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Atlanta Falcons’ concession-pricing trades small revenue dip for major goodwill gains

  • NFL franchise slashed the price of food and drink at their new Mercedes-Benz Stadium
  • Revenue decline less than anticipated; fan response greater
  • Sports teams from US, Europe and China consider following suit – as are cinema chains

When the Atlanta Falcons announced their ‘fan-first’ food pricing ahead of their move to the Mercedes-Benz Stadium in 2017, the NFL franchise immediately revolutionized the stadium concessions model.

With $2 hot dogs and bottomless soft drinks, $3 pizza and $5 cheeseburgers among the options, they were the lowest concession prices – by far – of any major sports team in the United States.

The Falcons’ ownership group, AMB Sports and Entertainment, anticipated a 20 per cent drop in concessions revenue on their final year in the old Georgia Dome stadium, and they were happy to trade this for goodwill from their fans. As stadium concessions revenue is a fraction of national income for NFL teams, it was a low-risk, high-reward strategy.

As it happens, the unexpectedly large 53-per-cent increase in volume meant revenues fell only seven per cent in year one at the Mercedes-Benz Stadium.

The move brought supplementary benefits. About 6,000 more fans per game entered the stadium earlier than they did in 2016, leading to shorter waiting times at the entrance gates, which improved security. And fans, feeling that they had more money in their pocket, spent 88 per cent more on merchandise on game days than in the previous year.

In the 2017 Voice of the Fan surveys, the Falcons and AMBSE’s MLS franchise Atlanta United – who also play at the Mercedes-Benz Stadium – were rated number one in all food and beverage categories: quality, variety, speed of service and price-to-value ratio. For their last two years at the Georgia Dome, by contrast, the Falcons ranked 18th overall.

“In the grand, grand scheme of things, food and beverage is not a top-five driver of our bottom line,” Greg Beadles, the chief operating officer of Falcons parent company AMB Sports & Entertainment (AMBSE), tells SportBusiness, “and so we pitched to our owner [Arthur Blank], ‘Look we think this is going to cost us money – and this is the projection on how much we think it’s going to cost in lost revenues’.

“But once we explained the ideas and how it tied in with his big-picture vision – of being in control of the fan experience from driveway to driveway as much as we could – he supported us to pursue it from then on. After we really dug into it, our owner said it was the right thing to do.

“Not everything we do is driven by dollars and cents, we believe in our core values. This is one example where that trumps economics.”

On the back of the Falcons’ success, the Baltimore Ravens and Jacksonville Jaguars are following suit with cheaper concessions in the coming NFL season, while sports teams from across the globe – as well as US cinema chains – have contacted the franchise to find out more.

Fixing a ‘broken model’

When Arthur Blank, the co-founder of home improvement store Home Depot, bought the Falcons in 2002, he was hampered in his attempts to improve the fan experience at the Georgia Dome, their home from 1992 until 2016.

The venue, now demolished, was owned and operated by the state of Georgia, via the Georgia World Congress Center Authority (GWCCA). It meant the Falcons, who were primary tenants, had no control over the price of concessions, the food quality or even the menu choices as GWCCA arranged its own concessionaire contract.

“But when the beer was hot and the hot dogs were cold, the fans would not blame the state of Georgia, they would blame the Falcons,” Beadles tells us. “And in that particular relationship, our hands were really tied.”

When Blank initiated plans to build a new venue in 2010, he ensured that the Falcons’ parent company AMBSE would be its operator to have better control over in-stadium revenues. The Mercedes-Benz Stadium, a private-public partnership, broke ground in 2014 and opened in 2017. It houses the Falcons and Atlanta United, who are also owned by Blank, and has hosted other major events such as the 2018 College Football Playoff National Championship game. The 2019 Super Bowl will also be played at the Mercedes-Benz Stadium.

Prior to the stadium’s opening, Blank set about improving the fan experience. Concessions was “right at the top of the list” due to the poor ratings the Falcons received, locally and nationally, from supporters.

“We started asking ourselves different questions,” Beadles adds. “Why is this the case that we have such terrible ratings across the board? Not just in pricing, but also quality, speed of service – across the board in the NFL we basically received failing grades from our fans.

“We brought in different concessionaires to present to us during an RFP [Request for Proposal] process and we asked them why. And we came to the conclusion that the economic model was broken.

“We were pointing the finger at the concessionaires and, rightfully so, a couple of the finalists pointed the finger back at us. They said owners and venues are greedy. So we said if we’re going to do this, we’re going to take it on our own and it will have to be our business.”

Most US major-league sports teams contract a concessionaire to take control of the business, including choosing the menu and pricing, and revenues are shared. Revenue maximisation is the concessionaire’s only goal and profit margins on food and drink can be as high as 77 per cent.

