In this case, you will play the role of team president for a minor league baseball team, the Wilmington Lions. The Lions are located in Wilmington, Delaware, and play in the International League of minor league baseball. The International League is an AAA-level minor league, the highest level of minor league baseball. All teams in the International League are affiliated with Major League Baseball teams, with the Wilmington Lions being the AAA affiliate of the Minnesota Twins. Through this affiliation, the Twins pay all of the salary and benefits costs related to the Lions players and coaches. This is a significant cost saving for the Wilmington Lions and all other affiliated minor league baseball teams. The Lions have been in existence for 30 years and have a sizable local following. A sampling of other cities that have International League teams include Norfolk (VA), Columbus (OH), Scranton (PA), and Pawtucket (RI). The Lions are owned by a group of eight individuals who all live in the Wilmington area, and the team is organized as a limited liability corporation (LLC).

The Lions play in WaWa Stadium. The stadium has a seating capacity of 10,000 seats, 12 luxury suites, and a grassy hill beyond the left field that can hold another 500 fans. The stadium is owned by the city of Wilmington. The Lions pay an annual fee of $1,100,000 to rent the facility for game days. The teams offices are within the stadium and the rental cost for this space is included in the $1,100,000 that it pays annually to Wilmington. The city covers all maintenance and upkeep expenses. Wilmington has a population of about 75,000, and approximately 250,000 people live within 30 miles of the city; thus, it can be characterized as a mid-size city. Wilmington is 35 miles from Philadelphia, 75 miles from Baltimore, and 125 miles from New York City; this is a minor league baseball team that is located within fairly close proximity to several MLB teams. With respect to sports competition, there is an NBA G League basketball team also located in Wilmington, and the University of Delawarelocated approximately 15 miles from Wilmingtoncompetes at the NCAA Division I level in all sports.

The average ticket price for Lions games in $10 with a ticket price range from $6 to $25. The team plays 75 home games per year and has an average attendance of 6,000, generating approximately $4.5 million in annual ticket sales revenues. Ten of the 12 luxury suites are sold out with an annual price of $20,000 per suite; thus, $200,000 is generated from suite sales. The Lions provide free parking for all their patrons. The team also sells concessions and merchandise to its customers and has contracted out all concessions operations to Aramark; the contract allocates 75% of all revenue from concession sales to Aramark and the remaining 25% to the Lions. For example in the most recent season, concession sales generated $3 million, with the Lions keeping $750,000 of that revenue.

Other sources of revenue for the Lions are the sale of corporate partnerships and stadium advertising (e.g., the scoreboard, outfield wall, behind home plate, and in the concourses), advertising in the game program and on the team website, and rights to in-game promotions. For the past season, the team generated $350,000 in revenue from corporate partnerships, advertising, and in-game promotions. As part of the Lions stadium deal with Wilmington, the team may also sell the naming rights of the ballpark, keeping 80% of the naming rights revenue. The team is in the 8^th year of a 25-year stadium naming rights deal with WaWa, an east coast convenience store chain (Links to an external site.). WaWa pays the Lions $200,000 for these naming rights. Thus, after the revenue split with the city, the team makes $160,000 in annual revenue from the deal. Because the city of Wilmington owns the stadium, the Lions generate revenue only from their games; the stadium hosts many other events like concerts, but the Lions do not receive any revenue from these non-team events.

Table 1 provides a summary of all revenue streams.

On the expense side, the Lions spend no money on the salaries and benefits of their players and coaches. However, they have a variety of other expenses, the two largest of which are the salaries and benefits of the non-coaching staff and the costs associated with the team. The team employs 20 full-time staff members, including the president, general manager, director of marketing, director of field operations, director of merchandising, director of community affairs, and director of business development. The Lions also have full-time staff members in areas such as ticket sales, media affairs, marketing, and community relations. The total salary cost of these 20 staff members is approximately $1.8 million. The team also supplies these full-time staff members with benefits related to retirement and health insurance which comprise about 30% of salaries. Thus, overall, the team spends about $2.35 million in total on the full-time staff expenses. The team also employs another 50 people as game-day staff during the season. These part-time staff members are involved in areas such as parking, concessions, ticket taking, ushering, merchandise sales, and security. The team spends approximately $400,000 a year on the part-time staff. Thus, the total annual staffing expense for the team is $2.75 million.

The Lions must also pay for the teams travel costs, supplies, and equipment. The Lions spend $800,000 per year to pay for travel costs such as transportation, lodging, and food. The Lions must also supply bats, balls, uniforms, and other equipment for the players. This results in an annual expense of $350,000.

Other expense areas include office supplies and equipment ($50,000); advertising and marketing ($200,000); local, state, and federal taxes ($750,000 a year); insurance for liability, theft, vandalism, and bodily injury (annual premium of $50,000); and fees to the International League to cover league-wide expenses such as front office and umpire costs ($50,000).

Table 2 summarizes the team's expenses.

The end result of the Lions annual operations is that it generates a profit of $150,000 ($6,250,000 - $6,100,000). While it is great that the team generates a positive profit, the ownership group is not pleased. They did not invest in the Lions in order to generate a profit of only $150,000. Thus, they have given you, the team president, a goal for the upcoming fiscal year. The ownership group has requested that you increase the annual profit level to $500,000. Additionally, the owners have requested that you submit a financial plan that outlines how you will achieve this $500,000 profit level.

Assignment

Present a plan for how you will reach the desired profit goal. As you formulate your plan, remember that it costs money to make money. So, if your plan is to increase corporate partnerships, keep in mind that it may cost money in areas like labor and office supplies to generate this additional revenue. In short, the net profit increase must be $350,000 (i.e., from $150,000 to $500,000) while factoring in both additional revenues and additional expenses. Justify any assumptions you make (that is, you can't just say that you WILL sell 25% more tickets in the next season without any description of how you will accomplish that goal).

Table 1

Sources of Annual Revenue

Source	Amount
Ticket sales	$4,500,000
Luxury suites	$200,000
Stadium naming rights	$200,000
Concession sales	$750,000
Merchandise sales	$250,000
Stadium advertising	$225,000
Game program and web advertising	$75,000
In-game promotions	$50,000
Total revenue	$6,250,000

Table 2

Sources of Annual Expense

Expense	Amount
Salaries and benefits	$2,750,000
Stadium rental	$1,100,000
Team travel costs	$800,000
Office expenses	$50,000
Team supplies and equipment	$350,000
Advertising and marketing	$200,000
Taxes	$750,000
League payment	$50,000
Insurance	$50,000
Total expenses	$6,100,000