Two ways clubs can free up capital and/or increase profit

As published in the Queensland Bowler – March Edition

Bowls clubs throughout Queensland are seeking opportunities to free up capital or increase profit as financial pressure continues in this industry. Clubs often don’t investigate their options until the future of the club is in trouble, however it is prudent for clubs to understand the options available to them. Although each club is unique, there are ways that all bowls clubs can alleviate financial pressure, including by implementing new management agreements, identifying assets to sell or engaging in a property lease-back arrangement. Here are two options that may be relevant to your club.

1. Sell an asset and engage in a lease-back arrangement

Many bowls clubs are asset rich and cash poor. This gives some clubs the option to either sell off assets to increase cash flow or pay out creditors. It is often particularly appealing for a club to sell a property asset if they own the freehold land. Selling the land doesn’t necessarily mean the club will need to move premises, as the club may negotiate to lease-back the premises from the buyer. Alternatively, the club may relocate to a new site (perhaps a Council leasehold site) or even merge with a like-minded club nearby.

2. Engaging an external manager to boost profits

Some bowls clubs choose to merge with larger clubs so they can have on-premises management support or access to more capital. However, there are other business models where clubs can engage external managers (with expertise in on-premises trading) to assist with boosting food, beverage and other sales. This is usually done via a management agreement.

For clubs who offer their patrons gaming services, the Office of Liquor and Gaming Regulation (OLGR) takes an active interest in reviewing these management arrangements. This is to ensure the club is not entering into arrangements which are financially unfair or which lead to a transfer of control (either directly or indirectly) to third parties.

Should a club intend to enter into a management agreement, one of its major obligations is to submit the documentation to the OLGR for approval at least 30 days prior to executing the agreement. This is because the OLGR wants to ensure the committee or board of the club remains in control, and that a third party with a commercial interest will not control the club’s affairs. The OLGR will also want to see that an appropriate share of profits are returned to the club for the benefit of the venue and its members, and that the fee paid to the manager is reasonable and proportionate.

As a firm committed to the clubs industry, we are advocates for clubs to investigate any avenue that may help them succeed. The above are two of several methods clubs may be able use to help remain profitable in a difficult market. If you would like to investigate options to improve your club’s profitability, please contact me on (07) 3224 0353.

“The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.”
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