The Jacobs family believes in taking a long-term approach but doesn't shy away from non-traditional management ideas. This year they celebrate the 100th anniversary of Delaware North, their burgeoning hospitality service empire, by inaugurating a trio of CEOs.
The company has had only two chairmen in its history—a statistic that remains unchanged despite recent management moves. "We're a group of professionals who have spent our lives in this," says patriarch Jeremy Jacobs, Delaware North's second chairman. (His father was the first.) "There's a desire every day to make it better and to grow it bigger."
Jeremy took a long-contemplated transition step at the end of 2014 when he announced he was relinquishing his title as CEO while remaining as chairman. His two oldest sons, Jerry and Lou, will serve as co-CEOs of Delaware North. The youngest son, Charlie, will become CEO of the family's Boston properties, which include the TD Garden, home of the Boston Bruins, a National Hockey League team owned by the Jacobs family, as well as basketball's Boston Celtics.
Progress toward succession has been slow and deliberate. Numerous consultants and advisers were engaged along the way. Hard lessons Jeremy learned from the sudden death of his father and the tumultuous times that followed (which included multiple federal investigations of the company) also have shaped how he and his sons are carrying out the transition.
Jeremy Jacobs is well known as the chairman of the NHL and owner of the six-time Stanley Cup-winning Bruins. Delaware North, the Buffalo, N.Y.-based family enterprise, encompasses various operating companies that provide concessions at sports venues around the world; run casinos and racetracks across the country; feed and entertain 350 million airport travelers; and provide lodging, food and recreational opportunities at some of America's biggest national parks.
Jeremy's father, Louis Jacobs, founded the company in 1915 with his two older brothers in Buffalo. Louis sold peanuts at the city's ballpark and popcorn at a local burlesque house while his brothers rented canoes and shined shoes at Delaware Park Lake. The trio won a Major League Baseball concession contract from the Detroit Tigers in 1930, a relationship that exists to this day. Louis eventually bought out his brothers when their health deteriorated. Louis's son Jeremy later bought out his two brothers, Mark and Lawrence, who pursued other interests. As it grew, the company changed its name from Jacobs Brothers to Sportservice to Emprise and, finally to Delaware North, the name of the two streets in Buffalo where it was originally located. In 2014, Delaware North reached $3 billion in annual sales, employed 60,000 associates and served a half-billion customers.
"We've evolved from sports to race tracks to arena management, and we've got a real estate project in Boston that's pretty serious," Jeremy says. "I hope the family grows itself into the future."
Growth is very much on the mind of Jeremy's three sons, Jerry, Lou and Charlie. They're even more concerned with preserving value for the future, however. "We take ourselves quite seriously in what we do, but we also have a sense of humility about us," 44-year-old Charlie says. "We're committed to our company's future and we have an active, informed shareholder base. That really helps for long-term stability." His brother Jerry is 53; Lou is 51. They have three sisters: Lynn Reichenbach, 55; Lisann Jacobs, 54; and Katie Robinson, 48. All are shareholders, although only the three sons work for the company. Jeremy Jacobs has 18 grandchildren and two great-grandchildren.
Learning from the past
Jeremy is now 75, robust and actively involved in company management. He shares many responsibilities with his sons while concentrating more on NHL matters and philanthropic interests with his wife, Margaret. Jeremy has long worked to prepare his sons for the transition. The need to be ready was a lesson he learned the hard way when his own father, Louis, died suddenly in his office in 1968, leaving the company in Jeremy's hands at the tender age of 28.
"I was not ready for it," Jeremy says. "Nobody should go through that." On the other hand, he adds, "If you can live through it, you gain a great deal of knowledge. But I would not subject anybody to that." Jeremy had worked for this father his entire life. "He was tough—a hard guy to outwork," he remembers. "He worked seven days a week, 20 hours a day."
His father left behind a flourishing company with some $50 million in sales at more than 500 operating units, including England's Royal Ascot Race Track, the New York World's Fair and innumerable baseball stadiums. But the company also had some unsavory aspects that caused serious problems for several years. The U.S. Justice Department began investigations in 1972 into possible antitrust violations, labor union contracts and connections with organized crime by Delaware North predecessor company Emprise. The investigations culminated with the conviction of the company (along with six reputed mobsters) for concealing ownership of the Frontier Hotel and Casino in Las Vegas. The company's pari-mutuel operations and liquor licenses were severely affected, and Jeremy spent years working to recover the company's good name.
"It made you stop and think about everybody you do business with," he says today when asked what lessons he learned during that time. "You have to examine them and you have to be more responsible for the personalities you expose yourself and your business to."
