An inside look at running a minor league baseball team
A Sunday home game for the first-place Schaumburg Flyers, and principal owner Richard Ehrenreich arrives at the ballpark early to conduct his personal scouting report. By 8 a.m., Ehrenreich is inspecting the stands, luxury suites and washrooms to make sure they’re clean. Then, he meets with the concessions manager to discuss shortcomings he noticed during the previous night’s game: Some vendors were hawking beer and hot dogs on the concourse rather than walking down to the seats, stealing sales from the concession stands; he spotted some ice buckets that weren’t emptied in the luxury suites; and a teenager pushing the dessert cart in the suites had his shirt untucked and was wearing shorts, which is unacceptable.
At 9:15 a.m., manager Andy McCauley and trainer Brian Czachowski join Ehrenreich in the clubhouse to deliver an injury report. Ehrenreich isn’t interested in how the injuries will affect the outcome of today’s game-he wants to identify any players who should be placed on the disabled list now, to avoid costly medical procedures and workers’ compensation claims later.
Shortly after 10, Ehrenreich discusses the previ-ous evening’s game with general manager Rick Rungaitis. It was a good night, with 7,800 people jammed into Alexian Field, where the minor league Flyers play. The only glitch, from Ehrenreich’s standpoint, occurred after the game, when a woman’s car wouldn’t start and the parking lot crew couldn’t find jumper cables. “Let’s make sure the parking attendants have cables,” he says. By 11 a.m., Ehrenreich is back in his office-one of the luxury suites-where he checks e-mails, looking for a report about last night’s ticket, concession and souvenir sales.
The game between the Flyers and the Gary SouthShore RailCats begins at 12:05 p.m., and Ehrenreich is now walking around Alexian Field, checking how quickly the lines move at the concession stands, sitting briefly in different sections and chatting with fans and periodically stopping to pick up a hot dog wrapper or empty beer cup. He pays little attention to the game being played on the field, even though his team is bound for the playoffs. Business comes first.
“I’m a big fan of the game. But I leave what’s happening on the field up to the manager. My job is to make sure everything off the field is running smoothly,” Ehrenreich says.
A lifelong Chicago Cubs fan, Ehrenreich, 49, left a lucrative law career to own and run a baseball team. Since starting the Flyers in 1999 in the independent Northern League, Ehrenreich has learned to lead with his head and not his heart. “As exciting as it is to run a baseball team, you’ve still got to approach this like you’re running a business.”
Considering the soaring popularity of fantasy sports leagues, there are plenty of people who dream of running their own team. But for those with more serious aspirations-and with some serious money-there are opportunities to own a real team, especially in minor league baseball. Ehrenreich epitomizes the modern-day owner: a middle-aged man who’s had some success in one career and is looking for a second career that’s more fun and fulfilling. “They come from all walks of life: They’re businessmen, car dealers, doctors, downtown attorneys and investment bankers,” says Matt Perry, CEO of National Sports Services, a Denver-based consulting firm that helps people acquire and run sports teams, and cities find franchises and build stadiums. But these people do have one thing in common: a love of baseball. The romance of the game developed when they were boys. It was an unrequited love, because they didn’t possess the physical talent to make it to the big leagues. Ownership is one way to consummate the relationship.
There are nearly 200 minor league baseball teams that charge admission across the United States, many affiliated with Major League Baseball and some in independent leagues. The best-known affiliated teams are in the Class A, AA and AAA leagues, where young, rising stars try to earn a job in the majors. The independent leagues, such as the Northern and Frontier leagues, are home to castoffs from the affiliated teams-players who still love to play professional ball and dream of one last long-shot chance of making it to the Big Show.
Depending on the market, the popularity of the team and the condition of its stadium, a minor league team can cost anywhere from $1 million to upwards of $20 million. There also are expansion opportunities in the independent leagues, but though it may cost only $500,000 to a little more than $1 million to start an expansion team, there are strings attached: There must be a suitable market, the team needs a stadium and any deal requires approval from league officials and team owners.
Coming up with the money to buy a team isn’t difficult for the very wealthy, but many buyers prefer to form an investor group or syndicate. This reduces the individual risk and allows family and friends to share bragging rights to ownership of a piece of the team.
