A golfer walks out of the pro shop with a brand new shirt and matching hat. The logo may be that of Bear Mountain Ranch Golf Course, but who collects the profit on that sale?
A generation ago, it was a 50/50 proposition— either the club or an employee owned the shop and collected the profits. Today, however, fewer clubs are relinquishing this money-making opportunity. The ones that do, such as Bear Mountain Ranch in Chelan, Wash., find the situation refreshing.
“Having the shop owned by the club’s head golf professional or director of golf means it’s one less set of expenses and headaches the club or course owner needs to worry about,” says Von Smith, Bear Mountain Ranch’s General Manager and Head Professional, who owns the shop along with his wife, Cindi.
SUMMING IT UP
- Fewer clubs are offering shop ownership options to their professionals.
- Shop ownership means collecting potential profits, but also assuming financial risk.
- By offering shop ownership, clubs can pay their professionals a lower salary.
In situations where club owners visit their property infrequently, Smith contends, they are less likely to know the pro shop’s primary clientele. But by having an employee own the shop who interacts with members and guests on a daily basis, the correct quality of goods, at the right price points, can be sourced and merchandised, making the shop profitable while enhancing the perception of the course in the eyes of members and guests.
“This arrangement gives the shop owner the freedom to bring in what we think the guests will like,” Smith adds.
Smith has been on the other side of the “who owns the shop” debate, too. When he was the Head Pro for the City of Chelan Municipal Golf Course from 1977 through 1994, the city owned the shop. And while he was at Desert Canyon Golf Resort in Orondo, Wash., the Director of Golf, Jack Frei, owned the shop. Having seen both sides of the coin, and assuming all things are equal, Smith prefers giving the ownership to the employee.
“I like to be in control of the merchandise, making sure it’s good quality and will enhance the visibility of the course through the use of the logo and the quality of material and styles,” he says. “Obviously there are financial benefits and obligations, but with smart buying and knowing your customers, there should always be a profit.”
Like Smith, Jack Sauers, General Manager and COO at Laurel (Miss.) Country Club, has been on both sides of the ownership table, and he prefers that the responsibility fall on the employee as well.
“As a General Manager, I much prefer that my professionals—golf and tennis—own their shops,” Sauers said. “On one hand, it takes me out of the need to monitor and control their inventory. But more importantly, it gives them a chance to be an entrepreneur, and a bigger stake in the game.
“As a golf professional, I always preferred to own my shop,” Sauers adds, “because I didn’t want anybody else to control my merchandise selection or how I operated my business.”
The Case for the Greater Good
At the other end of the debate sits Dave Hallenbeck, Director of Golf at Grand Geneva Resort & Spa in Lake Geneva, Wis. Hallenbeck, who’s been at the property for 33 years, prefers that shop ownership be in the hands of the club. Having individuals own the shop, he explains, creates more financial pressures, especially when controls aren’t airtight. The fear of theft—especially with tight margins—and having money tied up in leftover stock at season’s end can weigh heavily on individual owners, he notes.
Additionally, available cash flow can be a major benefit of the club owning the shop. “With pre-book deals and discounts, having the cash flow early in the season to pay the invoices is very difficult, until you begin to receive revenues,” Hallenbeck explains. “Also, not being able to take advantage of multiple discounting programs can affect [an individual owner’s] personal bottom line.”
Though Smith is in favor of the professional owning the shop at Bear Mountain Ranch, he does see some potential negatives. The most obvious of these is: Who pays the shop employees?
“The primary function of shop employees at public or resort courses is to take greens fees and make sure the guests are taken care of,” he says. “So, does the owner of the course pay all employees, even though they sell the occasional shirt or sleeve of golf balls? Or does the owner of the merchandise pay the employees, while they are mainly taking greens fees?”
This dilemma is usually solved through a rental of floor space or by allocating a percentage of sales from the shop owner to the course owner, with the course owner then paying the employees, Smith notes.
“Another issue is the collection and distribution of merchandise sales through the same register as the greens fee revenues,” he adds.
In Bear Mountain Ranch’s case, all sales go to the course owner and every two weeks, Smith submits a report showing merchandise sold. He gets reimbursed for these sales, less his rent and credit card charges.
“The negative to me is that I do not have use of those funds for approximately three weeks, as it takes about a week to get a check cut back to me,” he says.
Pay Them Now, or Pay Them Never?
Finally, there’s the issue of salary. Can a club pay less of a base if it turns over shop ownership?
“The situation absolutely influences the professional’s compensation package,” Sauers says. “In my experience, the professional can generate much more revenue through his ownership than the club will ever experience if they own it.” Employee ownership also lends reasonable assurance that the golf pro will put in sufficient hours and time to take care of the business, he adds.
“During my career as a Director of Golf and pro shop owner, the company didn’t even pay me a salary,” Sauers notes. “Our clubs’ shops were sufficient caliber for me to earn triple figures just through sales and lessons alone.”
Hallenbeck, though, believes salaries should be similar, regardless of shop ownership. “When building a compensation package, you would first base it on the historical shop revenues,” he says. “If a pro is good and sales increase, then both parties should be rewarded with a split of the additional profits. Incentives to build an operation should always be an option; the better performer will succeed and should profit from that success, along with the club owner.”
And, while the industry trend has shown fewer professionals owning the shop, there’s still a school of thought that handing over the keys to the pro shop, and its potential profits, is one of the best tools clubs have to retain valued employees or attract and recruit ambitious candidates.