Stop Anthos from Taking over CrossFit

[Ewen Roth]

Originally Posted by Dale F. Saran

Ewen - have you read the affiliate license agreement ever? Imagine if it got changed.

Ok, I'll try again.

HOW CAN A NON-MANAGING EQUITY PARTNER CHANGE THE WAY CROSSFIT INC. OPERATES?

I have a very limited imagination. Tell me how someone who doesn't have the power to manage a company can force that company to change its practices. In other words, why is this equity partner being called 'non-managing' if it can in fact take important management decisions.

[Christin Street]

Originally Posted by Russell Greene

Brendan,

You don't have to take CrossFit at its word: its actions speak louder. Greg Glassman has created a revolutionary program to improve people's health and wealth. That's what the 4000+ CrossFit affiliates signed up for, not a short-sighted money-making scheme and constraints on their independence.

Now, with regards to Anthos Capital, you could not have said this better: "I will say unless Anthos puts it in writing I would never trust any VC firm."

I wouldn't recommend, though, trusting them even IF they made promises in writing.

Correction: Greg AND Lauren Glassman created a revolutionary program..." She owns 50%. Her response sounds incredibly professional. Hopefully Greg will come forward with an equally professional response soon.

[Roland Jungwirth]

Of course a VC company's plan is to make a roi that is greater than you would get from leaving the money in the bank. This is - however - also the case for a company like Reebok, who intends to increase it's revenue by more than what they are spending (aka return of investment [roi]). Both (the VC and Reebok to name examples) have a vested interest in growing the sport and community and it is pretty obvious that telling affiliates what to sell is not the way to do that. So I don't necessarily see a big difference between a company having a vested interest in CrossFit growing in order to make direct profit (VC as non-equity partner) or through a profit made by selling more products (Reebok).

The biggest issue I guess is that the split is 50-50 (from what I have seen), but there are ways to get around that, e.g. Lauren sells 1% back to Greg for a non-disclosed amount ($1) and then sells the 49% to whoever she chooses (probably also to find closure). That way she receives her return on investment (in time/effort spent) and Greg keeps the majority to move CrossFit ahead in whatever way he sees fit.

Not making any suggestions or recommendations, just trying to show that every bit of news story normally has (at least) 2 sides to it. If we take out the emotions (remember all the "Reebok will kill the CrossFit mentatlity" calls when that partnership was announced), there might be an amical way to deal with the issue.

[Craig Massey]

Originally Posted by Ewen Roth

Ok, I'll try again.

HOW CAN A NON-MANAGING EQUITY PARTNER CHANGE THE WAY CROSSFIT INC. OPERATES?

I have a very limited imagination. Tell me how someone who doesn't have the power to manage a company can force that company to change its practices. In other words, why is this equity partner being called 'non-managing' if it can in fact take important management decisions.

I believe that legally that person jointly owns 100% of CrossFit Inc. Apparently it isn't a 50% share.

If someone else buys that ownership they can then begin the process of replacing the management team if they can satisfy a court that the current leadership is not acting in the interests of the company. Which I would expect to = not returning enough profit.
Fighting that off could tie up the upper levels of CrossFit In. in legal action and halt the development of CrossFit.

[Andrew Stemler]

I have trusted Greg and the head office staff since 2005. What ever they decide is Ok by me.

[Eric S. Jensen]

Here's an interesting video that was on the main page I'm kind of surprised no one has mentioned it yet.
http://www.youtube.com/watch?feature...&v=saAoYLDyE2I

Originally Posted by Ewen Roth

Ok, I'll try again.

HOW CAN A NON-MANAGING EQUITY PARTNER CHANGE THE WAY CROSSFIT INC. OPERATES?

I have a very limited imagination. Tell me how someone who doesn't have the power to manage a company can force that company to change its practices. In other words, why is this equity partner being called 'non-managing' if it can in fact take important management decisions.