Yet inking a deal is only the first hurdle. A minor league owner then faces the challenges of fielding a competitive team, offering fans an entertaining and safe experience and, finally, turning a profit. A successful baseball owner usually spends more time on the unglamorous details-like selling blocks of tickets to the Cub Scouts and Little League teams and figuring out how many hot dogs to cook-than trading players or deciding when to try a squeeze play. And there are myriad other concerns, including salaries, insurance premiums, uniform and equipment costs, transportation and hotel expenses and stadium rent.
Many owners fail because they focus too much on the baseball and not enough on business, Perry says. “You can spend a lot of money and lose a lot of money,” he warns. “Some people let their emotions get involved and make bad decisions. They wouldn’t do the same thing if they were buying a manufacturing plant.”
But a well-run baseball operation can turn a net profit of 5 percent to 10 percent a year, according to interviews with team owners and consultants. Then there is the equity play: Minor league teams have been appreciating in value by 3 percent to 5 percent annually in the past decade, with some instances-albeit rare ones-of owners selling for 10 times their original investment after holding the team for just five years. (However, Perry expects the appreciation rate to decline in the near future and then remain steady.)
It’s not all about the bottom line, though. On good days, a baseball owner can rejoice in seeing the seats filled, lines for the concession stands and fans enjoying the game and the zany promotions that help draw the crowds, like Elvis Look-Alike Night, the plastic-cow-tipping contest and sausage races.
And for everyone looking to own a team, there is a city looking to host a team. Tourism-hungry cities often are willing to finance all or part of stadium construction and offer low-cost leasing. This has helped fuel the creation-though not necessarily the survival-of more than 100 minor league baseball franchises in the past decade, Perry says.
The Schaumburg Flyers is one of those teams, and a good example of a well-run minor league ball club, Perry says. “The Flyers have the combination of a good market, a nice facility and a good operation-the three ingredients you need to be successful,” he says. “It is one of the better examples of how to run a minor league team.”
Studying the poker face of Richard Ehrenreich, it’s hard to tell whether he’s having any fun, or making any money, running the Flyers. But he insists he’s doing both, and he’s generally amenable to sharing his experiences with anyone who asks. “The first question everyone asks when they find out what I do is, ‘What’s it like?’ ” he says. “I tell them it’s fun, but also a lot of hard work.”
Ehrenreich’s team ownership was more the result of an evolutionary process than the realization of a lifelong dream. Sure, like any minor league owner, he has a passion for the game. As a teenager, he and his buddies got into the work-study program at Highland Park High School, which allowed them to get out of school at noon. They spent many spring afternoons in the right field bleachers at Wrigley Field. After earning a bachelor’s degree in accounting and a law degree from DePaul University, Ehrenreich worked as a corporate attorney at a downtown law firm and later had his own practice in Northfield. In his private practice, Ehrenreich did some legal work for the Zanesville Grays and Canton Crocodiles minor league teams, and that’s when he became interested in the prospect of ownership.
“I loved baseball. And I fantasized about having a job where I didn’t have a tie choking my collar, where I could be outdoors and where I didn’t have a boss,” he recalls. Encouraged by the popularity of the Kane County Cougars, the Class A farm club that started playing in west suburban Geneva in 1991, Ehrenreich thought the Chicago market had room for another minor league team. He formed a small investor group in 1996, retaining a majority interest, and started searching for a team.
Even while he was trying to find a franchise, he also was looking for a place to play. Ehrenreich approached three communities he thought were attractive markets: Gurnee, Glenview and Schaumburg. Only Schaumburg expressed any real interest. And that was essential, because Ehrenreich was counting on the suburb to foot the bill to build a stadium for the team. “Municipal funding at some level is crucial,” he says. “It’s hard to make it if you have to pay for your own stadium.”
The village of Schaumburg and the Schaumburg Park District agreed to share the $19-million cost to build a 5,800-seat ballpark, and the naming rights went to Alexian Brothers Hospital Network, which pays the municipality $200,000 a year.
