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Do Conference Organizers Know What is in that “Preferred Vendor” Contract

Preferred Vendor Contracts are Bad for Meeting PlannersJune 24, 2011, Update- Updating info on some of the links below (some of the venues have taken the pages down… chickens).

I was at an industry event a few weeks ago and had a great conversation with a guy who shall remain nameless because this is Chicago after all. He does not need the grief and I am sure that he likes his job.  Let’s just say that he is high up at a major food service provider.

One of the things that we discussed at length was the preferred relationship status of caterers and other vendors at some of Chicago’s main meeting and event spaces. My friend finally put words to what I had always known. They paid to get on the list and they paid a lot.

This is not unique to Chicago, Dave Lutz of Velvet Chainsaw has a post over at TSNN and these types of relationships are number four on his list of issues plaguing the tradeshow industry. I highly recommend the read.

In my eyes, the precise issue is not that vendors pay to be on a preferred vendor list, the issue is that vendors and venues treat these deals as a dirty little secret and act like they are ashamed of it. There is zero transparency. The simple act of hiding the agreements means that there could be dirty dealing going on and when this is the case, it is the end user (meeting planner) that gets the shaft. When you are forced to use a select group of vendors, from a very small pool, you will end up getting sub-par service and paying more. Because these are sweetheart deals, the venue and the vendor really don’t care if you are happy because both have a lock on the market.

The worst thing about these deals is how they try and sell them to the meeting or event professional; “We chose them because they provide the best service”, “They met our strict criteria”…. blah, blah, blah. In fact, perusing a few websites, this is how some venues describe their preferred vendors:

  • Superior in their field, these industry experts have been hand-selected to complement and enhance your occasion.
  • The XXXXX Museum requests that clients select a caterer from the following list, created to provide a selection of professional, reliable caterers that are familiar with the constraints of working in a museum environment.
  • Our Preferred Caterers have been selected for their excellent cuisine, attractive presentation and attention to detail.

I am in marketing, I know spin. This is to spin as tornado is to breeze.

What makes matters worse is that we as meeting and event pros accept these answers with a grin and a nod because we know the truth. We always have. We have been programed to simply accept. We put up with it because the venue is perfect, the client wants the venue, the venue is across the street from the conference hall, there are thousands of excuses why we must have the venue. We know we are going to get screwed and we just take it.

Here is how my friend described his companies deal with some venues here in Chicago. His company requested to be put on venue A’s preferred vendor list. They filled out the requisite paperwork, they had a few meetings and then they were told to make a donation on top of turning over a percentage of the gross from the catering sale. This was not your typical donation, it was a  pretty lofty sum, for some locations I was told that this sum was somewhere north of five figures.

After this is done, it is never mentioned again, until it is time to pony up and pay the piper to remain on the preferred vendor list.

So, what do we do as meeting and event professionals? You can try and not use the venue, but that is not always an option or the next venue has the same deal going. You can try and bring in your own vendor but this may not be possible or the penalty cost may be prohibitive. All tough choices and none of them good.

The winning bet is to demand that we see the fine print, demand that we see the contracts and how preferred vendors are chosen. Do I really think that this is going to happen? No, I don’t. In all likelihood, it will never change.

An even better solution would be for the venues to actually be transparent and say, “Yes, you must use our preferred vendor. Our preferred vendors are companies that have made a financial commitment to the venue that helps us meet our goals every year, that is why they are preferred” – Bam, end of story, I get that. I fully understand that stand alone venues and non-profits like museums need to make a living above the front door take and memberships to keep going. Times are tough and we can all appreciate that.

So, in the end? What can I do? What I can do is shine a little light on the process and help meeting and event pros understand why their food costs are so high at some venues. Information is key.

I submit the following preferred caterer agreements for your inspection. The City of Norfolk one is not too bad, only 15% of the gross. The one that really caught my eye was the one from the Scottsdale Museum of Contemporary Art. They get thousands up front, a percentage of the gross and then, if the client stays a client of the caterer, the caterer has to continue paying a percentage of all future deals. That is a pretty steep bargain. These are smaller venues as well, I would love to see a major venue’s agreement.

Here are two venues and their preferred vendor agreements:

Venue 1:

Attucks Theater in Norfolk.(Removed the link, they removed the page)

  • 15% of Gross Revenue must go the venue (city)

PDF Agreement Here (They removed the link, I guess they are ashamed)

Venue 2:

Scottsdale Center for the Performing Arts/ Scottsdale Museum of Contemporary Art

Requirements:

  • Qualified candidates will pay the annual $1,250.00 Presidents Club Membership fee and provide a $5,000.00 in-kind contribution for an annual listing to be renewed July 1 of each fiscal year.

Financial Consideration

  • Preferred Caterer will bill SCC for each contracted in-house event. SCC will pay Preferred Caterer within 30 days of receipt of invoice.
  • Fifteen days after close of each month, Preferred Caterer will submit copies of its food service net revenues from SCPA and SMoCA rental clients and will pay SCC 15% of gross revenue.
  • If Preferred Caterer refers a rental client to the SCPA or SMoCA, Preferred Caterer will pay 12% of gross revenue.
  • If Preferred Caterer acquires a client from its association with the SCC and provides food services off-premises, Preferred Caterer will pay SCC 10% of the net of taxes and rental equipment, labor reimbursement, and service charges.

PDF Agreement Here (Link removed, they deleted)

Now you know why costs are the way that they are. Now you know why a pot of crappy coffee costs $47.00.

You cannot believe that the caterer is not passing these increased costs on to their clients. If they tell you they are not, think about this. The next time you are at a Hockey Game and a beer costs $9.00, where do you think that your money is going?

Another thought; I have only discussed caterers, Venues are also collecting on A/V companies, decor companies, Internet providers, the balloon guy, liquor companies, transportation companies, event companies, photographers and more (not to slight any of these folks, everyone needs the business).I will leave it to you to do the math.

When you book a venue and you wonder why the room rental is so cheap, now you know. You are paying for it in the end, you simply didn’t know it.

Let’s Also Be Fair

There are some reasonable venues out there. In Henderson, TX, the Henderson Civic Center charges preferred vendors $100.00 per year. I doubt that even covers their administrative costs for paperwork. Blackberry Farm in Cupertino, CA charges $1000.00 per year to be on their preferred caterer list. That to me is reasonable as well.

I also think that every deal in this post could be reasonable, they would all be reasonable if we were made to understand why a Pepsi is $10.00 and why a carton of orange juice arrives with a 300% markup.

Conference and event organizers just want to understand, is it too much to ask?

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