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VSA Likely To Be Renewed By CAA
GRAND RAPIDS — The Convention and Arena Authority renewed its management agreement with Philadelphia-based SMG to operate the Grand Center and Van Andel Arena last month. At the same time, board members concurred with a preliminary agreement that would extend their contract with Volume Services America for the food, beverage and catering concessions contract at the arena for at least five more years.
Last spring, the CAA heard a renewal pitch from VSA for the concessions contract. The board also learned then that the food-service contractor wants to make some upgrades to the concession areas, and that local nonprofit groups have benefited from a VSA program.
VSA has been the arena’s only food and beverage provider, capturing the initial contract as Service America in 1996. Service America merged with Volume Services in 1998 to form VSA, one of the country’s largest concession and catering companies with sales totaling $550 million last year. Ogden Entertainment tried to buy VSA in 1999, but failed to complete the deal.
VSA offered board members a pair of renewal options, one for five years and another for eight. The current concessions agreement expired on June 30.
In a nutshell, VSA proposes that if the annual gross receipts from food and beverage sales at the arena exceed $2 million, which is the likely scenario, the CAA would get 48.5 percent of that take under the five-year option and 50 percent with the eight-year contract.
But the CAA, which owns and operates the arena and Grand Center, would then have to share a percentage of that income with its two sports-franchise tenants: the Grand Rapids Griffins and Rampage. The businesses are entitled to a cut of the concession income from sales at their games.
Both VSA options also give the CAA 17.5 percent of the arena’s catering receipts.
The concession and catering percentages in the renewal proposal are similar to what the company offered five years ago when Service America won the contract over bids from Volume Services, Fine Host and Ogden.
Steve Denny, VSA vice president for the Midwest region, told board members that his firm wants to improve revenues by adding a few third-party, well-known food suppliers to the building’s menu, possibly a pizza maker and ice cream vendor. But he added that some changes have to be made to the arena’s concession locations to do that.
“The infrastructure as it sits now makes it impossible to do this,” he said.
Arena officials haven’t allowed specialty food providers in the building to let the downtown restaurant business develop. But now that the restaurant owners have had five years to claim their market shares, officials may change their minds and the building may offer more than the standard arena food.
Denny said he also wants to add more equipment, such as steamers, toasters and new popcorn machines. VSA has offered to invest $600,000 in capital improvements to make these changes happen. The investment would be depreciated on a straight-line basis over the length of the contract.
Since the building opened in October 1996, VSA has been operating a program that allows nonprofits to work at concession stands during events and earn 10 percent of the event’s net take. Pat O’Toole, VSA general manager at the arena, told board members that over 200 agencies, churches and schools have participated in the program, and less than 5 percent of these organizations have dropped out.
“We’ve paid out over $1 million in the last five years to these groups,” said Denny. “It’s real hard work.”
The Aquinas College girls’ softball team and the Kentwood High School band have been involved with the program from the beginning and both have earned more than $40,000. In just two years, parent and student groups at Rogers High School have earned $63,000.
“VSA is providing these dollars,” said arena general manager Rich MacKeigan. “These aren’t CAA dollars.”