Delaware North Cos., the Buffalo-based hospitality and food-service giant with 55,000 employees on four continents, is preparing to transition to the next generation of leadership – a treacherous period for any family-owned business.
The company has been run by the Jacobs family since three brothers founded the company in 1915.
It has $2.6 billion in annual revenues from a sprawling portfolio that includes the Sportservice concessions operation, the Boston Bruins hockey team and management of numerous hotels, resorts and gaming facilities.
It ranks No. 172 on the Forbes list of largest privately held companies in the United States.
As Delaware North approaches its 100th anniversary, it is looking to its third generation of leadership, while bringing members of the fourth Jacobs generation into the firm. The family has pledged to keep the headquarters in Buffalo, but a new location in the city is being considered.
The company has weathered the recession, and the NHL lockout, and is seeking to grow into new international markets.
Four Delaware North executives – Chairman and CEO Jeremy M. Jacobs; his sons, Jerry Jr. and Louis M., principals with the company; and Charles E. Moran Jr., president and chief operating officer – sat down with The News for two wide-ranging interviews at their headquarters in the Key Center south tower in downtown Buffalo.
On being a family business:
Lou: We had bought a bunch of resorts in Australia, and we were reconciling with the seller. At one point, at a long table like this, we were going back and forth, and he looked at me and said to me – he was sort of indignant – he said, “You don’t understand. I have to answer to public shareholders. You wouldn’t know what that’s like.” I looked at him and said, “I have to answer to shareholders, but I have to do it across the table at Thanksgiving dinner.”
On running a global corporation:
Jerry Jr.: It takes a lot of work. Lou and I spend a lot of time working on our relationship so that we can have a very productive relationship. It’s very candid. There are no secrets. There’s no agenda. We’re very open to each other, and with our father. And that doesn’t happen naturally.
In the natural course of a family relationship, there’s going to be rivalries, there’s going to be the father, the dominant figure. So that came with a very explicit approach to addressing that. And I think we’ve done it.
Weathering the recession:
Moran: You would think, frankly, that our business was much more susceptible to economic downturns because all of our businesses are discretionary spending. They’re mostly entertainment-related. We still have a couple areas that haven’t recovered from 2007, 2008.
For instance, the corporate-meeting business has still not come back to the levels it was before.... We do the Plaza Hotel, in a joint venture, and that hasn’t come back.
But the rest of the business, when you look at per-capita spending in our ballparks, and our airport locations and in our parks and all that, those numbers have gone up. To some degree it’s a cheap alternative to what people would be doing. In other words, they’re not going to take the family on a full-week vacation because they can’t afford it.
Were it not for the (NHL) lockout, we’d be having our third record year in a row.
Changing customer tastes:
Jeremy: I often tell people, what was the largest attended business in sports years ago? It was horse racing. More people went to horse racing than any other sport. Today it’s non-existent, and you have to grow from that or you become nonexistent. The horse racing business got us into the gaming business. We wouldn’t have done that if we hadn’t been in that horse racing business.
Passing up the chance to run the Aqueduct casino:
Moran: We had a huge number of qualifiers that they never got around to looking at, to be candid with you. And in the final analysis, the company that did the deal, they put in no qualifications whatsoever about competition, about requirements from the state. They decided to take a risk and write a $375 million check. We would have never done it the way they did it.
Taking the company public:
Jeremy: There are two basic reasons for going public. One, you’re looking for capital or, two, you’re looking for an exit strategy. And neither one of those is an issue at this time, during my life. And I’m not saying the next generation may not make a change, because things evolve.
New generations of leadership:
Jerry Jr.: First we’ve got to acknowledge it was different for my father, it’s different for us, it’ll be different for them.
Every time, as the family, as the ownership gets more broad, as the business gets larger, the dynamics that involve family involvement are going to change.
The question is, what is the line where it’s the business of the family versus the business of the business? And how do you navigate that line? And on what grounds do family members become employed in the company, and what are the expectations of them and what are the ground rules as to how they conduct themselves? That all has to be worked out and sort of navigated at this point.
Buying the Bills:
Jerry Jr.: We tested that math so many times. (Also, NFL rules say Delaware North Cos. can’t own the Bruins and the Bills at the same time.)
That said, we will do what we can to ensure that the Bills stay in this town.
Lou: We’re certainly fans.
Jeremy: I might buy a horse because it’s altruistic, and I like that personally, but when it comes to sports of this size, it’s business.
(He pointed out that, in addition to the Bruins, his family has owned the Cincinnati Royals NBA team and the Buffalo Bisons hockey team.)
(The Bills) will go on the market. I don’t see that in our future.
Jerry Jr.: That’s my inheritance you’re messing with. (Laughs)
Jeremy: My dad never would take on that role. We chose to do it, and my family has chosen to continue that role. I think it’s distinguished them. I think it’s good business. It’s good for you to have a healthy environment that you’re working in. It’s good that your clients, your customers, look at you in a way that they know that you’re doing, quote-unquote, good things.
On Jeremy Jacobs’ role:
Jerry Jr.: What he does is he pulls back, he watches what we do, if he doesn’t like what we’re doing, he steps in. He hasn’t stepped in much lately. He’ll never retire. He’ll always be there. But he wants us to take more and more control.
Lou: We’re coming up on a 100-year anniversary and we’ve had two chief executives.
Knowing when to retire:
Jeremy: There’s an old story with Connie Mack. I knew Connie Mack, but my dad knew him well. Connie was in his 90s and he was still running the Philadelphia [Athletics baseball] team and he said, ‘You know, Louie?’ He says, ‘I think Roy’ – and Roy was his son – ‘I think he’s really, I think he’s finally gotten it put together. And I think he’s going to make something of himself.’ And my dad said, ‘Roy was in his mid-60s.’
The company’s future:
Jeremy: We’ll probably need to be more of a world company. We are pretty much North American-centric now. We do have operations in Australia, and New Zealand and U.K., but it’s a narrow base based on what we see with the world population, where it is.
We’ve got so many emerging markets. We’ve got to get more comfortable in India, South America. They bring a different set of opportunities and a different set of problems.
Jerry Jr.: We have grand ideas. We are pushing hard. We will grow. I could not tell you with any great precision where. But we will grow and we will be a much bigger company in the next decade.