By Ted Schnell • BocaJump | Jan. 11, 2012
With eight months under its belt managing Porter’s Pub, Carlucci Hospitality goes before the Elgin City Council on Wednesday with hopes of receiving a contract to continue operating the restaurant at Bowes Creek Country Club for another four years.
Carlucci, operating as Porter’s Pub Payroll PPP LLC, took over the pub in May, after the city axed the prior vendor, Twelfth Night Catering LLC for nonpayment of rent. The city is suing Twelfth Night for $66,220 in unpaid rent, city officials have said.
Because of the experience with Twelfth Night, the city opted for a different business model. Instead of contracting with a rent-paying vendor to run the entire restaurant-bar operation, the city hired Carlucci to manage it. Under the arrangement in 2011, the city paid the company $52,500 a month to manage Porter’s Pub. The city paid all the supplies expenses for the pub’s operation, but it also collected all the revenues generated by the facility.
Porter’s Pub grossed $609,500 from March through December, mostly under Carlucci’s oversight, city management analyst Aaron Cosentino wrote in an email on Wednesday.
Staff documentation gives Carlucci a favorable review for how it has been running Porter’s Pub, creating the high-end dining experience patrons expect in a country club setting. Carlucci generated $50,090 in its first month of operation at Porter’s. That figure rose to an average of $90,025 from June through September.
The same documentation notes, “Through the end of November, the Porter’s Pub operating statement, with an amortized management fee, shows a loss of $126,878. Much of this shortfall was related to start-up costs incurred before Carlucci began their management and during the transitional time between in-house operations and management by Carlucci.”
After Twelfth Night’s contract was terminated, city staff operated the pub on a minimal basis for a month or so before Carlucci took over in May.
“The staff believes that Carlucci will need a full season to reposition Porter’s Pub and maintain a balanced financial position as they enter their second year of operations,” the staff report to the City Council states.
As a result, the de facto subsidy to Porter’s in 2011 will continue in 2012, but will be reduced to $50,000 in 2013 and 2014, and end entirely in 2015.
“Essentially, we’re giving them a few years with subsidies in order to make a run at it,” said Assistant City Manager Rick Kozal. “Afterward, we’re essentially cutting the apron strings on all of this and they’re going to be on their own.”
In 2012, Carlucci’s management fee will drop to $35,000 a month, a figure the company agreed to, the staff memo states. The new fee reflects the lower staffing levels during winter operating hours.
The memo states the Porter’s Pub operation will come under the city’s golf fund, and will have no impact on the city’s general fund or recreation fund. City staff has reassured the City Council that even if Porter’s Pub failed to show a profit, the golf fund would have enough positive revenue to cover any losses.
The overall management fee payment to Carlucci will total $420,000 in 2012, plus a $19,500 contract extension payment. The city also has budgeted $251,000 for food and beverage costs at the pub, and another $82,610 for marketing and other operational expenses. That is a total budget of about $773,000.
Other contract details in the staff memo to the council:
The city will retain all revenue generated by Porter’s Pub up to $650,000 to offset the city’s operating subsidies during 2012;
The city and Carlucci will split equally all revenues between $650,000 and $850,000.
The city will keep all revenue between $850,000 and $900,000 to offset its utility costs.
The city and Carlucci will split equally all exceeding $900,000.
Incentives up to $5,000 and penalties up to $5,000 relating to operating the pub at a 35 percent level for cost of goods sold to help maximize profits.
In 2013 and 2014, the city’s subsidy to Carlucci is limited $50,000 a year for operations, and Carlucci will assume all responsibility for food and beverages costs. Carlucci also will lease Porter’s Pub for no cost in 2013 and 2014 and retain all revenue generated by the restaurant.
There is no cash operating subsidy from the city to Carlucci in 2015. During the contract’s final year, Carlucci leases Porter’s Pub for no cost and retains all revenue generated by the restaurant.
Bowes Creek Country Club has nearly 100 members, and the membership includes high-end dining opportunities. City officials have said that without Porter’s, members would have a bona fide reason to seek a refund of their membership fees.