At the Mercedes-Benz Stadium, by contrast, AMBSE pays supplier Levy Restaurants a fixed fee but keeps all the revenue. “They are paid on a strictly management-fee basis so we had to pay for all the investment up front – the equipment [typically a seven-figure investment] – but then that gives us the flexibility,” says Beadles. “We use their expertise on menu decisions and cooking innovations and all those sorts of things but we decide what the quality is, what the pricing is. Once we took control, then we were able to make the changes that we made.”

Cheap as chips

Having taken control over their stadium revenues and the concessions menu, AMBSE then decided to drop the price of food and drink at the Mercedes-Benz Stadium to unprecedented levels.

According to Team Marketing Report, at NFL stadiums in 2015 the average price of hot dog was $5.29, soft drinks were $4.79 and beer was $7.42. By contrast, at the Mercedes-Benz Stadium, with all prices including tax, a hot dog is $2, Coca-Cola with unlimited refills is also $2, while a 12oz Bud Light is $5 (see graphic). The team estimates that an average family of four can buy food and drink at the stadium for $28 or less.

Why exactly did AMBSE drop prices so low? Its executives – taking some inspiration from the Masters golf tournament in nearby Augusta, where sandwiches are as little as $1.50 – took a calculated bet that it was a move that would appeal to the Falcons fanbase with very little financial risk.

With only eight regular-season home games, concession sales are a tiny fraction of NFL teams’ revenue. The Falcons have not released their numbers but, to illustrate the point, the Indianapolis Colts generated around $5.2m in food and drink sales at Lucas Oil Stadium in 2013 and, like every other NFL franchise, received $226.4m in national revenue for the 2014 season.

“In those low ratings from the fans and their verbatim responses [in comments sections], what we were hearing was, ‘Look, when I come to the stadium I feel like a captive audience, that once I come in I can’t go back out, that I’m forced to pay these prices that compared to what I can get in the street are an order of magnitude higher’,” says Beadles. “So our thinking was why are we treating our fans this way when they come in?'”

The ‘wow’ items that are $6 or lower – soft drinks, bottled water, pretzels, chips, pizza, cheeseburgers, chicken fingers – are considered fan favourites and what the team sell the most of, but the Mercedes-Benz Stadium also has high-end food choices. Beadles says: “This isn’t just about cheap food, it’s about options – but they are all charged similarly to what they would be outside of the stadium.”

Appropriate infrastructure

AMBSE predicted a 15- to 20-per-cent increase in volume of sales of concessions at the Mercedes-Benz Stadium. When the uptick was actually 53 per cent, the venue was already prepared thanks to its significantly improved infrastructure.

This includes: 65 per cent more points of sale and 1,264 more beer taps than at the Georgia Dome; just over half the stands having cooking capacity compared to less than a third; whole dollar amounts (including tax) to reduce transaction time; queue lines designed – with the help of Georgia Tech’s Industrial Engineering programme – to maximize space and minimize waiting times; significantly more pantries and refrigerators; and self-service areas for soft drinks and condiments.

“There are seven, eight, nine different things that we tried to do to speed up the transactions by a few seconds each but when you aggregate them all it is considerable,” says Beadles. “For the College Football National Championship we broke the North American record on number of transactions for a sporting event (over 120,000) and yet we were still number one in terms of speed of service.

“This is a key thing when I talk to other teams and other venues, we actually discourage them from just lowering pricing if you can’t make the changes that we were able to make that building a new building afforded us. If you have an old building and you can’t get your back-end operations up to speed then it might be better to do this in increments than go the whole hog as we did.”

An unexpected consequence was significantly more trash being created and the ice in the self-service soda machines and items in the condiments station running out far quicker than expected. “These were interesting bi-products that we didn’t necessarily think about beforehand and we’ve had to spend more labour dollars to maintain and refresh the self-service areas and clean up the trash during events.”

Supplementary benefits

On average 6,000 more Falcons fans walked through the gates two hours before the game last season, which not only meant more time to sell food and drink, but also helped to ease waiting times at entrance games.

“One of the theories is that people, instead of stopping and eating somewhere along the way where they know they can get affordable food, would they come on down and avoid the traffic and come in earlier and eat here? And we’re definitely seeing that. So we now have less of a push getting those 6,000 people in later, they are already in the building, which helps with all the other fans coming in later to have a better arrival experience,” says Beadles. “We were number one in security screening and number two in arrival experience in third-party surveys that are done across the NFL and MLS.”

Gameday merchandise sales are also up 88 per cent compared to the previous season. “We think there is a correlation to people having a few more dollars in their pocket and the goodwill we’ve created,” Beadles adds.

