by Robert A. Sereci, GM/COO Medinah Country Club
 Guest Author and Club Benchmarking SubscriberMedinah Food Truck.jpg As most club managers do, I try to spend our capital dollars in the most prudent way possible. When the idea struck me to obtain a food truck and brand it with our logo, I kind of figured that I was going to get some raised eyebrows along with some direct questioning. Once the interrogation was over, the end result was surprising and very gratifying.

Medinah Country Club has three golf courses and two halfway houses. The membership has been clamoring for a new on-course facility for years. The problem was that the best location for this new amenity was in an area far away from the needed utility infrastructure, and the cost for such a small structure was going to be astronomical for the project scope.

One day, I was traveling around the club neighborhood and I spotted a food truck parked and in full operation; the light bulb immediately illuminated. Considering that our golf season is only about six to seven months long, coupled with the fact that we have a very busy shooting lodge in the off-season with limited food and beverage (F&B) facilities, and we are currently building racquet facilities and a golf performance center with no F&B facilities, the idea of utilizing a food truck seemed very practical.

As luck would have it, I have a good friend who is a F&B manager for a major league baseball team, and when I surveyed the idea with him he told me that it was my lucky day; they had a relatively new food truck that they weren’t using as much as they thought they would and they were eager to sell for a very reasonable price.

Game on; now all I had to do is sell the idea to our board of directors. As expected, I was met with resistance, specifically, a sort of knee-jerk reaction along the lines of “Are you sure that is appropriate for our club?” And I get it, this is Medinah Country Club we are talking about, after all! Home of seven national golf tournaments and seven major golf championships; eight, if you count the upcoming BMW Championship in 2019. “Isn't that something for smaller clubs of less renown?” they asked.

Well, if truth be told, you don’t find food trucks at other country clubs; in fact, I only know of two other clubs in the country that have one. Knowing that this was not going to be a slam dunk, I came prepared with all the benefits and reasons why we should own such an asset:

Halfway House – With a food truck, we benefit by having a seasonal F&B outlet that is used all year round to serve our members for about 8% of the cost of what new “bricks and mortar” would cost.

A Unique Wedding Offering – We are very fortunate to have a breathtaking clubhouse (recently we are ranked the sixth in “The 18 Most Iconic Clubhouse in Golf” by golf.com). But today’s brides are looking for that trendy new thing, that special offering that other venues don’t have that makes their wedding unique. Food truck are just that! The “awesome” thing they can share with their guests.

Tournaments and Club Events – Our property consists of over 600 acres of land, on which we host events and tournaments that require F&B service. A Food Truck allows us to access almost any location and set them up in a more efficient way. A little extra help from a Food Truck on Labor Day, Memorial Day and Independence Day is a massive help in alleviating the pressure of the small snack bar not built or equipped to handle the massive influx of business.

F&B Offerings on Demo Days: Our Demo Days on the Practice Facility benefit from a more festive mood once we pull a Food Truck and the party begins.

Brand Ambassador: Limited advertising for private, member owned clubs? No problem, when we do job fairs and park the truck at our recruitment site and display this very visible backdrop.

Public Relations & Community Support: Unfortunately, every community is exposed to natural disasters (tornado, fire, etc.) and when these moments do occur here, we’ll take our truck to the area in need to provide goodwill assistance and charitable support of food and water.

When the board heard my rationale, they were immediately able to appreciate the benefits. Once we began, the most challenging aspect of bringing it to fruition was obtaining the proper health permits. But we are ready to roll now, and even though our first event is still two weeks away, our members are already bragging to their friends outside the club about our new state-of-the-art Food Truck at Medinah Country Club. We haven’t sold one “street taco yet and it’s already yielding benefits. As this enterprise develops, I will keep you posted.  

