I remember exactly where I was when I found out that the University of Minnesota managed to lose money selling alcohol at TCF Bank Stadium last season despite grossing over $900,000 in sales. I was at a computer. And I, like all of you, was SHOCKED that such a thing was possible.
"How could this be?" I wondered. Did it happen because the U wanted to lose money, thereby giving them an excuse to stop selling alcohol? Was it due to an inept and poorly written contract? Was someone skimming off the top? I mean, who loses money selling beer at a sports event???
Well thanks to the STrib, we have our answer...a contract with ridiculous terms that were somehow approved by the previous AD administration and the Board of Regents:
A review of the university’s recent agreements with Aramark, a Philadelphia-based company that has had contracts with the school since 1998, suggested that school officials initially might not have aggressively pushed for higher percentages of alcohol sales at the 50,720-seat TCF Bank Stadium.
Within months after the stadium opened in 2009, school officials agreed to get 22.5 percent of potential alcohol sales even though the university had previously agreed with Aramark on a much higher rate of non-alcohol concession sales at the stadium: 33.24 percent of non-alcohol concession sales up to $1 million, and 37.93 percent of concession sales above $2 million.
For the love of...REALLY? You had a tentative deal where Aramark was agreeing to give you 33.24% base with bumps to 37.93% and you somehow walk away with a final deal that gives you 22.5%. Words do not exist to describe that stupidity.
Ok, so who do we get to blame for this? We're a blame happy finger pointing society and I want to know who I can tar and feather with an angry diatribe.
It was not clear, however, how the deal that led to the school’s revenue loss at TCF Bank Stadium came about or who ultimately approved it. Benedict said he was hired by the school only last July and did not immediately tumble to the possibility the school would lose money.
So that's how you're going to play it? K, I don't believe you but the important thing is that you're going to fix this. Right? RIGHT!
The school and Aramark, one of the country’s largest concessionaires, have since been renegotiating the contract at the urging of university President Eric Kaler and athletic department officials, and a new agreement would raise the university’s percentage from 22.5 percent of net sales to 35 percent of net sales up to $475,000 and 40 percent of sales above $475,000 in the stadium’s general seating area. Using the new percentages, school officials said the university would make $110,000 this coming football season based on last year’s sales.
Benedict said Aramark, as part of the new agreement, also pledged to give the school $37,000 to help erase its first-year loss, but he said the move was not an attempt by the company to make sure its university contract was not jeopardized.
Anyone else buy that part at the end that I bolded? Me neither. It looks like the current athletics administration continues to recognize that the department is an $80 million dollar business and should be run that way. This makes me happy. Also making me happy?
School administrators said the new percentages at TCF Bank Stadium would be in place for one year — the school said it hopes to further raise the percentage — and that the 22.5 percent figure would still apply to alcohol sales in the stadium’s premium seating.
Bolding is once again mine. So after playing a little hardball the U plans to do it again in a year? YAIS! The monies...we wants more!
The story does have a few interesting and confusing elements that I'd like to call out:
In addition, the school said it would push to make sure the Vikings — who will temporarily play at TCF Bank Stadium in 2014 and 2015 while their new stadium is under construction — do not negotiate a more lucrative deal with Aramark while using the campus stadium.
1) Why does the U care? PR reasons?
2) What leverage does the U have to prevent such a thing?
The decision to sell alcohol at TCF Bank Stadium came after school officials had pushed the Legislature for something else: to sell alcohol only in the football stadium’s premium seating areas. School administrators indicated they had little time to assess the possibility of losing money because they had to quickly prepare an alternative plan when legislators last year insisted that alcohol also be made available in the stadium’s general seating areas.
I'm sorry, but that doesn't fly. Legislators had only been insisting on GA alcohol sales since 2009. It was not a new request. The whole point of the deal the U signed on to was to offer the school flexibility in how to administer GA sales, not to accommodate a last minute GA sales demand from the Legislature. I've been VERY critical of the grandstanding and (in my mind) unconstitutional demands made by the Legislature during this whole saga. I was content with this being the U's decision and would have been fine with the plan to sell only to the premium seat-holders. But anyone who has spent any time following this mess knows that the GA requirement is not new and that the U had ample time to consider how much money would be required to at least break even. Someone signed the U into a bad deal for last season and now they're just throwing out weak CYA excuses.
I really wish that was the end of the silliness. But a story like this wouldn't be complete without a "won't someone please think of the children" moment from someone at the U.
Board of Regents member Clyde Allen, however, defended the arrangement, and said prohibiting underage alcohol sales — and not making money — was the school’s top priority at the football stadium. "Making money on it is not really the main purpose of it," Allen said. "We’re more interested in being sure that we can control the sale of it."
There is a lot wrong with this response that I need to unpack:
1) Of course it's about making money. If it wasn't about making money, the U would have stuck to it's "principles" and let all of the arenas be dry. From the get-go, the problem with the situation was that not being able to sell booze in the premium areas meant you got less money for their contracts and it was more difficult to get companies/individuals to sign deals when there are plenty of other premium seat options in the marketplace that do offer alcohol.
2) I'm completely ok with the U being gung ho about stopping underage sales. But lets not pretend that by prempting underage sales that the U is doing much to actually prevent underage drinking. They're simply preventing the impression that the U is contributing to it.
3) It is entirely possible to both control the sale of the alcohol to prevent underage consumption and to make money. These are not mutually exclusive outcomes. You know how I know this Clay? Because earlier in the article the U reveals that under the renegotiated contract they'll make money. And they won't have to change the access controls that are already in place preventing underage consumption.
Ok, I've vented my annoyance over some of the silliness displayed by the U. Now it's time to talk positives.
- Teague and Kaler get it. They understand that this is a revenue stream, that they have leverage, and that there is no reason Aramark shouldn't be giving the U a higher percentage of the profits.
- The revenue estimates for the upcoming season are probably low due to the Badger and Hawkeye fans who will be visiting. One downside? Expect WAY more alcohol related bootings and arrests this season.
- The U is clearly past the concerns over whether to continue selling alcohol in the GA sections at TCF. The losing money thing would have been a great time to cut bait and drop the idea entirely. Instead they are doubling down and working out how to make more money. This is a good thing, not because we can drink at the stadium but because the department needs revenue.
But that's enough of what I think...