The Four Factors of Successful Franchises

A recent article in the Canadian version of Money Magazine, suggests that four factors determine the success of a professional sports franchise.  They include:  the size of the market, the income level of its residents, the number of corporate headquarters in the area and a favorable exchange rate/tax situation.  It is suggested that these four factors (or the lack of them, that is) led to the demise of the Quebec Nordiques and the Winnipeg Jets back in the mid-1990’s 

I understand that this article is being written outside of Canada, but a couple of the same tenets of this article apply to professional sprots in the United States.

1.  Size of the Market.  This makes perfect sense.  A team in New York City or Toronto will have a better chance of thriving than a team located in Regina or Peoria.  But what about the Green Bay Packers and the Portland Trailblazers?  To a lesser extent, what about the Edmonton Oilers?  On the flip side, one of the teams threatening to move is the New York Islanders.  And Los Angeles has had not 1 but 2 teams leave the city in the last 15 years.  This is obviously not the only factor.

2.  Income level of its Residents.  This is not as easy an argument as you might think to make.  People living in the inner city and urban areas tend to make less.  So what is meant in the artcle is that the suburban areas’ residents make higher levels of income.  But Connecticut is the second highest state when it comes to per capita income.  And look at what happened to the Hartford Whalers!  Alaska has the higest per capita income in the United States.  It has never had a major professional sports team call the State home.  On the other hand, St. Louis is one of the most dangerous and poor cities in the United States, yet it strongly supports both the Cardinals and the Rams. 

3.  Number of corporate headquarters.  Again, Connecticut boasts one of the highest levels of corporate headquarters in the nation.  It wasn’t enough to stop the Hartford Whalers from leaving for North Carolina in 1997.  Many large corporate headquarters are found in Delaware, and still not professional sports teams call Delaware home.  Detroit is home to three struggling corporate headquarters, yet boasts some of the most rabid hockey fans in the NHL. Interestingly enough, if you walk around most luxury suite areas, the names on the brass plates are usually service companies, like law and accounting firms, with numerous offices.  No headquarters within 1000 miles.

4. Equitable Exchange Rates and Taxes.  The Canadian Dollar is now more valuable than the American dollar, so this factor makes sense as a reason why Canadian locales are more favorable to players and teams these days.  Gary Bettman’s insistence that players get paid in US Dollars might be looked upon favorably by Canadian team owners now that the exchange rate is favorable to Canada.  The tax question is not as intriguing in the States.  Yes, players might want to play in States like Florida because that state has no state income tax compared to tax rates in new York and California.  But that is a misnomer really, since states collect taxes on players just for playing in their state. 

Notwithstanding the well-reasoned opinion of the author, I think that one factor – not brought up in the article – is the most important factor in determining the success of a preofessional sports franchise.  I call it the “Cuban Effect.”  The Dallas Mavericks have been an elite NBA team ever since Mark Cuban took over the team.  He brought the right attitude to ownership.  Treat players with respect and give them nice benefits and they’ll want to play for you.  If you obtain enough talent this way, the team starts to play better and draw more people into the seats.  If a team is successful, corporations will come because it is important for business to bring clients to games that the home team will often win. 

It’s as simple as that.


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