Meanwhile, the Northern League gave Ehrenreich approval to pay just over $1 million to purchase the Thunder Bay Whiskey Jacks in Ontario, Canada, and move the team to Schaumburg for the 1999 season. “It was a somewhat complex deal, but in the end, the Northern League was happy, the village of Schaumburg was happy and we were happy,” Ehrenreich says.
The Flyers pay $300,000 a year in rent to play 48 home games, plus a 5 percent village entertainment tax on ticket sales. The team also has the right to host up to five concerts a year in the stadium; in past years, featured acts have included Def Leppard, Bob Dylan and Willie Nelson.
The Flyers collect about $4 million in revenues annually, and the team is profitable, although Ehrenreich declines to specify how much it makes. To turn a profit, he relies on three revenue streams: ticket and luxury suite sales, food and beverage sales and advertising; each accounts for about one-third of revenues, he says.
Individual tickets sell for $5.50 to $10.50, season tickets for $399 to $450 and the 16 luxury suites for about $1,000 a game, or $26,000 a season. Advertising is another critical factor, and at Alexian Field, everything is for sale, from the $12,500 outfield billboards to the $6,000 sponsorship of between-inning activities like the dizzy bat contest and the mascot race. Concession sales are more unpredictable. On a fireworks night, with a capacity crowd of about 7,800, the Flyers might sell $70,000 worth of food and beverages. If it rains the next day, the take may be a fraction of that.
Ehrenreich also must keep a close eye on expenses, from the $25,000 it costs each season for balls and bats to the $40,000 to charter buses for away games. Surprisingly, he doesn’t worry much about the salaries of his 22 players. The Northern League, like other independent leagues, has a total team salary cap of $105,000, which breaks down to a monthly paycheck of $850 to $3,500 for each player. The pay is modest, but Ehrenreich doesn’t like to hear complaints. “The ballplayers are the easiest employees to replace,” he says. “I’m not sympathetic when they complain about the long bus rides or that they only get enough meal money to buy McDonald’s. They’re living out a dream most people would pay us to live.”
However, Ehrenreich does pay close attention to player injuries. When a player gets injured in independent minor league ball, he collects workers’ compensation. Last year, the Flyers paid some $150,000 in workers’ comp, more than the total team payroll. That’s why Ehrenreich instituted the weekly injury updates with the manager and trainer, so players could get earlier treatment or rest-and he says his workers’ comp expenses are down significantly this season.
Ehrenreich’s minority investors like his style. “He’s tough, no-nonsense. He runs it one way: his way,” says James Straus, a Chicago executive who’s known Ehrenreich since high school. “We feel confident that Rich is protecting our interests and keeping an eye on costs.”
Straus has less than $25,000 invested in the Flyers, more for fun and bragging rights than a quest for a big return. “It’s just fun being able to go to the games and know you’re a part of the team,” he says. And he’s not looking for a return on his investment until Ehrenreich decides to sell. Indeed, the real value for many a minor league club is the equity that builds over the years. Ehrenreich’s 1999 investment of just over $1 million may well be worth $8 million to $10 million today, several knowledgeable sources estimate.
But on a late spring day, Ehrenreich insists he’s not interested in selling yet. The Flyers are in the playoffs. They are having a profitable year and about to get some valuable national media exposure. In a project called “Fan Club: Reality Baseball,” they are turning over day-to-day managerial decisions-things like the pitching roster and batting lineup-to the fans during the second half of the season, and Microsoft’s MSN will carry the results on its Web site.
The real reason Ehrenreich isn’t selling, though, is that he still gets a charge out of the venture. “This is one of those businesses where you’re sitting here in January with snow on the ground, thinking, if somebody offered me $10 million, I’d take it,” he says. “But in July, when the stands are full, it’s so rewarding. You tell yourself, I’ll never sell.”
By John T. Slania
Satisfaction Magazine
September/October 2006
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I found this a very interesting article about some of the insides of running a minor league baseball team. There are some good lessons to be learned here as well a some managerial nuiances that should be followed. This article was reprinted from Satisfaction Magazine.
I enjoyed this article and appreciate the inside the numbers look at the some of the finances behind minor league baseball. Of course there are a few different levels of baseball that one can look peer into to investigate any possibilities but thats for another time.
Enjoy your day
C.Warman
OwnmyTeam.com
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