become his first affiliate. The same goes for you, Patrick. I intend no ill will when I say that.

I've spoken to Greg, at length, many times, about this issue. He has always said that he only wants people on his side who understand and appreciate CrossFit's elegant prescription for fitness and business. If you think Anthos could add some tools or products and make a better fitness company, we will not stop you guys from joining them. We'd love for you to leave.

I can't help but notice, however, the discrepancy in responses. With few exceptions, CrossFit Affiliate owners tend to think that outside intervention in their business is a horrible idea and a violation of CrossFit's covenant with its affiliates.

On the other hand, those who support Anthos' plan, such as Patrick and Steve, for the most part do not own CrossFit affiliates. There must be something about owning your own affiliate that makes you hyper-vigilant to the perils of outside intervention.

Lastly, think to yourselves, how would you have reacted if Greg Glassman had sold out to Anthos and left the affiliates behind? Would you have taken the side of Greg and venture capital against the 4,400 affiliates whose business models and independence were now at risk? Would you not accuse him of betraying all that he'd said and built?
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Old 08-10-2012, 01:41 PM   #417
Brent Eno
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Re: Stop Anthos from Taking over CrossFit

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Originally Posted by Russell Greene View Post

I can't help but notice, however, the discrepancy in responses. With few exceptions, CrossFit Affiliate owners tend to think that outside intervention in their business is a horrible idea and a violation of CrossFit's covenant with its affiliates.

This is exactly right. I've met some very intense and passionate owners. Simply put, very few owners will put up with bull**** from anyone. Their businesses are their livelihoods for a lot of them, and they won't deal with an outside entity telling them how to run their business. Even if we assume the worst and Anthos does try to make changes to the business model, very few will go along with it. I don't want it to happen, but if it does, I'm not worried. This community is pretty damn strong.
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Old 08-10-2012, 02:08 PM   #418
Bryan Kemper
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Re: Stop Anthos from Taking over CrossFit

There are a great many companies that provide Crossfit related goods and services. If Anthos has such a great vision to make Crossfit better, then let them develop, market and provide a better product or service that the affiliates or individual client will use. When I hear "money left on the table", I do not immediately think that it is a novel or useful tool instead it is a way to get more money out of a fat cash cow. That is not the community that I joined.
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Old 08-10-2012, 03:07 PM   #419
Joe Koltz
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Re: Stop Anthos from Taking over CrossFit

With all the information posted on the Internet, lawsuits, counterclaims, PR videos, etc. There are a few questions that seem to be left unanswered.

First, my understanding of Crossfit's current model is that it is very geographically spread without a bunch of infrastructure that is self sustaining and has reasonable cash flow. In theory a VC firm could look at that model and say "wow, look at all that money that we could have a chunk of every quarter.". They also may say things like "wow, look at this captive market of 4,400 store fronts with an average of 100 customers that we could sell products into, or better yet charge someone a fee to sell their products into." almost a half a million customers isn't a bad market. Or they could try to centralize memberships and simply charge a small fee for billing and collections of said fee. Let's say just $1.00 per month per member. The Affiliate only loses $100 per month but saves a bunch of time and effort and VCCrossfit picks up an extra $5,280,000 a year. The question that I haven't seen answered yet is with the proposed deal can Anthos force their approach downstream to the affiliates or is the concern that their involvement simply halts the progress that Crossift is making?

Second, and by far more concerning is with relation to the actual Asset value. Let's say someone like a VC firm comes In and ends up with a 50 percent share of Crossfit, Inc. and then through whatever means creates a more marketable (ie. storefront, shoe depot...) product focused location, centralizes corporate control and membership and in the process creates a larger bottom line for the "corporate Crossfit, Inc.". What do you think the next move is going to be? I think Mr. Kelly already told us. He mentioned the holding period for an investment. That is a nice way to say exit strategy. Who is Anthos going to sell the new and improved GloboBox Crossfit to when their "holding period" runs out?

Finally, I can't believe that this "definitive agreement" isn't anything more than a deal that is subject to approval by the family court in AZ and as such could be completely disregarded by the judge if he found that their was another viable alternative presented to him that would put Ms. Glassman in the same position as she would be with Anthos. My experience has been that family court judges have a great way of seeing through all the talk about how "I just want what is best and only I know what that is so trust me even though I haven't been involved for 2 years" once a matching offer is on the table. As cynical as it may sound, divorces come down to money, every time. Has Crossfit, Inc. put that offer on the table?

My hope is that Crossfit stays true to what it is, a grassroots movement that is improving the way ordinary people move and live as well as providing us with the entertainment of watching extraordinary people show us what levels of performance the human body is actually capable of.

No matter how this all shakes out clearly Crossfit has reached its next level of evolution and as such I hope it takes steps to better protect itself, because like it or not Mr. Kelly was right about the 50/50 structure not working long term.
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Old 08-10-2012, 03:18 PM   #420
Ian Nigh
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Re: Stop Anthos from Taking over CrossFit

Quote:
Originally Posted by Joe Koltz View Post
With all the information posted on the Internet, lawsuits, counterclaims, PR videos, etc. There are a few questions that seem to be left unanswered.

First, my understanding of Crossfit's current model is that it is very geographically spread without a bunch of infrastructure that is self sustaining and has reasonable cash flow. In theory a VC firm could look at that model and say "wow, look at all that money that we could have a chunk of every quarter.". They also may say things like "wow, look at this captive market of 4,400 store fronts with an average of 100 customers that we could sell products into, or better yet charge someone a fee to sell their products into." almost a half a million customers isn't a bad market. Or they could try to centralize memberships and simply charge a small fee for billing and collections of said fee. Let's say just $1.00 per month per member. The Affiliate only loses $100 per month but saves a bunch of time and effort and VCCrossfit picks up an extra $5,280,000 a year. The question that I haven't seen answered yet is with the proposed deal can Anthos force their approach downstream to the affiliates or is the concern that their involvement simply halts the progress that Crossift is making?

Second, and by far more concerning is with relation to the actual Asset value. Let's say someone like a VC firm comes In and ends up with a 50 percent share of Crossfit, Inc. and then through whatever means creates a more marketable (ie. storefront, shoe depot...) product focused location, centralizes corporate control and membership and in the process creates a larger bottom line for the "corporate Crossfit, Inc.". What do you think the next move is going to be? I think Mr. Kelly already told us. He mentioned the holding period for an investment. That is a nice way to say exit strategy. Who is Anthos going to sell the new and improved GloboBox Crossfit to when their "holding period" runs out?

Finally, I can't believe that this "definitive agreement" isn't anything more than a deal that is subject to approval by the family court in AZ and as such could be completely disregarded by the judge if he found that their was another viable alternative presented to him that would put Ms. Glassman in the same position as she would be with Anthos. My experience has been that family court judges have a great way of seeing through all the talk about how "I just want what is best and only I know what that is so trust me even though I haven't been involved for 2 years" once a matching offer is on the table. As cynical as it may sound, divorces come down to money, every time. Has Crossfit, Inc. put that offer on the table?

My hope is that Crossfit stays true to what it is, a grassroots movement that is improving the way ordinary people move and live as well as providing us with the entertainment of watching extraordinary people show us what levels of performance the human body is actually capable of.

No matter how this all shakes out clearly Crossfit has reached its next level of evolution and as such I hope it takes steps to better protect itself, because like it or not Mr. Kelly was right about the 50/50 structure not working long term.
Great first post Mr Koltz, welcome to the forums!
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