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Back in Black

October 13, 2009 By: Michael Harrelson Night Club and Bar Magazine


Feeling the Brunt of the Economic Trend, Operators Find Alternative Revenue Sources to Increase Cash Flow

Even in the best of times, it’s no easy feat to keep a nightclub or bar in the black financially, and the recent economic slump is compounding the issue. 

Today, management must do more with less — simply because fewer customers are coming through the door and are spending less once inside, meaning success is measured not in the maintenance of market share and meeting profit targets, but in a brand’s ability to hang on and weather the storm.

With this survival strategy top of mind in many areas of the country, some owner/operators are attempting to gain control of their bottom line through budget cuts and scaling back or eliminating line cost items, from personnel to music to advertising and promotions. Rather than cutting costs where the house can ill afford it, however, others are solving their deficit problems by creating new revenue streams within the four walls of their establishments.

Not only does the additional cash flow strategy avert the possibility of turning off customers accustomed to the atmosphere and service they get at their favorite watering holes, but it amounts to a permanent solution to a temporary problem that can add to the overall guest experience and contribute a pretty penny to any concept’s profit picture over time.  

Friendly Territory
These days, entrepreneurs are finding the means to extra income flow in some familiar places. Long a fixture in nightlife, jukeboxes have been moneymakers and patron magnets in bar and club settings for more than half a century. And today, with new technology and functions galore, they are bigger players than ever, offering enhanced credits that can accrue to the house from the coins, bills and credit card transactions that keep the music coming.

At Fish Head Cantina in Halethorpe, Md., owner Scott Fisher saw his earnings from the jukebox increase threefold with the installation of a state-of-the-art TouchTunes system five years ago. The system offers hundreds of thousands songs and easy, remote access from vendor-provided video game screens at the bar.

“We had the old-fashioned coin-operated jukeboxes when I came in about six years ago,” Fisher says. His Baltimore-area bar/club/eatery draws a diverse crowd ranging in age from 21 to 50 with its variety of sports activities and live music offerings. “What was in the jukebox was what was in it, and trying to get the guy out to change the tunes was a pain in the butt.”

The digital jukebox he installed five years ago gives his customers instant access to a huge library of music via high-speed Internet technology that is updated and augmented automatically. “The beautiful thing is, the busier the jukebox gets, the longer customers are going to have to stay to hear their song. Sometimes they have to wait two hours to hear their song, and they will.”

Although he earns a percentage of the income derived from each play, Fisher says the real opportunity to profit lies in the add-on sales that accrue as a result of having a jukebox. “The longer they stay, the more money they spend. It is a beautiful thing when they stay — especially these days in a tough economy.”

If the actual and residual sales that result from having a digital jukebox in place are not enough, Robert Greenberg, TouchTunes’ chief marketing officer and senior vice president of digital media, says other TouchTunes offerings go even farther. One such offering is Barfly, which presents sports and entertainment content on high-definition screens in bar and club locations. “Barfly provides a screen within a screen, and the most compelling thing is that venues can promote themselves and generate income from advertisers.”

Other systems also provide for customized promotions. A soon-to-be-launched ad management feature from jukebox provider AMI Entertainment Network will allow venues to run location-branded advertising on its digital jukeboxes, says Mike Nickerson, vice president of advertising for the Bristol, Pa., music company.

“Let’s say that Tuesday night is softball league night,” Nickerson says, “and you want your patrons to come in and drink $5 pitchers of beer and eat chicken wings. This allows you to promote the event on-screen with logos and templates.

“Running these ads on your screen in the bar can increase sales by up to 20 percent. If you’ve over-ordered chicken wings, you can create an ad and blow through them before they go bad on you.”

The Color of Money
ATMs are another fixture of bars and clubs that serve as a virtual cash conduit flowing directly back into the till of an establishment, while also providing convenience to patrons.

The four Moneytree ATM machines located at the Flora-Bama Lounge & Package in Pensacola, Fla., are put to good use by customers who stop by for a beverage after work, on busy weekends or during special events such as the venue’s annual Mullet Toss contest. At $3 per transaction in extra income for the iconic establishment that opened in its present Gulf beach location in 1964, the alternative cash windfall definitely comes in handy to manager Susan Poston. “We do make money off of our ATM machines, and it definitely helps,” she says.

But the monetary benefits of having ATMs are not limited to the transaction fees, Poston adds. “People still use credit cards at the Flora-Bama, but on big weekends, we don’t have that option because credit card transactions are too time-consuming for the bartenders. The ATMs greatly facilitate service at the bar and result in higher sales at the end of a busy night.”

Getting paid in cash for a round of drinks or dinner means venues do not have to wait to receive reimbursements from credit card companies or pay the 2.5 percent or more per transaction charge merchants do, says Wayne Young, marketing engineer for Digital Network Solutions, the manufacturer of Ft. Walton Beach, Fla.’s Moneytree ATMs. “The difference is that with credit card transactions, the owner pays a fee, whereas with an ATM machine you would essentially make a profit off of a transaction.”

For the operator who wants to add a new source of revenue to an establish ment without a major upfront cash outlay, few income-generating sources can match the possibilities of electronic and online video games.

Consistently ranked at or near the top in terms of the steady stream of greenbacks it provides, according to Play Meter and RePlay magazines, Golden Tee Live 2010’s online version and the stand-alone offline Golden Tee Unplugged can produce $150 per week per unit for owners at no added cost to the establishment, says Gary Colabuono, marketing director at Incredible Technologies, which markets the popular game systems.

“The return on investment for the owner is huge because he is not putting out any cash,” Colabuono explains. “Typically, the Golden Tee machine is purchased and maintained by an amusement operator who places it at a bar or club and splits the income with the owner. The owner’s part of the investment is the real estate taken up by the Golden Tee unit and the power.”

One owner who wouldn’t want to give up the income he derives from video games is Steve Alberts of Duffy’s Sports Pub in Palatine, Ill. Alberts, a five-year veteran of the sports bar trade, employs an array of poker video and other popular bar-top games in his arsenal of video entertainment, including three Golden Tee games.

“It brings in new customers all the time,” Alberts says. “Especially when they update the courses and roll them out each October for the millions of players who play the game. Not including when guys come in for tournaments, my Golden Tee games can make me $1,200 to $1,500 a week.”

And for every dollar that comes Alberts’ way via his share of the video game revenue, Colabuono says the owner can count on $4 to $5 more from food and beverage sales. “Let’s say that a game grosses $300 in a week. The traditional split is 50/50, so when the weekly collection is made, the amusement operator gives the location $150, but our research tells us that the same players have spent an additional $600 on food and beverage, so the location has grossed a total of $750 on the games.”

The prospect of such additional dollars is attractive, but any operator considering adding gaming or music systems or other machines to their venue must consider the cost of the equipment, installation, power, maintenance, revenue structure and even the real estate involved. Savvy operators who do their homework and invest in the systems and services that meet their guests’ needs and preferences while also delivering additional profits to the bottom line will tap into a double-whammy that will likely will carry them through these tough times and generate even greater revenues in the next, hopefully more prosperous, era. While an electronic system as an alternative source of revenue may have a hefty upfront cost, its potential paybacks can be a blessing in today’s market. NCB


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