Apparently, Lauren Glassman owns 50% of the stock, because she and Greg were married and she received her half of the business from the divorce. Under those circumstances, there is probably no buy sell agreement, so no agreement in place to provide for rights of first refusal if a shareholder wishes to sell. We know HQ claims it offered more money, but we don't know what those terms were. In other words, it is possible that Lauren received offers of $20M cash from Anthos or $25M from Greg paid over time.

In any event, a 50% shareholder probably has the right to cause a dissolution of the corporation. So, maybe Anthos buys Lauren's shares, and immediately moves for dissolution, only to buy all the assets out of the dissolution process and end up with the company. Who knows?

[Ewen Roth]

Originally Posted by Thomas Davenport

Apparently, ...there is probably... we don't know ...possible that...

... probably has the right ... So, maybe ... Who knows?

Thanks for offering some answers, and I'm not being sarcastic. Craig Massey offered a different possibility. If my livelihood was in jeopardy, I would expect something more definitive from the people in charge.

[Craig Howard]

Originally Posted by Chris Sinagoga

Cool to hear from Lauren. Where did that post come from?

Lauren is sincere and likely frustrated, but she is naive. I have worked for more than 20 years in this industry in sales and in executive management.

Anthos' investors require a return on their investments. Anthos will challenge the Portfolio Manager for a return on the $20million investment. Anthos will not sit quietly allowing their $20m to ride on CF. This is NOT what they do - visit their website. Brian Kelly's entire career has been in investment banking. He is a Vanderbilt MBA who began his career at Goldman Sachs. He does not know or understand the passion of building a small business from scratch, helping members change their lives, and living in the CrossFit Community. Brian Kelly's entire career has been buying and selling companies, or taking companies public in order to generate return for private investors. The reality is that he has to divorce himself from the personal sentiments of the acquiring companies or their franchisees. He is not paid to care. He is paid for Return on Investment. And he is paid a lot.

I have been through a very similar process in the brokerage business. I was a franchise owner acquired by a parent company, and then assisted with the acquisition of other franchises to increase company value. I never want to do it ever again - it is an ugly process of finding business owners' breaking points: either financially or otherwise.

Anthos would require a very strategic plan from Mr. Kelly in order to permit this $20m investment. Given Anthos partner Chip Adam's experience at Under Armour, I speculate Anthos has a product strategy in mind. In my experience, and assuming they could earn control, it would go something like this (speculation only):

1. Anthos would "roll-up" the desirable affiliates trading ownership for equity in CF or even cash.
2. Anthos would require franchise agreements from the remaining affiliates, knowing that not all would be able to or want to participate.
3. Anthos would open many CF corporate locations in major markets with a combined emphasis on gear, supplements & fitness.
4. Anthos would consolidate equipment purchasing for all franchises with one or two suppliers to reduce capital costs.
5. Anthos would eliminate most, in not all other retail clothing and supplement sales at the franchisee level.
6. Once complete control and homogenization has occurred - and several profitable quarters have been achieved, Anthos will take the firm public in order to expand the business and capture an enormous return for their investors.

Should this happen, some affiliates could earn a substantial payout. But, ALL affiliates will lose their business that they built with their own hands with a passion for helping others through fitness.

[Kevin Benson]

Originally Posted by Ewen Roth

Ok, I'll try again.

HOW CAN A NON-MANAGING EQUITY PARTNER CHANGE THE WAY CROSSFIT INC. OPERATES?

I have a very limited imagination. Tell me how someone who doesn't have the power to manage a company can force that company to change its practices. In other words, why is this equity partner being called 'non-managing' if it can in fact take important management decisions.

Just because the partner is labeled as non-managing, it doesn't mean they don't have rights under the documents governing the legal entity. If Anthos didn't see a path of take some form of control, I don't think they'd be willing to cut a check for 20MM.

I would think though that the document governing ownership would be robust enough as to not allow one party to dispose of its interest without consent from the other parties.