Australian Clubs

Grant Thornton Australia | Audit, Tax and Advisory
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2016
Australian Clubs

Australian clubs

16 Feb 2016

Australian Clubs

Clubs appear to prosper across Australian towns and cities, but operating a successful one isn’t easy.

Gone are the days when selling a cold beer to members after a round of golf was enough. Competition is fierce and developing the right strategy to attract and retain patronage is a constant challenge. With external factors outside an operator’s control, managers must focus on exploiting the business’s strengths while mitigating operational weaknesses and seizing all available opportunities. It’s not easy, but it is doable.

Profitability

The sector generates a relatively low profit margin: less than five per cent without gaming and around seven per cent with gaming. Operators can also boost profits through positively influencing patron numbers and keeping a tight rein on expenditure. Other factors within the operator’s control include:

the use and number of gaming machines
the level of debt and quantum of interest for freehold venues
leasing costs for leasehold venues
stock management, including its impact on working capital/cash
workforce flexibility, where wage costs are aligned with patronage through effective rostering
profit margins on food, with constant review of both costs and menus
investing in a sound business technology platform to streamline operations

Successful strategies

Converting occasional visitors into members is the heart of a successful strategy. Being willing to innovate and try new approaches is also key. Maximise your position in the market by ensuring your venue has a clear identity, core values and an atmosphere that patrons can identify with; one which also matches the local demographic, for example, family-oriented, gaming or night trading. Ensuring club facilities are maintained and holding regular club activities will also draw repeat business back.

Having a resourceful club manager who is willing to take ownership of the club’s direction and management is also important. Club board members must ensure managers are incentivised appropriately with both financial and non-financial KPIs; for example, regarding management (staff turnover), occupational health and safety measures or governance via online compliance training.

The small margins typical of clubs require a strong focus on cost control. Successful businesses develop detailed budgets to manage cashflow on a weekly basis for stock ordering, payroll, maintenance and marketing.

Clubs also require refurbishing on average every seven years. This is a significant expense and critical to driving patronage. The age of the premises will dictate the timing and cost of such capital expenditure: typically, bars and gaming areas require greater capex than dining areas.

Where a club has gaming facilities, the gaming strategy requires careful attention. It must be aligned with the club’s broader member strategy and members’ social attitudes to gaming. Consideration should also be given to the siting of the gaming area and its lay out – is it discreetly separated from other activities and out of general view? A sensible approach to capital expenditure is vital, as is ensuring any TAB, Keno or Foxtel facilities and the gaming room are regularly refurbished.

Customer service plays a huge part in repeat patronage. Successful venues have a trained and motivated workforce with a clear understanding of customer service essentials and the target market. Although this can be difficult with a largely youthful and casual workforce, strong management will be up to the challenge.

A firm business technology foundation can make a world of difference in key areas such as membership management, budgeting planning and forecasting and the nuts and bolts of paying bills, tracking different sources of income and keeping a handle on costs.