In the first two parts of this series we have looked at the pitfalls of the accounting of player values and contracts with sport marketing agencies. Today, I would like to dig a bit deeper into another area that is not as straight forward as it might seem on first glance: Catering and the Catering rights.

Catering rights

Catering might seem like a simple business at first glance:

You buy beer, softdrinks, sausages, french fries and the all-time favourite of German soccer fans - Schnitzelbroetchen - and sell them at a much higher price. Use a cheap work force and big profits are guaranteed.

Well, why this is true, unfortunately this is not the standard way of doing it for soccer clubs. Instead, they turn to big catering companies such as Aramark or Sodexo to do the catering for them.

Of course, soccer clubs could use these firms as service providers, which would free them from the need to hire people, buy beer etc. This would not change the business model and the accounting would stay easy to understand. However, this is also not what is done in most cases.

In reality, soccer clubs give away the right to sell beer and sausages in their stadium to the likes of Aramark. These catering companies will then pay a revenue based rent to the soccer club. This transfers a big part of the risks to the catering company but still does not change the profit in an individual year a lot, unless... 

...unless the revenue based rent is set much lower than it would normally be the case. This is what happens a lot and one might ask: why are the soccer clubs giving away profit for free to the catering companies? Indeed, they are not. Instead, the clubs often get a signing bonus for such a contract, which compensates for the low rent. 

The nice thing about this: This signing fee becomes profit and cash flow immediately when the contract is signed. However, this profit will be missing in the next years, as the club will get lower income from catering rights.

Payment cards

Another trick often used by soccer clubs is to use payment cards to pay for the catering services in the stadium. You want to buy your beer against cash? Very often this is not possible. Want to you use a standard credit or payment card? Most likely, this is also not possible. Instead fans often have to pay with special payment cards, which need to be charged with cash upfront. 

Extra effort for everybody - how can this be helpful for anybody? Well, this is straight simple: many fans charge money on their cards and than lose them, forget them at home or just keep the money on their card for ever. Best case, this means that they are giving away a free loan to the club or the service provider. Worst case is that they are giving away money for free. Very often this is an issue especially for the away fans, which want to go home quickly after the match and thus leave small amount on their cards - even if it might be years before they come to the same stadium next time. Typically, after three years cards are voided and the remaining money on the card turns into profit for the club or payment service providers.

Another risk for the fans has become visible recently, when the service provider which handled the payments in Frankfurt, "JustPay" went bankrupt. This meant that the funds on the cards of the fans would have been lost if Eintracht Frankfurt would not have voluntarily compensated the fans.

So next time you go watch a soccer game in a stadium, you might look with different eyes on your payment card and "Schnitzelbroetchen".