Page 12 - GBC winter 2016 Eng

CASE ONE
FACTS
A public/semi-private facility, 18-holes of golf in close proximity to a population of 30,000 plus. The golf course opens sometime in April and closes October 31st. The green fee rate is less than $50 including cart at peak time and hosts approximately 4,000 tournament rounds. The tournament rounds are typically 50 to 75 (per tournament) in total, with only six being larger than 100 players.
The pro shop, kitchen and patio are not adjacent to one another. Total rounds approximate 28,000 with food and beverage revenue totaling $320,000. Food costs are at 38% and wage and other costs total 56%. The electricity, heat and other overhead charges amount to $40,000.
In this example, the operator tried to determine whether they should lease out their restaurant operations or continue to operate in-house. Management considered the following pros and cons:
CONCLuSION
In this example and with most decisions - financial performance typically dictates a change in operations. Most operators would concur with the observation that improved profitability with minimal supervision and improved services is a ‘win’.
In addition, operators who were in this situation agreed that the lease option was a success; however, a couple of operators were able to rearrange their operations whereby the pro shop and food and beverage areas were together by eliminating a wall. In these situations they were able to create a ‘cash and grab’ food and beverage operation with no table service. This reduced the labour cost and allowed the owner to control service and brand and increase profit.
PROS
The management of staff was eliminated, allowing for more time to improve golf operations.
The risk of making a profit of 6% was eliminated and replaced with
a guaranteed income – typical lease is a straight rental fee equal to overhead or a percent of sales. Either method guaranteed a profit in excess of the past experience.
Assuming the rent exceeded the overhead costs, the restaurant was open year round which improved service and introduced more people to the property.
The quality of food and service with a larger menu improved all patrons’ experience.
CONS
Management loses control of service and quality of food. This can be partially rectified by an early termination of the lease or other penalty; however, making a change in mid-season is costly.
If you host tournaments and organizers only want to spend “x” dollars, the discount will go against green fees and cart revenue unless a pre-determined discount for tournaments is included in the lease.
Control of the liquor license needs to be determined in order
to eliminate risk of an occurrence and to ensure a change in arrangement does not leave the facility without a liquor license for a period of time.
Members or golf patrons may find that they lose ‘their’ clubhouse and may not have an area where all can sit together at peak times with non-golfer use.
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Golf Business Canada