The Consultant

Foodservice Consultants Society International 1997 Award for Excellence in Management Advisory Services

The Consultant

The Consultant

Douglas Fisher, FCSI, FHG International Inc., won FCSI’s 1997 Award for Excellence in Management Advisory Services for the litigation support work he executed for Toronto’s SkyDome and the Toronto Blue Jays Baseball Club in their battle with the Bitove Corporation over food prices in 1996.

The Result: Fisher helped SkyDome and the Blue Jays recover losses and keep future foodservice revenues of well over $150 million (Canadian).

In 1996, the Canadian public watched with unconcealed delight one of the country’s most spectacular food fights. It pitted the Toronto SkyDome and the Toronto Blue Jays Baseball Club against their foodservice operators, The Bitove Corporation. The outcome of this divorce would have an unprecedented impact on the foodservice operations of every stadium in Canada. It would cause them all to pause and think hard about their relationships with their foodservice providers.

SkyDome’s management considers the facility the world’s greatest entertainment center. It hosts over 4 million visitors a year to NBA basketball, American League baseball and CFL football, as well as trade shows, conventions, rock concerts and other international sporting events. The stadium has five luxury restaurants, four of which overlook the playing field, with capacities ranging from 200 to 600 seats each. The facility also contains 161 SkyBoxes which seat approximately 3,000 people per game.

Who’s Who

The Bitove Corporation is Canada’s largest privately held foodservice operator. The company operated the SkyDome’s restaurants and SkyBoxes under a 40-year lease, in the process providing it the right to do almost anything it wanted concerning pricing, service, menus and restrictions of outside sourcing.

Bitove is an important player in Canada’s foodservice industry, with operations spread around Ontario and other parts of the country. The company wielded a big stick because it not only operated foodservices at SkyDome, it was also a tenant: The Bitove family owned the NBA’s Toronto Raptors, an important source of revenue for the SkyDome. When the Bitoves made a move, everyone had to sit up and pay attention.

On the other side was a group made up of interests that came together almost by accident. The SkyDome was originally conceived and owned by the Government of Ontario, which eventually spun off the stadium to a consortium, SkyDome Acquisitions, Inc. Joining it was the Independent SkyBox Association (ISBA), made up of the 161 owners of the stadium’s SkyBoxes. The owners came together because they were fed up with the prices they were being charged for food and beverages and the restrictions that were imposed on them regarding outside food and requirements for serving staff.

The two sides retained numerous advisors, lawyers and consultants to bolster their claims. As with any legal wrangling, especially over money, the numbers became important. The key advisor to the SkyDome and the Blue Jays was FHG International Inc., a foodservice consulting firm with over 15 years of experience in the industry. SkyDome eventually retained FHG to take a look at the numbers and get at the facts.

The Fight Is On

The fight started when the SkyBox owners, through the ISBA, launched a $12.5 million lawsuit against Bitove and SkyDome over what they felt was price gouging. Their 10-year leases were coming due, and they were threatening to walk out en masse unless something was done to lower the price of food and beverage services. The SkyDome, as part of its defense, took up their banner. After all, SkyBox revenue represented 47 percent of SkyDome revenue, so supporting the ISBA was a natural thing to do.

At that point, SkyDome retained FHG to take a look at foodservice operations at major stadiums and to determine if Bitove’s prices were indeed too high, and if so, by how much. The analysis took over a year to complete and included an analysis of 30 comparable facilities throughout North America. The result showed how “out of line” the Bitove foodservice prices really were at SkyDome. After almost 10 years, there was finally proof that $6.50 for a hot dog and bun and $110 for a case of warm beer was a bit much to swallow.

Concurrently, the Blue Jays, the SkyDome’s major tenant, started to look askance at Bitove, believing the foodservice operator was also overlooking the rules when it came to the club. To FHG International, this appeared to be a distinct possibility. In the summer of 1996, FHG undertook on behalf of the Blue Jays to investigate the hidden revenue Bitove was generating, much of it contravening the agreement they had with the Blue Jays. Hidden revenues were found in minimum food and beverage requirements, explicit viewing charges, administration charges, membership fees and the like. In the end, FHG found over $10 million in revenue from 1989 to 1995 that rightfully belonged to the Blue Jays that Bitove was collecting and, more importantly, keeping. If something wasn’t done, another $30 million for the period 1996 to 2029 would be lost.

The dispute became more and more public as the players moved from the back rooms to the limelight. The public and media loved it. The fight pitted moneyed people and huge corporations against each other, each making claims in the tens of millions of dollars. The SkyDome tried to terminate Bitove’s lease and recover the money paid inappropriately to them by SkyBox owners. The firm tried to get an injunction against this move. Bitove also announced a $55 million lawsuit against SkyDome for damages to its reputation. It was fascinating reading for everyone, whether they lived in Toronto or Yellowknife near the North Pole or Carbonear in the fishing outposts of Newfoundland. Meanwhile, other stadiums and their foodservice operators watched nervously, waiting for an outcome everyone knew was going to affect them one way or another.

The Outcome

Eventually, Bitove ended up on the wrong side of the legal fence. Based on the FHG report, the court ruled Bitove would be required to immediately roll back food and beverage prices. It gave Bitove the choice of either reducing potential profit over the next 30 years by $37.5 million or giving up its lease. At the same time, the SkyBox owners’ $12.5 million litigation and the Bitove defamation action would proceed. (Both suits were subsequently dropped.)
Bitove attempted to have the FHG report sealed, but Canada’s national newspaper, The Globe and Mail, went to court to insist that the information was in “the public interest”, and the court agreed. As a result, prices tumbled in the SkyBoxes to industry standards, and the SkyBox owners renewed their leases. Given that outcome and the court’s ruling against them, Bitove decided to settle the balance of claims out of court. Ultimately, in 1997, SkyDome purchased Bitove’s interest in the foodservice operations at the stadium.

The Impact

In the end, FHG’s work created over $166 million in quantifiable benefits, plus “tens of millions of dollars” SkyDome officials say were gained through SkyBox renewals. The final tally:

  • $12.5 million to SkyBox owners for 1989 to 1995
  • $37.5 million in reduced SkyBox prices for 1996 to 2029
  • $10 million in viewing charges revenue paid back to Blue Jays for 1989 to 1995
  • $30 million in viewing charges revenue to go straight to Blue Jays for 1996 to 2029
  • $55 million Bitove suit dropped
  • $21 million benefit in purchasing Bitove foodservice interests at SkyDome

 

 


The impact of the work has brought a reasonableness to the price/value relationship offered at Canada’s sports facilities. It is an impact that has rippled through the industry and forever changed the face of Canadian stadium/foodservice provider relationships.

 

A Quarterly Publication of Foodservice Consultants Society International
Winter 1997, Volume 30, Number 4