The concessions model has not affected the stadium’s attempts to secure major events. If anything, it has proved a major advantage. “It’s one of our hallmarks with the business and the building so when we made our initial pitch for the Super Bowl and every other event like the National Football Championship game here – and hopefully in 2026 we’ll be a World Cup venue – in all these situations we have built into the bid that our pricing would be the same. We want to be consistent with that across the board. Now they are more receptive because they see the goodwill that it’s developed, and it will extend into their brand.”

AMBSE has received global interest in its concessions model and the company is not holding any information back from interested parties. “We’ve had people from Europe and China here checking it out along with everyone you’d expect Stateside – hockey, baseball, basketball teams. We’ve been asked to present to all NFL teams and we’ve had one of the global management companies that manages hundreds of venues come in to visit us. There is even interest from movie theatres, maybe they’re in a similar situation and want to learn about how a programme like this could help them.

“We tell them we don’t have it figured out. A lot of people thought it would just be a marketing gimmick for the first year of our stadium but we are not raising any pricing in year two and in fact we are going to be lowering some pricing for the upcoming football season. We’re also trying to listen to the fans and make changes based on variety and quality in what they are telling us.”

Replication challenges

The Baltimore Ravens are following in the Falcons’ footsteps by reducing the price of concessions at M&T Bank Stadium in 2018. Labelled ‘Flock Friendly Fare’, the new menu consists of the 21 most popular items on the team’s concessions. No single item will cost fans more than $9, while 13 of the items can be bought for $5 or less.

The measure has been taken in large part to repair the relationship with a section of fans angered by players’ national anthem protests – leading to no-shows at games last season – and also disappointed by a three-year play-off drought.

The Ravens estimate they will lose $1.5m following this move but the franchise believe it is worth undertaking in their attempt to boost strained relations with some supporters.

“Concessions to us is less of a business attribute as it is a fan-experience attribute,” Baker Koppelman, the Baltimore Ravens vice-president of ticket sales and operations, tells SportBusiness.

“So we started looking at, ‘if we start making a little less money in concessions, does it really matter?’ We’re not trying to scrape every dime we can from people. When you start looking at the money that we make from concessions coupled with complaints [over prices], why wouldn’t we lower them and make our fans a little bit happier? It’s a way of acknowledging that we want to address your complaints and fix something that is upsetting you in the context of your trip to the stadium.

“In the context of things $1.5m is meaningful but you could probably find many things that you are spending $1.5m on that may or may not have value. I wouldn’t call it a marketing expense but you can look at it as the cost of doing business. In the balance of revenue to fan satisfaction, we skew it to the fan satisfaction side of things first and let the revenue take care of itself. We feel like if fans are happy then things will take care of themselves.”

The Ravens began looking at reducing the cost of concessions two years ago and were heartened by the success of the Falcons. One of the team’s concerns, however, is trying to react to a projected increase in volume of sales in their current facility with limited opportunity to redesign the stadium accordingly.

“The Falcons is a model that everyone is looking at but it’s hard to compare apples to apples. They were able to plan for it going into a new stadium but we are kind of retro-fitting and that is a little slippery,” Koppelman adds. “We assume volume will increase a little bit. We are putting our concessions partner [Aramark] to the test in terms of potentially having to deal with increased demand based on the pricing.”

The Ravens plan to add more frying machines to deal with a projected increase in sales in french fries and chicken tenders. “Other than that there’s not a whole lot that we can do. We can’t build more concessions stands on the concourse. We expect increased volume and we’re doing the best we can to keep up with it,” Koppelman says. “It may take us a game or two but hopefully we’ll get into a groove at some point in relation to the expected increased volume.”

The Ravens, not Aramark, will bear the brunt of any losses by waiving their share of the profits in a renegotiated contract. “I think they were pretty open to it – they were involved in helping us set the prices and build the model,” says Koppelman. “I think they are intrigued about it as it is something new and they want to see how it goes. I think they will keep a close eye on it from a data perspective to see what they learn from it and how it might impact other clients they have.”

Despite significant price decreases, the Ravens have not gone as far as the Falcons in terms of offering super-cheap prices. Why not? “It wasn’t really scientific, it was more looking at an item and asking what is reasonable in the grand scheme of things and what will make fans say ‘Wow, it’s incredible that they did that’,” says Koppelman.

“The average fan is going to make the comparison with the Falcons – we’re both football teams and all that. But the fact that they’ve done it in a new stadium is a big factor. With us, we decided that this is what we feel comfortable doing, this is what we feel it should be.”

Koppelman says fan reaction will be the appropriate measure of success. “Our first metric is how fans will receive it. We’ve had some good feedback already but obviously they want to see it in action and experience it. If it turns out that we end up making our money back or making more then so be it but it really boils down to our fans feeling like we’ve done something significant for them.

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