We mentioned recently how offering a lifetime membership option could (1) help a club fund capital improvements and (2) provide a convenience to those members who want long-term use of the club at a fixed dues rate (see “Financial Strategies,” page 2, October 2001 PCA).  Club consultant Larry Franks has provided more details about the advantages of life memberships:

Generally, life memberships have been offered in the beginning or development stages of a country club or city club to raise “up-front” capital.  This capital usually was earmarked for administrative costs of the pre-opening membership campaign.

At most developmental or new city and country clubs with which I have been involved, both with ClubCorp and Club Development, Inc., we offered life memberships.  This life membership would afford the life member and family full club privileges for as long as they were members of the club without the payment of any monthly dues.  The membership was not transferable to another person; however, the membership would pass on to a surviving spouse, but not to any other family member.

We would use a general formula for determining the dollar amount at which we would offer the life membership.  This would be the initiation fee we were charging for the full family membership plus the monthly dues for a seven- to ten-year period.  The rationale was that this would be the typical length of time a family would remain as members.  Example:  A $5,000 initiation fee, plus $350 a month in dues times 12 months times seven years.  It totals $34,400, so we would establish a fee of $35,000 for the life membership.

In recent years I have been involved in consulting with various city and country clubs.  The consulting work has ranged from new construction to operations to membership development.

A few years ago I was working with a country club (golf course, tennis courts, swimming pool) in a small market area—60,000 to 70,000 people.  The area had steady growth, but certainly was not a dynamic market.  The club had been around for about 50 years and was the only private club in the area.

However, as is the case with many member-owned clubs in towns that size, the operations were not in good shape and the cash flow of the club had not been able to keep up with the proper maintenance and capital replacements.  The physical shape and appearance of the club were certainly not attractive to prospective new members.  A substantial number of existing members were resigning because of the operations, physical problems and appearance of the club.

There was debt on the club and the board of directors and members were not inclined to incur more debt for physical improvements.

This is a scenario that applies to many clubs.  Our challenge:  How do we get the club back to physical par as well as improve operations.  Here is the successful plan I put together for that club, and for a few more since then.  The check-list items substantially remain the same:

1)   Develop a strategic plan for the club that addresses the operational problems. Can the club do well in operations?  Certainly, you do not want to make extensive improvements in your physical structure and continue to louse up the operations.

2)   The board and members generally buy off on the idea of revamping the operations so the club can function within proper industry guidelines.  With this approach in place, how do we raise money for improvements without incurring more debt?

3)   A definitive plan needs to be established for the improvements needed, and the estimated costs.  How much money do we need?

4)   Then a membership plan is developed.  This plan is to offer a form of life membership.  This membership will not be affordable to the majority of the members, however.

5)   A term is placed on this membership of from 10 to 15 years of no dues for the member and family.  This is a selling point with the entire membership.  The biggest objection to the sale of a true life membership, i.e., no dues forever, is that you are taking a certain amount of dues out of the income stream of the club forever.

6)   Generally, I have set the amount of the term membership at a level that is quite appealing and will generate the needed dollars.  For instance, if a club charges $300 per month dues, the amount of dues a member would pay over a 10-year period without any dues increase would be $36,000.  The amount I might set for this membership would be in the $20,000 range.

7)   A membership application that defines the membership needs to be prepared. Then, a full membership meeting should be called to present the plans for renovation and the plan for a term membership.  Hopefully, it will sell.

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