Restaurant Deal

As stated in the Burpee Hill Special Place Minutes of 6/11/2011 changed August 2011, Ken Ryder had this input as regards the Restaurant and the Center—

Input from ECA Manager Ken Ryder:

“Restaurant:  …. the Board agreed to waive the rental from November 2009 – March 2012 to address the financial difficulties that the restaurant was having.

The Center: The Center is a cost center of the Association. I don’t dispute that 70% of the space is restaurant related. For FYE2011 (April 1, 2010 – March 31, 2011) the operating expenses for the facility and grounds was $184,928. The Budget for The Center for FYE2012 is $180,687. It is interesting that the word “subsidizes” is used. The Center is an amenity like any other amenity supported by the Annual Assessment.”

Here are the actual key points in the restaurant contract (Topic refers to the TOPIC # in the Restaurant Contract):

·      The term of the contract was for 2 years thru March 31st 2014. It has been extended. (Source on extension --Ken Ryder-email)   TOPIC #2

·      No payments are due unless the gross revenues are greater than $650,000.   TOPIC #3a

·      Room rentals at the Center: the concessionaire rents the rooms and obtains 50% of the rental fees of the first 24 rentals in a year. He obtains 75% of all rental fees beyond the first 24.   TOPIC #5

·      The Center building is approximately 14,000 ft.² on two floors. The concessionaire has first rights to 70% of that square footage which includes common space.   TOPIC #6

·      The operational cost of the Center is shown in two locations in the Annual Financial (Budget) Plan and other financial statements:

o   Facilities and Grounds

o   Center

         The average actual cost for those 2 Center Cost components for  FY11-FY13 was $220,000 per year based on the Annual Financial Plan Documents. One can determine the annual pro-rata restaurant operating costs at 70% (.70 x $220,000) or $154,000 per year. Center Capital Costs are additional.

·      The concessionaire caters events at South Cove and for any non-ECA events has the right of first refusal at South Cove.

·      ECA pays for Center equipment maintenance and repairs necessary by ordinary wear etc.    TOPIC #8

·      ECA is responsible for exterior building maintenance, plumbing heating and electric services to the Center building.    TOPIC #11

·      House charge accounts: ECA has its own charge card - a throwback to country clubs. Our G&A staff handles the processing work of the charge card. The concessionaire gets paid weekly based on charges submitted to ECA. I see nothing in the contract whereby he pays for the service which is always done if you use a normal credit card for a fee of 2% or greater.   TOPIC #15

·      Advertising--ECA provides a reasonable space FREE OF CHARGE in ECA publications as well as on Eastman cable TV, Eastman website, chalkboard postings at both ECA entrances, etc.  TOPIC #16

·      Insurance-- ECA insures the building and our property and equipment within the building.  TOPIC #20

So there you have a thumbnail sketch of a sweetheart deal for an ECA owner/restaurant operator. In addition to prorating approximately 70% of the operating expenses as restaurant operating costs, the same allocation would need to be done for capital/building costs.

If we assume the new building cost of $4.5 million, ($6.1 M with interest) excluding set up costs like kitchen equipment, bar equipment, furniture etc.  Seventy percent (70%) of $6.1 M of the proposed new Center  would mean that $4.3 million is the cost of the restaurant portion of the building.  If one assumes a 25 year building life, that's about $244,000 per year for the Center building Capital Costs including interest. 

The actual calculation will depend on how much (what %) of space the concessionaire occupies in the new facility as well as what the actual building costs, interest costs and major equipment costs are.

One can comfortably calculate that we will pay $250,000 to $300,000 per year (Capital and Operating costs) for the privilege of having a restaurant where it is. Add to that amount the remaining 30% or $142,000 per year (total $400 to $442K) in Center Capital and Operating expenses. That is about $300 per ECA member per year for at least 15 years without inflation of costs to operate, ECA free advertising or building insurance. 

A far better approach would be to eliminate the restaurant and create a snack bar such as the Hanover Country Club has. Private clubs are allowed their own liquor licenses and in some cases you can BYOB-- a much better economic deal for the ECA owners here.

For those who need a restaurant, bar etc. they can work with the existing restaurant at Rum Brook Plaza or even create a new restaurant across the street as you exit the main entrance. The operation would have nothing to do with ECA owners. Whoever could invest in it as entrepreneurs and give back to some of the local town residents the opportunity to provide a service not just to Eastman Owners but also to Grantham residents and highway travelers.