Virtual Business
Lesson 1 – Franchise Location
Franchise Location
A very important decision for any sports team
Demographics –
total population of the city, the number of people
enthusiastic about their sport, and their ability to afford
tickets.
Infrastructure –
the available venue (stadium), parking capacity, and
possible financial incentives offered by the local
government
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No city is perfect on all
factors, but some are
superior to others
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Franchises can move if the
choice of location proves
wrong, but it’s a difficult
task that will require
rebuilding awareness and
loyalty in the new location.
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(NFL expansions can cost
up to $700 million
~Houston 2002)
Proposal for new stadium
Renderings
Franchise
A franchise is the permission contracted to a group or
single entity to sell a company’s goods or services within
a certain region.
In Virtual Business - Sports, a franchise is the right of
association within a professional football league.
Fan Loyalty
Loyalty is devotion to an entity.
Sports fan loyalty largely determines how much fans are
willing to pay for sporting event tickets and how many
games they are likely to attend.
A losing record is likely to decrease sporting event
attendance, but there is usually a segment of extremely
loyal fans that will continue to attend games.
Seating Capacity
Seating capacity is the total number of seats that are
available at a specific stadium.
Shea Stadium
Infrastructure
Infrastructure is the physical resources required for the
operation of an event or activity. A good city for a
football franchise will have an infrastructure that matches
the team’s needs.
This includes the right size stadium, enough offsite parking,
and available transportation.
Kansas Speedway
Let’s Take a Look at Virtual Business…
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First, we must change screen resolution
Second,VB tutorial on Franchise Location
Third, worksheet on franchise location (6 questions)
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Keep in folder so we can do ticket pricing tomorrow
Lesson 2 – Ticket Pricing
Ticket Pricing – Lesson 2
Price
 Price is the amount of money you charge customers
for one unit. Ticket prices should reflect what
customers are willing and able to pay.
Revenue
 Revenue is the money you collect for things you sell.
Revenue is equal to Unit Sales x Price of each unit.
 A sports franchise has a number of revenue sources,
including: ticket sales, concessions, licensing and
sponsorships.
Demand
 Demand is the amount of goods or services that
customers want to buy.
 Ticket price for a sporting event should be determined by
the amount of demand that exists for that event.
Yield Management Pricing
 Yield management pricing involves setting different prices
for goods or services in an effort to maximize revenue
when limited capacity is a factor.
Lesson 3 - Promotions
Promotions
Target Audience
 Target audience describes a particular market segment
selected as being the most appropriate for a certain
advertising campaign or schedule.
Promotional Items
 Sometimes a business will use special items in
combination with its promotional campaign to help
attract customers. These items are considered
promotional items.
Forecasting
 Forecasting involves the prediction of upcoming results
based on the evaluation of accessible, relevant data.
Lesson 4 – Media Planning
Media Planning
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Refers to the different avenues through which a business
can reach its potential customers
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TV, radio, Internet, newspaper
Media planners seek to reach the largest possible
percentage of their target audience while keeping
advertising spending within a set budget.
Define 1 or more target segments their are likely to
purchase their product
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(defined by demographics)
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Cost Per Reach – Cost of an ad campaign divided by the
# of people reached
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Media – describes avenues for communicating a message.
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Awareness -- % of potential customers in a specific target
audience who are aware of a product’s existence.
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Demographics – basic characteristics of a population
segments such as gender, age, and income.
Lesson 5 – Stadium Personnel
Definitions
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Groundskeeper – someone who maintains property
grounds of substantial size.
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Security – security and well-being of the fans, stadium
property and workers.
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Important b/c it could lead to player injury and league fines
Crowds could become unruly
Crowd control is critical to ensure the safety of fans as well as
players, coaches, and officials
Usher – make sure fans sit and stay in their assigned
seats.
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Fans move to better seats if no one stops them
Insure integrity of the franchise’s product: seats. Not allowing
them to purchase cheap and move
Lesson 6 – Stadium Parking
Stadium Parking
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Traffic flow, parking, and getting fans through the gates
and into the stadium is always a challenge at a large event.
Event organizers must ensure there is adequate parking.
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Large parking lots at the venue
Parking lots away from the site (satellite parking)
Arrange for buses
Parking lots should be staffed with personnel to get cars
in, attendants to direct traffic, and security to help resolve
accidents or other incidents.
Ticket sellers – for ticket purchase on day of game
Ticket takers – collect tickets from fans that bought
ahead of time.
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Ingress – flow of fans to or into the stadium
Egress – flow of fans out of or away from the stadium
Bottlenecks – lessening of traffic throughout.
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Overloaded parking lots
Not getting fans to seat quick enough
Satellite Parking – offsite parking
Lesson 7 - sponsorships
Definitions
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Sponsor – organizations, firms, or individuals that give
teams money in exchange for advertising rights on
stadium signage and naming rights.
Signage – signs, symbols or design.
Naming rights – exclusive right of a sponsor to have its
name and logo on a stadium
Negotiation – act of discussing an issue between two or
more parties with competing interest in order to reach
and agreement.
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Companies sponsoring a sports team is a form of
advertising.
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Good candidates to buy their products
Try to offer a wide range of sponsorship opportunities to
meet different budget needs of potential sponsors
Small signage ads may appeal to small or local businesses
Stadium naming rights may appeal to large national or
international corporations.