The real take-away from this story is not that food trucks are great and every club should obtain one. The moral is that as club managers, our tendency to play it safe causes us to avoid reaching for what is unique, even if there is a strong benefit in doing so. So many times, clubs are interested in “keeping up with the Joneses,” or not taking a chance of doing something different because of how it may be perceived by others, both inside and outside your club community. Your club is what your members want it to be. Yes, we have a food truck… it’s the best darn food truck in the city. If you feel that you have a great idea, then work the plan, present it well, and see what sticks. Don’t be afraid to show your board and your members that your wheels are turning.

By the way… did I mention that we have a chicken coop?

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by Mike Stetz 
Originally published in the Fall 2014 issue of Golf Inc. Magazine.

If you’re losing money or breaking even on food and beverage, you’re in good company. Just don’t lose money for the wrong reasons.

club food and beverageWhen Ken Butler was interviewing for the position of chief operating officer at the Berkshire Country Club in Reading, PA, in 2012, the board members asked him how he would turn around food and beverage. He answered by asking them, "Why would you want to?" and they looked at him like he was crazy. 

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navigate_club_board_educationBeware of Dragons...

Fair warning: The case study you’re about to read may be disturbing for even the most seasoned club leader. Any resemblance between this story and your worst nightmare is purely coincidental.

In medieval times, elaborate drawings of fierce dragons were used to mark the boundary between the known world and whatever certain danger might lurk beyond. Those who dared to defy conventional wisdom and venture past those limits were labeled as fools or heretics destined for disaster. In the modern world, business leaders are often called upon to face down “dragons” and navigate through unfamiliar territory in the process of executing a critical initiative or bold strategic plan. Unfortunately, and far too often in the club world, boardroom politics and personal agendas can block crucial information and sabotage the clear fact-based decision making process necessary to push on toward success. The belief that club food and beverage can be relied on as cash generating profit center rather than an amenity for members is arguably the club industry’s most notorious and persistent dragon. The real case below highlights what happens when chasing F&B business is placed above making sure the club’s dues engine is healthy.

Club Background: This cautionary tale begins in the boardroom of a long-established country club that has been part of its local community for nearly one hundred years. After a lawsuit almost a decade ago, the club was still struggling to regain its financial footing under the weight of considerable debt. The suit and subsequent economic downturn caused member counts to drop significantly and club leaders were anxious to reverse the tide and expedite the recovery process. In an effort to clearly identify the club’s strengths and opportunities for improvement, the club’s GM became a Club Benchmarking subscriber. Working closely with CB Co-Founder & COO, Russ Conde, they completed the data entry process and analyzed a variety of standard graphical reports in order to develop a plan of action.

As you will see in the detail below, the data clearly showed that through creativity and cost control the GM was actually patching up weak dues revenue with significant profit in F&B. They were taking steps that would not be acceptable in most clubs, but the club was generating F&B profit equivalent to dues from 35 members. The F&B performance was in the 95th percentile—clearly not much room for improvement there—and yet the club’s board remained convinced (erroneously) that the solution to their financial woes lay in even more F&B banquet revenue and more profitability from F&B. In reality, the board was out to slay a dragon, but unfortunately, they wanted to slay a dragon that had long ago been tamed. The true root of the problem—membership count—was obscured by the board’s singular focus on F&B as the answer to the club’s financial pressure.

Benchmarking Process: The benchmarking process began by running the Available Cash and Key Performance Indicator Report, Food & Beverage Report and Membership Report using the club’s data. Click here to view a sample Club Benchmarking report

  • Available Cash/KPI Report Findings: As the club’s management team suspected, the Available Cash & Key Performance Indicator report showed the club’s Net Available Cash was near break-even and at the 47th percentile nationally. The pie chart illustrating the clubs proportionate sources of cash revealed several anomalies, most notably the fact that the proportion of cash coming from membership dues was 25 percentage points below national norms (53 percent versus 78 percent as a national norm) and that F&B net was contributing a significant proportion (17 percent) to Available Cash with the national norm being a consumption of 3 percent of Available Cash. Clearly F&B outperformance was helping to mitigate insufficient dues revenue.

