THE SPEAKER: The Midwest Entrepreneurs speaker on Thursday April 14th was Professor Mike Connell. His topic was approaches to keep a struggling small business open and his example was small town country clubs. He has been the President of Board of the Monmouth Country Club (MCC) for six years. He discussed the changing business model of country clubs. Like many country clubs, MCC is a non-profit organization owned by the members.
THE OLD BUSINESS MODEL: Professor Connell started by reviewing the business model of the standard American country club that was developed in the 1930’s, 40’s and 50’s. Membership was limited and there were often waitlists to join. Would-be members had to be sponsored by existing members and there was membership committee that investigated and voted on new members – membership votes were not always positive (the black pea). The new member paid an initiation fee for the privilege of joining the elite and elitist organization. In additional to the initiation fee, members paid annual or monthly membership dues. Most country clubs included services such as: a private golf course, a swimming pool, upscale dining services, tennis courts and a sauna. There were regular social functions including card groups, dances and other parties. Members were expected to eat at the club several times a month (minimum monthly food purchases); at many clubs members were sent bills if they did not patronize the restaurant frequently enough (charging people money for food that they did not eat is not an attractive business feature). If the club had an operating loss for the year (which they frequently did), each member was sent an additional “year end assessment” to cover the operating losses — unexpected large year-end fees are another unattractive feature of this business model. Club membership was often expensive and beyond the reach of most American households. But many country clubs flourished because they were the best golf course in town, the best dining, and an essential place to make business contacts. Small town social life and business deals often revolved around the local country club.
A CHANGING ENVIRONMENT: Over the years, American culture and the business environment of country clubs changed – especially in small towns. Nice public golf courses were built. Good restaurants opened. Television and other entertainment options evolved to compete for limited entertainment dollars. Local businesses were driven out of the market by malls and big-box stores — local business owners were usually country club members. The population became more mobile and small town ways died. Many country clubs including Monmouth Country Club struggled financially and some went bankrupt. Most responded by raising dues and prices. These price increases further reduced membership and revenues hastening the downward spiral.
A NEW BUSINESS MODEL IS DEVELOPED: Around 1998, MCC faced a financial crisis. The operating loan was so large that the local banks could not allow the debt to increase further. Foreclosing on a golf course is not a pleasant option for a local bank – the market of potential buyers is small. Given the financial crisis, the MCC board concluded that the old full service, high dues, elitist model was outdated and doomed to failure in Monmouth, IL. The MCC board decided to pursue a different market niche. MCC concluded that it could not compete with local public course as the for the competitive golf dollar. The board also realized that it did not have the power to force people to patronize the dining room and that the entertainment market was crowded. First the MCC board lowered the dues and began to sell a new product service mix. MCC began to focus on “family golf” — an uncrowded place where women golfers and children were welcome. Pleasant evenings of family golf were the rule. Many couples golfed at a leisurely pace. Parents and children golfed together as a group. Unaccompanied children were welcome during the day. Membership at modest prices increased. Expensive labor was eliminated in the pro shop and the dining room. All food minimums and assessments were eliminated. The restaurant was leased to private operators and the dining room was opened to the public. At first, the pro shop was staffed with volunteer labor and later operated on the “honor system” with members voluntarily paying for the items they purchased or writing up tickets to be billed later. A retired member acted as the business manager for a salary of $1.00 a year and another member kept the books without compensation. While the new system did not earn high profits, it did allow MCC to maintain a private golf course, a private pool, and an on-site dining option. Under this system, the operating loan was paid down but not eliminated.
REFINING THE BUSINESS MODEL: A year ago and additional tweak was made to the business model. A local caterer began to operate out of the MCC kitchen facilities with food sales to members on three nights a week only. MCC began to advertise that the clubhouse as available for rent to both members and the general public. The clubhouse was open for weddings, class reunions, birthday parties, wedding anniversaries and private parties. The board realized that the MCC atmosphere and convenience are its most marketable assets. It has a pleasant atmosphere with a scenic view and a private bar and convenient handicap-accessible parking. MCC invested in capital improvements to make MCC more attractive as a rental facility – new tables, additional chairs, dishes, linens, new restrooms, and a private dining room. The business model is still evolving but early results are promising. MCC has an affordable private, family friendly golf course and pool, and a limited social calendar of adult parties. For the first time in fifty years, it appears that the dining room, clubhouse and bar could generate positive net revenue for golf course operations. While some country clubs still flourish with an exclusive, high priced model, other small town country clubs have gone bankrupt and closed. MCC has found a middle road. While it is not flourishing as high-end golf and dining experience, it is open and viable in a different market niche – private family golf, private swimming pool and clubhouse rentals including bar sales.
BUSINESS LESSONS FOR CLASS: The world is a dynamic place. Businesses must constantly adapt to remain viable. New products and new strategies are often essential. Darwin said that his theory was misstated. It is not “the survival of the fittest” — it is “the survival of the quickest to adapt.” Small town country clubs are not viable in a modern world of competitive entertainment choices. The primary function of every business manager is to keep the door open by providing a service at a price that customers are willing to pay for — change is the only constant.
