FU­TURE OF GOLF

Out­sourc­ing a club’s as­sets.

Golf Digest (South Africa) - - Contents -

Out­sourc­ing is a con­tro­ver­sial topic whose mer­its are vig­or­ously de­bated by golf club mem­bers. It comes in var­i­ous forms – food and bev­er­age, the pro shop, golf carts, driv­ing range and course main­te­nance.

At Mark Wilt­shire Golf we have been ex­posed to all types of out­sourc­ing. Clubs will ask us which is best – to re­main in-house or to out­source – but in our opin­ion there is no pre­ferred way as it is de­pen­dent on a club’s sit­u­a­tion. Hav­ing said this, we ad­vise clubs to be cir­cum­spect when out­sourc­ing in­come streams be­cause po­ten­tial rev­enue growth gen­er­ally ex­ceeds the sav­ings on cost-cut­ting ex­er­cises.

Food and bev­er­age is out­sourced most. While play­ing a sup­ple­men­tary role to golf it of­ten is the big­gest headache in terms of con­trols and prof­its. Find­ing an af­ford­able per­son with the skill to man­age F&B can be chal­leng­ing. Fac­tor in pur­chas­ing – what, where and how much, stock con­trols, pric­ing of menu items, por­tion sizes, work-ros­ter­ing, and ser­vic­ing pa­trons – and one can see why re­tain­ing F&B in-house be­comes less at­trac­tive.

We have found that clubs ex­pe­ri­ence dif­fi­culty se­cur­ing the right bal­ance in F&B man­age­ment. Cater­ing is more com­plex than serv­ing drinks. In essence, it can be di­vided into food prepa­ra­tion, back-of-house (con­trols, pur­chas­ing, cost­ing) and front-of-house ser­vice. F&B man­agers are nor­mally strong in one area and sel­dom equally com­pe­tent in all three ar­eas. To counter this, clubs will con­sider em­ploy­ing two in­di­vid­u­als, but turnover is at a level where the cost of ad­di­tional em­ploy­ment is pro­hib­i­tive. The ques­tion re­mains whether such ap­point­ments can in­crease turnover to the point of jus­ti­fy­ing ex­tra costs.

By out­sourc­ing F&B, clubs ex­pe­ri­ence in­stant cash flow re­lief, fewer labour is­sues, and hand over to spe­cial­ists who of­fer im­proved qual­ity and ser­vice. The down­side is the risk of F&B op­er­at­ing as a separate en­tity, not align­ing with golf op­er­a­tions and needs of mem­bers.

Clubs can en­ter into agree­ments with F&B op­er­a­tors that are doomed from the start. Clubs out­source only the cater­ing, as it is eas­ier to op­er­ate a prof­itable bar, or the rental per­cent­age of turnover clauses is too high. At the same time, op­er­a­tors over­es­ti­mate the abil­ity to achieve a cer­tain turnover. This can con­tribute to an ac­ri­mo­nious re­la­tion­ship be­tween op­er­a­tor and club, and can­cel­la­tion of the agree­ment. And when an F&B op­er­a­tor is suc­cess­ful, clubs of­ten de­cide to take it back in-house be­cause they are “los­ing” too much in­come, of­ten with dis­as­trous con­se­quences.

To­day, many clubs out­source their golf shop to a third party which in­cludes manag­ing tee book­ings and col­lect­ing green- and cart fees. Some clubs pay the third party for this ser­vice, while in other in­stances the op­er­a­tor pays a rental to the club for the re­tail rights. It may also in­clude teach­ing rights, and pull- and golf cart in­come. There are var­i­ous per­mu­ta­tions at play. In most in­stances, the arrangement be­tween club and third party works well and is ben­e­fi­cial to the club. How­ever, a third party can put its in­ter­ests be­fore a club’s and it can be dif­fi­cult to pick up as it evolves over time. This is detri­men­tal to a club and com­mit­tees need to be aware of the risk.

Course main­te­nance is an area which clubs will out­source. It dif­fers from the oth­ers purely be­cause it is a cost. It comes in var­i­ous forms, en­tail­ing a monthly flat fee, a proven cost plus fixed man­age­ment fee, and may in­clude or ex­clude a separate fee for course equip­ment, de­pend­ing on who owns the as­set. On this point, it is bet­ter for a club not to own course equip­ment when out­sourc­ing main­te­nance. Rather pay the op­er­a­tor a fee to take care of its own fleet.

The ad­van­tage to out­sourc­ing course main­te­nance is that the op­er­a­tor has ac­cess to spe­cialised skills, deals with staff and labour is­sues, pos­sesses pur­chas­ing power (the ben­e­fit should be passed on to a club), and takes the risk of main­tain­ing the course to a cer­tain stan­dard. The dis­ad­van­tage is that clubs may feel they are los­ing con­trol over their big­gest as­set. There is doubt whether the fee paid to the op­er­a­tor, ex­clud­ing the man­age­ment fee por­tion, is ap­plied to the course.

MWG rec­om­mends that clubs en­ter into a ser­vice level agree­ment with op­er­a­tors which is mea­sur­able. The agree­ment should in­clude a de­tailed SLA with the cour­ses it main­tains, which should trans­late into an au­dit scor­ing tem­plate. At MWG we au­dit our cour­ses monthly in con­junc­tion with the club rep­re­sen­ta­tive and this sys­tem en­sures trans­parency and serves as a tool to man­age the course.

In con­clu­sion, there is no right or wrong with out­sourc­ing. It can be ap­plied suc­cess­fully if third party op­er­a­tors align them­selves with the in­ter­ests of a club and its mem­bers, while a club al­lows op­er­a­tors to suc­ceed fi­nan­cially.

Cater­ing at golf clubs can be a com­plex oper­a­tion.

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