  • F&B Report Findings – The CB benchmark data clearly showed the club’s F&B operation was performing well beyond national norms from a financial perspective. F&B profitability was at the 95th percentile. Essentially, from a financial perspective, this club’s F&B department was operating as efficiently as possible. While 75 percent of all clubs consume operating cash to subsidize F&B, this club was producing 17 percent of the cash to run the club from F&B. Those results were attributable, at least in part, to extremely low labor costs in that department. F&B labor was 30 percent of F&B revenue (literally the 1st percentile) in contrast to the national median of 62 percent. The club’s F&B revenue per F&B FTE (full time equivalent employee) was very high—the 73rd percentile—which indicates a lean workforce producing very strong results. Management relied on a variety of measures to achieve those results including as-needed, part time college student hires.

  • Membership Report Findings – The club’s member count relative to clubs of similar size was very low (the 13th percentile) and the member turnover rate was very high—13 percent versus the national median of 5 percent. The initiation fee had been eliminated (national median for an unrestricted individual member in 2011 was $16,000), and the club’s investment in member marketing was lower than 75 percent of all other clubs in the country. Full Member Equivalent Count (total dues revenue divided by full member dues rate) was at the fourth percentile nationally, meaning the normalized number of members at the club was less than 96 out of 100 clubs in the country.

Data-Driven Results: This is not a typical CB case study. There are countless others where use of CB has had positive impact on a club.  This is a story about lost opportunity.

Based on the CB reports, it was obvious that the club’s business model was seriously out of balance. The data clearly showed that the most urgent need was to revitalize the membership base and fee structures, but the board’s obsessive focus on low-margin F&B as a solution to the club’s financial woes was draining resources away from efforts to attract and retain members. The board should have been commending the management team for keeping the operational results whole via F&B outperformance, but instead they were hounding the team for more F&B. Despite the overwhelming evidence, and the best efforts of the GM, the board chose not to accept the facts and instead stayed mired in the F&B über alles mindset.

This club’s board lost sight of their fiduciary obligation to utilize facts in their stewardship of the club, ignored the data available to them through their CB membership and declined an offer from the Club Benchmarking CEO and COO to provide a free on-site presentation and interpretation of the club’s benchmarking reports. They held fast to their own perspective on the club’s financial challenges, adamant that weak F&B performance was to blame despite an abundance of data to the contrary. They drew swords over expenses that CB reports showed were well below national norms including executive salaries, total labor expenses and a series of other critical expense benchmarks.

As you may have guessed, during this battle key members of the club’s management team, including the GM, were asked to leave. The board was intent on replacing them with “better F&B people with better skill sets” in order to book more banquets, essentially guaranteeing that the bulk of future management effort will be directed to F&B rather than membership growth. The prospects for the club’s eventual recovery seem in doubt absent a dramatic shift in the board’s internal dynamics and a willingness to govern based on fact rather than opinion or agenda. It’s a frightening story to be sure, and one that we hope will serve as a reminder of what can go wrong when opinions, guesswork and personal agendas compromise the ability of a club’s leadership team to rely on credible facts and data in the execution of its duties.

There are important lessons to be learned on two fronts in this case study…

Club Management: Be proactive in using data to help the board understand the business model of a private club and what drives that model. This takes time but it can change the dynamics and results of the club and set a proper foundation for board vs. club management roles and responsibilities. Taking a passive approach to board education increases the likelihood that a "nightmare board" will eventually find you. If you are facing a situation similar to the one described in this case study and would like to brainstorm with our team about the best way to get through to the board, please don’t hesitate to contact us.

Governance: Seek knowledge about the club industry and the business model of your club. Ask questions more often than you give answers. Don’t accept "because I just know" from fellow board members. Push for facts and data as you would in your own business. The tools exist for every board in this industry to be properly informed and thoroughly equipped for success.

