There is a switch in Find my iPhone location settings for the "Find My network" that presumably opts you out of this.
They does seem to do the trick. I’m ok with using a service like that to find a phone, but to utilize the devices of others (while a noble idea) creeps too far into the scary for me.
Yeah, Find My is an app that needs your location services to work. ...If your Location Services is off, or your Find My app doesn't have permission to access Location Services, it shouldn't be able to report your device (nor other peoples' devices) location to Apple.
Don't enable "Find My iPhone" when setting up your phone.