Food and Beverage Minimums
In an ideal world, all clubs would not contemplate forcing members to spend money on specific areas of the Club because the members were engaging, spending and participating in club concessions (F&B operation).
For some, unbelievable reason, private clubs determined, in the “Golden Era” of the private club industry, that it was a good idea to impose the obligation to spend a certain amount on Food and Beverage (and with many club allowing Food only). And, regardless of how the private club industry has changed, the consumer has changed.
Bad Policy and Bad Profits
Private club leaders have become addicted to the idea that Food & Beverage minimums are perceived to guarantee:
Members utilizing the F&B operations more often.
A more profitable (or less losses) F&B operation.
The “budgeted” profits produced by unused and/or unspent F&B minimum obligations.
Whenever a customer feels misled, mistreated, ignored or coerced, profits from that consumer are ‘bad’. Bad profits arise when companies save money by delivering a lousy customer experience (think about your “change ticket fees”). Bad profits, for a private club, arise when the club derives income from not providing a utilized service.
Remember, you start every month with a profit. Members pay you their dues in advance and should have a reasonable expectation of a quality experience with each and every aspect of the club experience.
Alternative Solutions
It is, in fact, possible to offer a strategy that is a winning proposition for all members of your club. Private club leaders are so afraid of the wrong decision they are making no decisions.
Hospitality Premium / Fixed Gratuity - Charge a monthly ‘fixed gratuity’ hospitality premium. This policy allows for all members to win by spending on food and beverage at their club. The more they spend the more they win! Currently, the less they spend the more they lose!
Annual Spending Minimum - It is fair to assume and require members to utilize the club with an expectation of a minimum amount of annual expenditures. However, the club should not dictate on what or how this minimum requirement is spent.
Capital Improvement Fee - Clubs must be vigilant in the continued investment in capital improvement projects. Forced and consistent savings rather than a large assessment.
Private club leaders have become addicted to bad profits and should consider investing in more ‘member friendly’ strategies which are more financially beneficial to the club.