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For Better or Worse
The Unromantic Truth About Wedding Business 

Wedding CakeFood and Beverage is certainly one of the most important amenities in a private club, but it's also one of the most misunderstood in terms of its financial impact. Many boards get fixated on increasing F&B revenue as a solution to the club's financial woes. In particular, they focus on weddings and banquets, believing higher profit margins associated with those large events will produce the revenue boost they need.

Like virtually every other decision club leaders must make, the positioning of F&B in the club is a choice. Should Food & Beverage be viewed as an amenity or as a profit center? To help us weigh those options, let's take a closer look at the impact of high-volume banquet business in an actual club. 

Benchmark Study: In the quest to increase revenue, the true costs associated with high-volume banquet business—financial and otherwiseare sometimes overlooked. Case in point: A financially healthy, high-end country club with a positive net operating result and the physical capacity to handle very large events. The club had become a popular wedding venue—so much so that they were averaging about 50 weddings per year and demand showed no sign of slowing down. The for-profit club’s total banquet revenue was in the top 10 percent nationally and made up 43 percent of their F&B revenue vs. an industry median of 30 percent. While a club in this position might be tempted to look for ways to accommodate additional business, this club’s board and manager recognized the need for a careful cost/benefit analysis based on industry data. 

The Downside: One of the most significant areas of concern for this particular club was member displacement. The volume of weddings was impacting members’ access to the clubhouse nearly every weekend. Over time, the members adapted by packing the club on Friday nights and avoiding it completely on Saturdays. Since a major component of the membership value equation is a feeling of privilege and privacy, the situation was less than ideal in terms of both member satisfaction and the club's ability to appeal to prospective members.

Another troubling issue for this club was the amount of management resources and energy consumed by the marketing, booking, and delivery of so many banquets. In addition, while the exact costs would be difficult to isolate, increased banquet traffic in the clubhouse was taking a toll on the facility itself, increasing housekeeping and maintenance expenses and potentially accelerating replacement cycles for banquet-related furniture, fixtures and equipment. The question this club's leaders were asking themselves was "is it worth it?"

Financial Impact: The ratio of F&B Net Income/Loss as a Percentage of Gross Profit was used to determine the relative significance of the club's F&B operation to its overall financial health.  In fact, for most clubs a full 80% of revenue comes from two items – Dues (50%) and F&B (30%). However from an impact perspective the dues revenue represents 80% of a clubs gross profit whereas F&B generate zero gross profit.  This reinforces that clearly all revenue is not created equal in clubs. Industry data confirms that 75 percent of clubs lose money in F&B and this particular club was in the 81st percentile, so somewhat profitable in F&B. Still, despite all the volume and effort, the club’s F&B operation was producing just four percent (4%) of the club’s overall Gross Profit. For this particular club, that 4 percent equates to about $250,000 which begs the question: Could the same amount be generated through less intensive and invasive methods such as membership drives, outings or minor price adjustments?

The chart below summarizes F&B Net Income/Loss as a Percentage of Gross Profit for clubs with golf and clubs without golf. 

F&B Net Income/Loss as a Percentage of Gross Profit
(based on National club industry data)

 

25th
percentile

MEDIAN

75th
percentile

Clubs with Golf

 -9%  -4%  0%

Clubs w/no Golf

-9%

-2%

+2%

Conclusion: This case study reinforces what club industry data clearly reflects: F&B in the club industry is a vital amenity, but it is not a profit center. The benchmark data helped our case study club make a very important choice—to refine their banquet strategy in terms of “quality vs. quantity.” This club's leaders recognized that lifecycle gatherings such as birthdays, anniversaries and weddings are a high value amenity for their members and those events continue to be a key part of the club’s culture. Emphasis on “off the street” banquet revenue is greatly decreased and the club's leaders are now focused on a more balanced view of other sources of Gross Profit such as new member dues or golf operations revenue.

FandB_in_context.png

 

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