Concessions

What is a concession?

• An area where food, drinks, or other items are sold at a stadium.

• They enhance the fan experience while generating revenue for the organization.

What is the main question when deciding whether to operate in-house concessions?

• Whether operating concessions is a core competency of the organization.

• A business's main strength or strategic advantage

• A venue should consider operating concessions in-house when concessions are considered a core competency and the venue wants greater control and profit potential.

When should a venue consider outsourcing concessions?

When another company can operate concessions more efficiently and allow the venue to focus on more important business activities.

What is comparative advantage?

• The ability to provide a service at a lower opportunity cost than another organization.

• Is about opportunity cost → "Even if we can do this ourselves, is our time better spent doing something else?"

• Ex. A university hires Sodexo to run concessions so it can focus on fundraising and sponsorship sales.

  • Because the university believes its resources are better spent on fundraising than operating food stands.

Why did the lesson use the Texas Longhorns as an outsourcing example?

Because outsourcing concessions allows them to focus resources on potentially more profitable activities such as sponsorships and media rights.

What is an advantage and disadvantage of outsourcing concessions?

• Access to specialized expertise, more diverse food options, faster service, and potentially better prices.

• The venue loses control over management decisions and customer service operations.

What is an advantage and disadvantage of running concessions in-house?

• Greater control over quality, operations, staffing, and customer service.

• Employee wages, training, liability costs, and operational expenses.

What is a competitive advantage?

• The ability to provide greater value through lower prices, better service, or a superior product.

• "Who can provide the best value to customers?"

• Ex. Better quality, Lower prices, Faster service, More variety

• Ex. A concession company offers more menu options, shorter lines, and lower prices than the stadium can provide itself.

  • Competitive advantage because it creates more value for customers

What question should executives ask when comparing in-house and outsourced concessions?

Which option provides a better experience and greater value to fans?

What is a pro forma and income statement?

• A projection of future financial performance.

• A financial statement showing revenue, expenses, and profit.

• Venues create pro forma income statements to estimate future revenues, expenses, and profits before making decisions.

What are variable and fixed costs?

• Costs that change with output, such as wages, utilities, and food supplies.

  • For instance, if a team wants to add two more concession stands into the stadium, it will have to hire more people and buy more food

• Costs that remain constant regardless of output, such as buildings, rent, and equipment.

  • Not usually relevant to output decisions because they remain constant.

How is profit calculated?

Profit = Revenue − Direct Costs − Operating Expenses.

How can a venue increase concession revenue?

By increasing attendance, increasing spending per fan, or both

What factors must be considered when trying to increase concession revenue?

Marketing costs, advertising costs, attendance levels, food variety, and food supply costs.

Why is menu diversification important? Why are local food options becoming more common at stadiums?

• To appeal to a wider range of fans and increase sales.

• They showcase local culture and enhance the fan experience.

A university decides to hire a concession company so it can focus on sponsorship sales. Which concept does this demonstrate?

Comparative advantage.

A stadium wants complete control over customer service and food quality. Which option would likely be preferred?

In-house concessions.

A venue wants more diverse food options and specialized expertise. Which option would likely be preferred?

Outsourcing.