Profit Maximizing an Amusement Park: Six Flags Food Rebranding

Just read the rumor over on Screamscape.com about Six Flags rebranding the food options in their parks (ie. Papa John's Pizza to a generic pizza place). At first glance, this doesn't make any sense to me. In this report from January 7th, 2010 they claim branding their food significantly increased their revenue:

Six Flags' ability to rapidly identify and effectively capitalize on sponsorship opportunities is a part of the significant growth in gross revenue per capita and gross profit per capita.  For example, replacing unbranded pizza in 2006 with Papa John's, a newly-acquired national sponsor, increased gross revenue per capita spending on pizza by 93% and increased gross profit per capita on pizza by 87% by 2008.  Similarly, replacing unbranded hamburgers with Johnny Rockets increased gross revenue per capita spending on hamburgers by 42% and increased gross profit per capita on hamburgers by 30% by 2008.

 

If branding their food resulted in increased gross revenue why would they suddenly un-brand it? Well, I think the key word here is REVENUE. Their revenue increased and they make no mention of what the PROFIT was. So, branding their food options may have increased revenue but profits could be down, we just don't know. Another key missing piece of information is the price of the food. The revenue may have gone up only because the price of a piece of pizza dramatically increased. If the price was higher for Papa John's brand, then you've got your per-cap growth right there. That's just an increase in spending however, it doesn't reflect an increase in profits if the cost of that product was also higher.

From what I've heard, for many of these name brand sites, the deals had Six Flags only getting

a percentage of the cost of the items... and not the full profit. Not sure, but I wonder if they were franchised out entirely with the staff being employees of Papa John's and not Six Flags.

 

This is much the same way that a lot of ride photo stands started out long ago, and I know Lo-Q works the same way with the flash passes. Lo-Q runs the stands, Lo-Q pays for the install in the park and still owns the devices and system. This is why Six Flags Flash Pass is so expensive, because Lo-Q takes most of the profits from the system as the operator, and just gives Six Flags a percentage off the top.

 

Same goes with all those crazy locker systems Six Flags put in. Six Flags didn't pay for them, they are leased out by an outside vendor, much like all the soda machines in the parks. That's why you don't see soda machines in Disney... they make more money by having their own stands with employees running them to sell plastic coke bottles all day. I'm guessing Six Flags can't staff enough employees to make this work out for them, so they went the automated machine route.

 

If it made better financial sense to outsource, even the big parks in Orlando would think about it, but they don't... because you always make more money in the end by owning everything you sell and cut out all the middle-men whenever possible.

 

Anyway, from what I'm told, all of these deals are under renegotiations and unless the terms are a lot better for Six Flags, they are leaving.