Mission Creep: Best Friends Buys A Fitness Center

nautilus-nt-cc1This is Andy. Andy is a five year old, purebred Nautilus machine. We suspect Andy has seen some abuse – his upholstery has some tears and one of his cables is missing – but we know, with your help, we can restore him to be happy and healthy again. Won’t you please help us help Andy? With your help, anything is possible.

Best Friends has recently taken quite an interest in employee health, desiring to provide the employees of its home base with a gym facility. Should be easy enough – Best Friends owns about 3700 acres a few miles outside of the small town of Kanab, UT. There are around a hundred building structures on the property, should be a cinch to find some unused space. A barbell set from Amazon, a few bikes and treadmills from the thrift shop in town, and Bob’s your uncle!

Oddly, that’s not what they’re doing. Instead, they’re purchasing the long-struggling Adobe Fitness, both the business and the building, located in the center of Kanab several miles from their main campus. That’s a pretty strange and extravagant expenditure for a donor-funded animal non-profit, to purchase an outside, fully staffed professional fitness facility for the use of its employees. The claim will be made that it’s an important part of their benefits package. Health coverage is also an important part of a benefits package, but you don’t see non-profits with unrelated missions buying up hospitals to provide it because that’s not very cost effective, as well as being not at all relevant to their stated non-profit mission.

Screen Shot 2015-03-27 at 3.52.08 PMIt gets weirder from there. The new business, The Best Friends Wellness and Fitness Center, has been spun off as a for-profit company also headed by Best Friends CEO Gregory Castle, despite its origin from non-profit (donor) funds. Best Friends is in the process of hiring a Fitness Manager who will oversee a professional, paid staff. While Best Friends employees will have free use of the facility, the facility will also be open to the public who may pay for a membership, both Kanab residents and visitors. Best Friends obviously feels that they can make up for free access to their employees by driving the many visitors they bring to town to purchase paid access, and the manager they’re seeking to run the place is expected to be focused on growing the business financially. At this point this starts to look a lot less like an employee benefit and a lot more like speculating in a for-profit business venture that has nothing at all to do with animal welfare. The last few years of explosive growth have, indeed, been good to Best Friends’ coffers.

The status of the new, donor-funded business as a separate for-profit corporation is a very interesting one. There’s certainly no reason a fitness center can’t be set up as a non-profit for social good – indeed, the YMCA does this all the time. If Best Friends were growing bored of their animal mission it could be set up as a non-profit with the separate mission of promoting community health, or it could be set up as a separate non-profit for the sole purpose of benefiting the animal charity. One of the few conceivable reasons I could fathom for the for-profit status, however, is that private for-profit companies do not have the obligation to disclose any of their financial activities to the public, as opposed to the public tax returns of a non-profit. The success or failure of the new business venture will be well-concealed as well as important information like compensation paid to management and key staff. Such non-transparent business arrangements, while perfectly legal, should be avoided by the ethical non-profit for the appearance of impropriety they may bring – at worst they can be used as a device to transfer money in a way that is completely off the books of the non-profit that controls them. Best Friends does Lifting-Frenchiehave an odd and unexplained history (which I believe is no longer current practice) of operating their gift shop and merchandise operations as for-profit companies controlled by company insiders (founders), and I would assume that arrangement ended, similarly, for the appearance of impropriety that it could bring.

The thorny issue of compensation at a for-profit subsidiary is bound to be a bone of contention among Best Friends staff and may sow the seeds of open revolution. The pay structure of a for-profit business is likely not subject to the pay discount that most employees of a non-profit expect – indeed, the national average salary of a qualified fitness manager is around $40-45k. Many Best Friends employees who contribute very directly to their stated animal related mission and goals make significantly less. A national animal charity that pays its Zumba instructor more than their animal care staff is sending a very clear message to some of their lowest-paid employees. Of course, many of the lowest-paid employees will have little use for a fitness center – the difficult, physical work of sanctuary operations out on the desert sand is enough to keep them in fantastic shape.

Charities are given special tax status in exchange for their focus on a social benefit or issue. The IRS requires charities to have a stated mission, a goal. Smart charities know that, to succeed, their every activity must make a substantial and significant contribution to their mission. There is little precedent or support for an animal charity using non-profit funds – which in the end, is all donor money – to finance a profit-making business activity so far outside of their stated goals. This new, for-profit business venture seems to have more to do with the CEO’s personal interest in physical fitness than Saving Them All, the incorporation as a separate for-profit a tacit admission that these operations have little to do with the core mission.

If donors, however, support a national animal charity using non-profit assets to finance a for-profit fitness business, this will open up some new avenues of investment for Best Friends to consider – obviously the rise of their national profile has generated more fund-raising than they feel they can directly apply to their stated mission. Kanab is a small and isolated town, there are so many resources they lack that would be a benefit to both employees and residents and also have the potential to be profitable. A bowling alley, a vegetarian sushi bar, a vitamin shop, a natural foods store, a massage studio, a juice bar…

With your help, anything is possible.

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