If you are like me and you enjoy going to many different sporting events, you pay attention to many of the team’s revenue drivers: ticket sales, corporate sponsors, suits, naming rights, merchandise sales, and more. Concessions always seem to slip my mind. Maybe it’s because I used to view them as an overpriced and unappealing service. However, a recent talk with a former Aramark VP of Marketing is beginning to reshape my perception of the business.
Aramark is a leader in the stadium and arena food service industry. They also specialize in facilities management, premium event catering, and more. They can make money three different ways. In a “P+L” deal, the concessions collect money from the fans and pay the team 40% – 50% of the earnings. In a “Fee” deal, the client (the sports team) pays a flat management fee for Aramark’s services. In a “Split” deal, a combination of the two occurs. Does 40%-50% seem like a big chunk of money to pay the team? You bet! The fast food business operates on an average 30% markup. When you have to pay 40%-50% to the team and still make a profit, you find yourself charging $8 for a beer. For Aramark, Beer is great. It’s where they make their biggest margin. Here are some of their other initiatives:
