Percentage of Profits?

medic92 said:

We have an opportunity to be a vendor at the local Gus Macker basketball tournament on Memorial Day weekend. It's a three day event and the profit potential is allegedly around 8k. My sticking point is that instead of paying up front for a spot, the organization wants 20% of the profits. I don't like the idea of handing over 20% of my hard-earned money, but since I don't have a ton of experience with this sort of thing I don't know if I'm being unreasonable.

Is this a common thing, and is 20% an unreasonable number?

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To me it is.

Medic92, are you talking profit or sales? Big difference for sure.

I am guessing 20% of the gross sales as figuring profit and proving profit is quite a task and I can't see a group of people setting around after an event trying to agree on what the profit was for a food vendor.

If it is 20% of gross sales I think this is fairly standard. I see many BBQ contest venues that state that the vendors are an 80/20 split. One thing to consider is that if they are counting on you to make money for them to make money they will place you in a decent area, where if you are paying a flat fee they have no interest in how you do, they got their money and you are on your own.

Look at it this way, if you are looking at $8k in sales, you will be paying $1600 for your vending spot, if you do $4k in sales it will cost you $800. You are the one that has to decide if you are willing to pay that much "rent" to do that much business. I look at it as it is a better situation than paying $1600 up-front and then having a rainy weekend and only doing $4k in sales, then you have paid 40%.

Plus look into it but most of the time if you are running on the books and this is being handled by non profits they earmark your 20% as a donation and you can write that off on your taxes.

Yeah, I'd just do the numbers to determine the potential. 20% needs a lot of brisket sandwiches sold to make it up.

First thing I'd need to be clear on is 20% off the top or from profit.

20% of sales.
Raise your prices to cover the cost.
This is a very common practice.

People don't expect to get cheap food at a fund raiser. Add at least 15% and up to 25% to you regular prices. 3 days is a lot of work in prep & clean up.

I think you're mixing up profits and revenue. They would not ask for a share of profits because that number is too easy to fiddle.

Regardless, I suggest you contact SCORE (https://quincytristate.score.org/) to get a handle on questions like this. You can get free business mentoring and they may offer classes that would be of value as well.

medic92 said:

I used SCORE when I was getting the business started. Good bunch of people.

As far as whether it's gross or profit, I assume it's gross. The only information I got was a text from my Sysco rep and she said 20% of the profits so that's what I stated on here.

I'm thinking of doing it more for the exposure for our business. Quincy has a much higher population than my little town and people from all over would get a taste of our food.

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I'd raise prices accordingly and do it.

What these kind of events do is make people buy tickets and then people will pay for your food with the tickets so at the end you can't lie to them. They usually range from 10% to more often 20% around here. I don't do many of these but usually when I'm assured I'm the only food vendor we do pretty well.

Just my 2 cents worth but 8k profit for a 3-day basketball tournament seems stretched. I mean unless you are vending the final four or something. As far as the 20% I agree with others saying just raise the price. I took a trip up north to NY City in early March to the Barclays Center to see WBC heavyweight championship. In the Barclays a 16oz beer was $13.50, large tub of popcorn $15.50, sausage dog $9.50, soda $5. I had 4 beers and was bleeding from the bottom end if ya know what I mean :shocked:

Are they limiting the number of vendors? Two local events also do the 80/20 split, but the number of vendors is set based on expected crowd size. Both events also provides ample advertising for the vendors, as well as power and water.

Last year one vendor had a poster stating they were donating 25% of their sales, now they didn't mention the 20% agreed upon amount on the poster, so I'm guessing many people thought they were being very generous.... at any rate, their sales were brisk all day.

If $3,000 of your 8K is spent on meat and supplies, your left with $5,000. IF you have to give them another $1,6000 for the sales YOU made, then you are down to $3,400. You will need to pay for 3 days of help. Another $500.00.

Instead of making the customary 50-66% profit, your profit is down to around 35-40%. I'd say a hard NO, and tell him you will do it for maybe 10%, and not for total sales...