Colorado Gym Owner Uses Reward-Based Business Model for His Affiliate, Incentivizes Members Who “Willingly Pursue their Fitness”

Ethan Townsend wanted to open a CrossFit gym, but as a personal trainer he knew how financially risky it could be, but he went on to do it anyway. Now, he is the owner of Official Fitness/OFW CrossFit where he’s instilled a rewards-based membership model that he says is the key to his success. 

Official Fitness, located in Windsor, Colorado, opened in 2016 and currently has around 270 members. Townsend’s background is in personal training and after going to business school decided to open his own gym.

One big thing: It what may seem to many to be a controversial strategy, the Official Fitness/OFW CrossFit business model features memberships that start at a low price point ($69.99 for an unlimited, month-to-month membership) while incentivizing attendance by offering 50% off for athletes who attend 12 or more times per month. 

Remind me: The affordability of CrossFit as an owner and a member is part of an ongoing conversation in the community. Another example is a gym in Illinois that offers a $65 membership subsidized by Kirby Medical Center, where the gym is located and owned by the medical center’s CEO.

• “I was trying to come up with a business model in which we could leverage relationships and the strength of CrossFit in terms of creating that community, but also incentivize people to come in and actually change their fitness for the better,” said Townsend. 
• “We landed on 12 times a month being the reward zone. So if you hit greater than 12 times a month or more, you get your membership half off.” 
• Townsend further explains, “we treat the membership kind of as a loss leader and to get bodies in the door, so that way I could be busy as a personal trainer and then I could start hiring trainers and we could increase profit margins that way. So the way that I initially designed it was to have the membership be that loss leader to generate traffic.”  
• “The business model in question was designed in such a way to keep sustained traffic through the gyms so that the personal trainers stay busy.” 

Once that model was in place, Townsend said, his membership went up to about 180 members. He also recently expanded and relocated, and even added childcare as part of his offerings. 

The details: The unlimited membership ($69.99 per month) requires no contractual obligation, but there are also six- and 12-month contracts for members who know they are in it for the long haul. These memberships have even lower starting price points. 

And, it doesn’t matter which membership tier an athlete is at, if they attend 12 times per month or more, the next month’s price is cut in half. 

• “My whole idea was I want to give away the farm and sell the specialty just so that we could have those bodies coming in and increase the hit rate for personal training. It had a pretty cool side effect,” said Townsend. 
• “Now of our 270 members, I can say that closer to 35% actually show up and receive their membership benefit.”
• “We actually give away close to about $4,000 a month in membership incentives. And so if we were to just charge everybody the flat rate of $50, $60, or $70  we would have over $11,000 in monthly revenue and memberships, but we’re happy with the $7000 because it covers our lighting and our rent.” 
• “The biggest trade off is simply bodies. Right. Our classes went from a good day being seven to 10 people. And now at least once a day we’ll have classes between 16 to 22 people. So space becomes a real issue, having enough equipment becomes a real issue, ensuring safety. So of course you have to offset that with additional instructors or split times.”  
• “Our retention is far higher. I mean we even have probably better than 30 or 40 legacy members that were with us in the first year and are still members to this day. So it definitely positively impacts our retention numbers.”

Gym owners who are interested in using this model, Townsend advises to “start small, start lean and don’t take out any business loans.” 

• “For this particular model to work, you do have to kind of put your nose to the grindstone for a while because you have to let people know that you’re here, people have to know what you offer. And so if you can spend some money on advertising, really making sure that people know what you offer is huge,” he said. 

The key is to start lean because the first few years will be very tight “and then it snowballs pretty rapidly after that once people will actually know what you’re doing.” 

The big picture: Townsend and his rewards-based approach is just one example of a business model gyms could take to run their affiliate. This may not work for every gym, but it’s clear if done right it can be extremely beneficial to both the gym and its members. In Townsend’s words, the Official Fitness/OFW CrossFit approach is to “actively and intentionally reward those who are willing to pursue their fitness and that’s that’s what we’re all about,” said Townsend.