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($300 million in 2002 for Houston’s stadium to be named
Reliant Energy)
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Negotiate w/ potential sponsors to create the right mix
of advertising opportunities at an acceptable price
Offer a wide range of options
Be careful not to wear out the potential sponsor’s
patience with repeated, unacceptable offers.
More about Naming Rights…
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Alltel Stadium, Jacksonville Jaguars, $620,000
American Airlines Arena, Miami Heat, $2.1 Million
Heinz Field, Pittsburgh Steelers, $2.9 Million
Philips Arena, Atlanta Hawks and Thrashers, $9.3 Million
Sports Authority Field, Denver Broncos, $120 Million for
10 years
Pinnacle Bank, Lincoln, NE $11.25 Million for 25 years
CenturyLink (formerly Quest) $14 Million
Lesson 8 -- Licensing
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Licensing – authorization that one business gives to
another business, individual or organization which grants
one or the entities permission to use another’s property
(e.g. logo) in exchange for a fee.
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Usually 8 – 12% goes to the organization who sold the license
Royalty – per unit payment made for the use of
intellectual property created by a business or person,
such as a sport team’s name and logo.
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Licensee – the group, individual or corporation paying a
percentage of the revenue earned through the use of the
entity’s intellectual property.
Licensor – the one that owns the rights to the intellectual
property and grants permission to a group to use it.
Virtual Business – Project Level 1
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Complete level 1 & 2
Goal is to profit $3,000,000
Level 1 Hints
Level 1 “Cheats”
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Choose Midway City
Ticket Pricing: $47, 42,37, 32, 32, 27
Stadium Staff: Ushers 5 on each level; Security 12 each
level; Groundskeepers 10
Parking Staff: 14, 12, 16, 16, 12
Satellite Lots:
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Column 1 3rd row, 3 buses
Column 1 6th row, 5 buses
Column 2 5th row, 5 buses
Column 2 7th row, 2 buses
Level 1 Cheats continued…
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Media: Don’t start until AUGUST 14TH
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Broadcast 93 spots, 92, 93
Cable: 127, 0, 91
Radio: 100, 0, 156
Internet: 92, 91, 113
Promotion 35,000 each game
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Game 1 – hat
Game 2 – football
3- hat 4-football
5-jacket 6-helmet
7-keychain
Level 1 Cheats continued…
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Sponsorships
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Stadium Naming = USA BANK $625,000
Scoreboard = Humongous $340,000
Ticketbooth = Big Box Hardware $175,000
Field Sign =
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SportsCo $65,000
LOTSA $35,000
BrightBulbEnergy $50,000
FixMeUp $25,000
Licensing: DVD = Juliette’s; Sporting = Eddie’s; apparel = Josh’s
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Save each level as a separate file name in case you “mess
up” – then you don’t have to start from the beginning.
Level 2
Profit goal $3,000,000
Level 2
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Sometimes the economic conditions can deteriorate in
what was a good location.
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It may become impossible for a franchise to make money.
Then you move
New sponsors will need to be found and awareness
among the new fan-base will need to be generated.
Changing weather can also greatly complicate the
management of outdoor events.
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Beautiful weather – sell out
Rain – drives away fans who were planning to purchase tickets
on game day
Must adjust staff, etc. to manage these fluctuations
Level 2 “Cheats”
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You will need to move your franchise before your time has
expired to do so.
You can keep some similar settings to level 1 – but experiment
with your own.
You will need to go through all the tabs on the “Actions” menu
on the toolbar.
Licensing: Accept the best offer based on the formula:
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Revenue = Fixed Payment + royalty x estimated units sold
After you receive the pre-game report before each home
game, you should stop the simulation and alter the ticket
prices accordingly. At the end of each home game, you should
change the ticket prices back to their previous levels.
Level 2 “Cheats” for Ticket Prices
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Promotions:
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if you are using a high appeal promotion, increase the ticket
prices
If you are using a low appeal promotion, increase ticket prices
by a smaller number
Weather:
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Sunny
Light rain – maybe decrease a little
Heavy rain – decrease a little more
Heavy rain my need to increase the groundskeepers before the
next home game to avoid fines. Change back later if you have
sunny weather for next home game.
Level 3
Goal is to profit at $9,000,000
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The ultimate test of business success is being able to
replicate that success.
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Profitability goals for this level – need to acquire and
turnaround several existing teams
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Each of your teams will need to adapt to different
situations based on some “randomness” of the simulation
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Most likely, if you haven’t in level 2, you should change
cities.
Level 4
IF you make it here, you will have control over the hiring and
firing of football players on your team. Players will also be
subject to injuries.
Goal: Improve the profitability and
win/loss record of your franchise by
hiring and firing players.
Hints: If you own more than one franchise, you can effectively
trade players by signing and releasing them.
Player performance declines after a certain age.
Level 4
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Winning means more money for professional sports
teams. This level is about increasing ones teams’ winning
percentages through adjustments in players and coaches.
You can trade players by releasing them and signing them
to another team.
The optimal player selections will depend on which
franchises you acquired on your way to level 4.
In general, you should concentrate on younger players
with excellent statistics and affordable salary demands.