Focus on fast growth designed not to ‘stray’
He just doesn’t like going into unfamiliar territory.
So the Buffalobased food service, gaming and hospitality giant has been following what Jacobs calls a “regional global” approach to its fast-growing international business, which has more than tripled its sales over the last five years.
“Stay close to what you know, and don’t stray too far toward the fringes,” Jacobs, a principal at Delaware North, said Thursday during a speech to members of the World Trade Center Buffalo Niagara.
The idea, Jacobs said, is “to push the envelope slightly,” moving into new markets that are similar to Delaware North’s existing ones with the same type of services that it already offers in the United States, Canada, Britain and Australia.
“The question is how big can we get, and how fast, particularly in the international arena,” Jacobs said.
What would be considered going too far? “That would be Delaware North going to China and getting into the bowling industry,” Jacobs said.
Instead, Delaware North has been steadily building up its food service and hospitality businesses in the English- speaking countries that are part of the British Commonwealth, which also have similar legal values.
So the company runs resorts and offers concessions at airports and sports stadiums in Australia. It provides concessions at airports and sports stadiums in Britain, including a high-profile job at Wembley Stadium in London. The company does all of that in the United States and Canada, too, in addition to a gaming operation.
Those are lessons that Delaware North has learned over the last 95 years, as it grew from a tiny concessions business started by Jacobs’ grandfather Louis to a company that now has more than $2 billion in annual sales.
“We’ve been in a lot of different businesses,” Jacobs said. Decades ago, it branched far afield into businesses such as publishing and aluminum smelting when diversification was all the rage, only to later pull back.
In the early 1990s, it won the contract to provide concessions with the Moscow Circus, only to learn that business ethics aren’t the same everywhere. Jacobs recalled how the company was approached by an extortionist and rejected the demands, only to have its Russian partner later killed. The next day, the company pulled all of its executives out of Russia.
“We didn’t properly understand the Russian market when we did the Moscow Circus,” Jacobs said.
So now, Delaware North’s focus is on the British Commonwealth markets such as Australia. The company last year paid $36 million to buy five resorts and a sightseeing boat in Australia to build on its business in a nation that already contributes more than $100 million in revenues, or more than 5 percent of its total sales.
“There’s enough in common here that it makes sense for us,” Jacobs said. “We have this approach that, if we’re going to go into a new area, we need to have a beachhead” that is big enough to support the needed administrative systems and provide a springboard for further expansion.
Next, Delaware North has its eyes on India. The company, which provided concessions at the Commonwealth Games when they were held in Australia, is working with an Indian partner to do the same at the Games that will be held later this year in Delhi.
For Delaware North, it’s a matter of “keep your toe in the water,” Jacobs said, “and get a sense of what it’s like.”