Lou Jacobs says his father firmly passed along that concept to him and his siblings. "The lesson of those accusations is what a blotch on our reputation could mean to our business," Lou says. "We're very hypersensitive to that type of thing." The proof that the lesson was learned is in the company's success today. "We do a lot of business with national parks, port authorities, municipalities, airports," Lou points out. "Whether it's the racing commission, or liquor licenses, or the parks commission, or the city of Chicago or Atlanta, we have to make sure we're indisputably ethically clean."
Holding high-profile positions like Jeremy's NHL chairmanship, however, involves scrutiny by sports fans and the press. The 2012-13 NHL player lockout generated harsh backlash, and the family's dispute with a Wellington, Fla., real estate developer was the subject of an unflattering Boston Magazine article that same year. "Occasionally, there are issues that we become involved in that are played out in the public landscape," Lou says. "In the case of the lockout, our father is the chairman of the Board of Governors for the NHL, and his role in ensuring the league's health and success is something very important to him. It was unfortunate that the lockout happened, and no one wanted it—especially him." Jeremy Jacobs received the St. Jude Award for Inspiration in Sports at the Global Sports Summit, a meeting of sports franchise leaders and owners, in August 2013, and the NHL was named "Sports League of the Year" for 2013-14 by SportsBusiness Journal and SportsBusiness Daily.
Lou says of the Wellington controversy, "It's a complicated issue, with a Boston real estate developer attempting to commercialize a protected preserve. We will continue to work hard to see this area protected, as it's important to our family and important to the community. We do not shy away from supporting candidates and causes that are important to our family or to our company."
In addition to teaching them to stand fast for their beliefs, Jeremy also made sure his sons really wanted—and were capable of—responsible positions in the company when they came of age. All three of them worked elsewhere for several years and worked their way up within Delaware North across a range of jobs and divisions. "When I graduated from college, he told me to go find a job on my own," Jerry says. "Dad wanted me to know what it was like to hold a job before I came to work for him."
The sons didn't have it easy after they joined the company, Jerry says. "He was very hard on me in terms of his criticism. It was always a little heavier than it was on others. Not that he wanted to toughen me up, but because he wanted to make it abundantly clear to me and everyone else that I wasn't entitled to anything." Jerry says that approach had two positive outcomes. "In order for me to do my job, it was important to know I could do it on my own," he says. "You can't be a strong leader if you don't have self-confidence. Looking back, I wouldn't have the respect of the executives I work with today if it had been any other way. It was a gift he gave me." With a laugh, he adds, "I can say that now."
Until their appointments as CEOs, Jerry, Lou and Charlie held the title of "principal" of Delaware North. They don't so much divide their duties as surround them. "We really try to operate as a group of three," Charlie says. "We each have our own direct focus day-to-day, but we try to be interchangeable." He oversees the large Boston operation, which includes the Bruins, TD Garden (which is undergoing a $70 million upgrade) and a nearly 2 million-square-foot mixed-use project under development adjacent to the arena. He travels to Buffalo, where his brothers are headquartered, for weekly management meetings chaired by his father every Monday.
"We have a partnership model we're working on, where we work very closely together," Jerry explains. "Lou's office is across the hall from mine, and we bounce decisions off each other until we come to agreement. It works very well." None of the three professes to have or want a dominant leadership position.
Management and the board
Another lesson Jeremy learned from his long experience is the importance of professional, non-family management in a company the size of Delaware North. "To think we possess all the knowledge and professionalism within the family is misleading," he says. "We seek out the best and brightest in the professional management of the company." The family incentivizes top management and keeps career paths open. "To say you can't be 'president' if your last name isn't Jacobs is to cut people off," he says.
Chuck Moran, who joined the company in 1992 as a VP of finance, is Delaware North's president and chief operating officer. "We've also taken a lot of time to beef up the next level of professional management," he observes. "We've brought on a lot of people over the last ten years, groomed them, and switched assignments to give them diverse experience. We're preparing for the next transition." Current plans call for him to retire at the end of 2015.
The company also has a strong, active board of directors, a majority of whom are independent members. "We look for people who have both related experience in the business and those who have unrelated experience because they bring a different perspective," explains Delaware North director Howard Fluhr, who is also chairman of consulting firm Segal Company. "In a private company in general, in addition to the obvious fiduciary duties, you want to have a range of points of view on the board. That's even more important in a family business."
Jeremy Jacobs and his sons serve on the board, along with six outside directors with backgrounds in finance, sports law, hospitality and consulting. The board meets four times per year. At each meeting, Moran gives a report and operating managers make presentations about various aspects of the business and pending matters. "That gives us not only insight into what's going on, but exposes the board to those people as well," Fluhr says.
Jeremy purposely built a strong board. "The quarterly reviews, compensation committees, audit committees—in a family structure they get lost," he points out. "But in the corporate structure, the board forces that upon you. That's one of the better things we did years ago."
