Wodify Explains COVID-19 Policy Change that Upset Affiliate Owners

April 8, 2020 by
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At the end of March, Wodify, the popular gym management software among CrossFit affiliates around the world, announced a new policy that has ruffled gym owners’ feathers more than a little bit.

Wodify announced they’re extending the amount of time it takes an affiliate to receive their funds from member transactions. Typically, it took two to three business days to receive funds. Now, it will take 10 business days, or 14 calendar days.

Brendan Rice, Wodify’s Chief Marketing Officer, explained the decision only affects about 35 percent of their customers at the moment. Specifically, it applies to those who use Wodify Payments — Wodify’s payment processing option that is powered by the payment processing platform Stripe.

Understanding Wodify’s Relationship with Stripe: “As the payment facilitator, Wodify Payments is an integrated solution that is built using Stripe’s connect platform,” Rice told Morning Chalk Up.

  • “Because of that, the money flows from gym transactions — (such as) gym memberships — through Wodify and into the gym owner’s bank accounts. When funds flow the other direction — (such as) refunds and chargebacks — the money comes out of Wodify’s account and then we debit that customer’s bank account. It’s important to note that if a gym’s bank account has insufficient funds and there is a chargeback, then Wodify is liable for the full amount of that chargeback.”

Under normal business conditions, “this is an ideal solution for both Wodify and our customers,” Rice said, as it offers gyms a simple, affordable and transparent way to process their payments. But under the current novel coronavirus pandemic climate, gyms have now become a high-risk industry.

This effectively makes Wodify as vulnerable as the gym owner.

Even prior to COVID-19, Rice said there are cases where they have found themselves on the hook financially.

  • “There are a handful of cases each year where a gym, either intentionally or unintentionally, shuts down after charging members for services and we are left with the liability to pay the chargebacks,” Rice said. Most recently, there was a case prior to the novel coronavirus pandemic that cost Wodify $65,000.

It goes without saying, these situations are likely to arise more frequently in the upcoming weeks and months, as more and more gyms are beginning to worry about financial ruin.

Affiliate Owners Up in Arms: Since Wodify announced their new policy, angry affiliate owners have flocked to various online forums to express their anger and figure out their best course of action. Two hundred owners signed an open letter to Wodify to voice their opposition to the policy.

  • “It’s one thing to institute a change to help protect affiliates given the change in circumstances, but it’s quite another to announce that change on such short notice and without offering a modicum of relief or leniency for businesses that are already suffering,” said affiliate owner Lindsey Neal to Morning Chalk Up.

Rice explained why the decision came with such short notice.

  • We knew we were going to take the most heat for being one of the first companies to announce these changes, but we wanted to do so before April 1st, to let our customers know as soon as we made the decision. Other companies that have implemented similar changes did so on or after April 1st, putting their customers in an even more challenging position because April 1st charges had already been processed. We wanted to give at least some chance for owners to charge their members through alternate means—check, cash, etc—if they needed the cash immediately,” Rice said.

Still, affiliate owners are not pleased. Many have expressed their intention to cancel their accounts with Wodify, while others have already jumped ship.

Garrett Scales, a Wodify customer who wasn’t even affected by Wodify’s new policy –he uses goEmerchant as his payment processing platform as opposed to Stripe — decided to leave Wodify.

  • “(Wodify) should not be allowed to hold money for any period of time. They are trying to protect themselves instead of their clients, the affiliates,” said Scales, the owner of CrossFit Inversion in Yorba Linda, CA.
  • “Wodify is blaming Stripe, of course, but in the end it is Wodify’s fault (because of) how they (chose to integrate with Stripe),” added Scales, who has since shifted to PushPress, a gym operating system.

Is Leaving Wodify the Best Decision for Stripe Customers?

Wylie Belasik, the owner of Subversus Fitness Center City in Philadelphia, PA posted on social media why leaving Wodify might cause an affiliate owner more damage than good.

  • “Jumping ship right now isn’t your best option. Leaving means that you would need to gather all payment information from members again and set up new memberships. Even under normal situations, that process stands to lose you 10 to 15 percent of membership continuity. People don’t get back to you, (or they) change their mind now that they have an out,” Belasik wrote.
  • “My opinion is slow money is better than no money. If you want to leave, when you have a brick and mortar again, would be the more prudent move.”

Other Companies Following Wodify’s Lead: While Wodify has taken much of the heat from the  affiliate community, as they were the first to announce changes, other gym management companies, including MindBody Online and ABC Financial, one of the largest players in the Globo gym space, have also changed their policies in recent days.

ABC Financial announced they’ll be withholding five percent of funds as they anticipate an increase in refunds, returns and chargebacks amidst COVID-19, while MindBody announced a 20 percent hold on all deposits until further notice.

  • “At Mindbody, we recognize how important cash flow is to your business. However, we must responsibly assess the potential loss that our merchants may face during this time,” they wrote in a statement to their customers. They also said exceptions would be reviewed on a case by case basis.

Rice, too, said Wodify is currently evaluating options for how gyms might be able to apply for a shortened payout schedule. This evaluation would be based on “how they have changed their business model, documentation from members opting in, and historical data on refunds and chargebacks,” he said.

Advice for Struggling Gyms: Rice recommends visiting Wodify’s Gym Owner Resource Hub, which includes links to government financial assistance programs, information about what other gym owners and industry leaders are doing, among other tools. He also recommends communicating with every single member to ensure they know their membership fees are still going to go through, and if a business needs immediate cash, consider billing through cash or check for the time being.

Standing by the Decision: Prior to finalizing their decision, Rice said they considered holding funds as Mindbody is doing. They also considered stopping facilitating payments altogether. Ultimately, they decided the best course of action was to increase the payment schedule, as this was “the least disruptive to the gym owner’s business, allowing them to continue charging memberships and keeping 100 percent of their payouts,” he said.

  • Rice added: “Although this was met with a lot of backlash and we know it’s not an easy change for our customers, we strongly believe this was the right thing to do. We believe that losing some customers, but being able to survive as a business and help gyms continue to grow after this is over is better for both Wodify and for the CrossFit community, than risking us having to shut down operations entirely.”

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