Most parks and recreation agencies operate food, and sometimes merchandise concessions in their venues and, most of the time, they could generate more income through these operations.
The following steps should help in your examination of this aspect of your business (yes, you should consider the revenue generation portion of your job a business) and to help determine whether it’s earning to its potential.
Outsource or In-House?
Should your agency operate your concessions with internal staff, or should it outsource the responsibility to a specialist in the private sector?
Both strategies have positives and negatives associated with them and you should be careful to realize that a course of action that worked in another community may not work in yours.
This is due to a number of variables, such as (1) the level of competency within your organization and among potential contractors, (2) the public relations climate in your community, both internally and externally, and (3) how the terms of the relationship are forged between your agency and an outside concessions company.
Nonetheless, here a few rules of thumb that can help you analyze the situation:
• Determine the public relations ramifications of outsourcing this responsibility or taking it in-house. The issues of losing control or eliminating jobs, for instance, through outsourcing must be resolved. Likewise, the extra work burden and start-up budgetary considerations of doing concessions in-house could ruffle feathers.
• If you’re able to realize a cost savings through outsourcing, you may want to do it in-house, depending on your in-house staff situation.
• Determine if enough for-profit concessionaires exist that could handle your needs. For instance, do not think that the concessions management company that contracts with the local pro and college sports teams will submit a bid for your opportunity. Your facilities and events are probably too small to warrant the attention of these large companies. Investigate the smaller concerns and ensure that more than one has a good reputation for product and service.
• Evaluate whether your personnel has the proper expertise to maximize revenue from your concessions.
It’s all in the Packaging
If your analysis makes a strong case for outsourcing your concessions, package it correctly from the start. Most agencies have a number of different concessionaires who work in their many facilities (pools, golf courses, etc.). This array of vendors working under the umbrella of an agency limits the revenue it could be generating.
Instead, create a Request for Proposal for one company to handle all of your concession needs. This scenario creates greater competition among concessionaires and will increase the value of the bids you receive.
Additionally, if your recreation and parks department is large enough, you may now warrant the attention of larger concession companies that can invest more and upgrade the professionalism of your concession offerings. Finally, having one concessionaire as a partner will create more uniform service delivery and improve quality as perceived by your customers.
In the event you already have myriad relationships with separate vendors, re-negotiate your new contracts to expire in accordance with the latest termination date of your existing contracts. This way, all of your concession contracts will be up for bid at the same time and can be packaged together.
Of course, you will have to determine whether a single concessionaire in your municipality can provide all the services you need. If not, arrange your concession RFPs into a few groups you know can be handled by a few different companies.
The idea is to have fewer vendors working for you. The law of supply and demand will turn this new package into more money for your other recreational endeavors.
Analyze Your Fee Structure
Most agencies accept a flat commission from their vendors because it’s the easiest to track and all financial risk is taken out of the hands of the government. If you are reviewing a short list of potential “comprehensive and exclusive” concessionaires, you will have more negotiating leverage and may want to consider other means of remuneration, if it means more revenue for your department.
To illustrate, I will use the example of a 500 square foot golf course pro shop. A review of retail leasing in your area determines that $15 is the average price per square foot being paid, or $7,500 annually.
If 100,000 people visit this course every year, and your receipts indicate that 1% of these visitors made an equipment purchase in the shop and their average purchase was $30, then you can project commission revenue on different levels:
In this example, you can see that you would need a 25% commission on gross receipts to earn as much as you would from a no-risk lease. You would take the lease option unless you negotiated the commission higher than 25%.
Also, if your concessions package is large enough, you may be able to use a comprehensive relationship to help you build that new facility you’ve been wanting. For large deals, a concessionaire will sometimes contribute capital toward the construction of a new facility, preferably one in which it would be working. In return, the agency agrees to accept a much lower commission rate from the vendor.
You will also want to investigate a lease-commission combination, whereby the agency is guaranteed a minimum amount of revenue, but can also reap greater rewards if business surpasses expectations.
Akin to this strategy is the fixed-price-with-incentives contract. Here the agency receives a predetermined amount and will provide incentives for the concessionaire to continuously improve performance.
The Land O’Lakes Foundation in St. Paul, Minn., is supported by Land O’Lakes Inc. The Foundation’s mission is to “improve the quality of life in communities where Land O’Lakes Inc. has members, employees, plants and facilities; to proactively help rural communities prosper and prepare for tomorrow by donating resources that develop; and to strengthen organizations dedicated to human service, education and youth, civic and art endeavors.”
The Community Grants Program supports organizations throughout the north central, western, and eastern United States with cash awards and through employee volunteers.
Areas of interest include: alleviating hunger; building knowledge and leadership skills of rural youth; agricultural and cooperative education programs; supporting stewardship of soil and water resources while maintaining a positive balance between the environment, agriculture and global food needs; and quality artistic endeavors.
Extensive information on eligibility, guidelines and deadlines are available on-line and applications can be downloaded in Word format.
There is also a Matching Gifts for Educational Reform. Programs can apply to participate, allowing any employee gifts to be matched by the foundation.
Grants are made in communities in the following states: California, Idaho, Indiana, Iowa, Maryland, Michigan, Minnesota, Montana, Nebraska, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Virginia, Washington, Wisconsin.
There are grants lists, contact information, and annual reports available on the site. Visit www.foundation/landolakes.com for more information and specific application instructions.
Mick Jackowski, Ph.D., is an alternative funding specialist who can be reached at firstname.lastname@example.org.