When it comes to completing the transition to the third generation, Jeremy says the plan must be developed and carried out by his sons. "They spend a lot of time making sure they don't get in one another's way," Jeremy says. "It will happen within that structure."
Jerry concurs. "He's absolutely right. If we don't come up with a solution that's ours, it's worthless. Of course, the real test will be when our father is no longer around."
"They have such a great formula with Charlie, Lou and Jerry all working together," says 48-year company veteran Rick Abramson. "They all have different thoughts and points of view, but when one talks, he speaks for them all. It's a strong, unified family."
This didn't happen by accident. "My brothers and I decided we wanted to work better together and get to another level of performance," Jerry explains. "We brought in a consulting group to help us do that." They adopted the High Performing Team model from Guttman Development Strategies. "It was a lot of work, a lot of drama; many, many hours of thinking this through and talking openly about how to do it," Jerry adds. "It's worked very, very well."
"On the family side, they made a deliberate choice to do this just as siblings, as opposed to involving their father," says Stephanie Brun de Pontet of the Family Business Consulting Group, who has worked with the brothers on family governance issues. "They felt it was important for them to gel as a group for the future. The dynamic would be different if their dad was in the room."
Jerry points out that they are deeply invested in sound family governance practices. "We have regular shareholder meetings on a quarterly basis," he explains. "That group includes the six siblings, and we present the same financial data the board gets. We discuss the strategic direction and major moves in management. We get their feedback, and that goes into the equation." In addition, he says, "We just formed a family assembly, which includes spouses and G4s. Then we have a family council, which consists of the six siblings. It deals with the business of the family, not the business of the business. The shareholder meetings are about the business."
Although no other family members currently work at Delaware North, Jerry says, "We've crafted a family employment policy and begun to take steps connecting to G4 in terms of what opportunities the company might offer and how they might go about pursuing them. We've been very careful to make sure there are no expectations that family members work in the business. We don't want to make it a burden. It should be more of an opportunity."
He summarizes the family's careful approach to the intersection of family and company business by observing, "We watch closely what happens around family-owned companies. We've seen how family disputes can pour over and destroy a good business. We've seen how business decisions can be made on an emotional family basis that is really wrong for the business. Our mantra is, 'We're trying to protect the business from the family and protect the family from the business.' "
"All of it is in the interests of long-term continuity," says Brun de Pontet. "They understand that, in order to succeed over multiple generations, it's important to invest in the family relationship as well as the strong business practices they have developed."
Dave Donelson is a business writer in West Harrison, N.Y., and the author of the Dynamic Manager Guides and Handbooks.
Delaware North around the world
Delaware North Sportservice is the oldest and second-largest (with 27% of revenue) division in the company, with 55 clients like Busch Stadium in St. Louis and CenturyLink Field in Seattle. The division, which harkens back to the company's roots by operating food, beverage and other concessions at stadiums, has served customers at Super Bowls, the Olympics, the World Series, and even the Little League Baseball World Series in Williamsport, Pa.
The largest division is Delaware North Gaming & Entertainment, which generates about 29% of the company's revenue. This unit specializes in racing venues with added video gaming, table games, full-service restaurants, retail shops and hotels. You won't find these venues in Las Vegas or Atlantic City, but the company has steadily built business in places like Memphis, the Quad Cities and Cincinnati. In early 2014, the company gained the right to build a video lottery terminal on New York's Long Island.
Delaware North got into the national parks concession business in 1993 when it won the contract to serve visitors to Yosemite National Park. Today, it also manages the Kennedy Space Center visitor complex and Shenandoah National Park, among dozens of other attractions. In addition to the government contracts for operations on park property, Delaware North has invested in numerous resort, food and lodging properties of its own adjacent to them, like Tenaya Lodge at Yosemite.
Travelers passing through Los Angeles, Atlanta, Newark and dozens of other airports around the world eat at hundreds of restaurants and other facilities operated by Delaware North Travel & Hospitality. The company recently acquired the Patina Restaurant Group, whose high-profile portfolio includes New York's famed Rockefeller Center Ice Rink and Rock Center Café, the Grand Tier Restaurant at the Metropolitan Opera, and the Michelin-starred Patina Restaurant in the Walt Disney Concert Hall in Los Angeles.
International operations are a growth center for Delaware North. In 2014, it debuted a joint venture with a local concern to provide catering and food services to the Singapore Sports Hub, marking a return to the Asian market after a 20-year hiatus. In Australia, Delaware North owns several resorts and recently extended its concession contract with Melbourne & Olympic Parks, home of the Australian Open Grand Slam tennis tournament. On the other side of the globe, Delaware North serves soccer fans at two of the three largest stadiums in London, Wembley and Emirates. —D.D.
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