Delaware North Companies Incorporated

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Delaware North Companies Incorporated

438 Main Street
Buffalo, New York 14202
U.S.A.
(716) 858-5000
Fax: (716) 858-5266

Private Company
Incorporated: 1915 as Jacobs Brothers
Employees: 40,000
Sales: $1.5 billion
SICs: 5812 Eating Places; 3339 Primary Nonferrous Metals Nee; 2731 Book Publishing; 6719 Holding Companies Nec

Delaware North Companies Incorporated is a privately owned holding company that operates over 200 subsidiaries. The two largest companies in the Delaware North family are Sportsystems Corporation and Sportservice Corporation. Sportsystems, which owns and operates nine horse- and dog-racing tracks, runs the most extensive chain of pari-mutuel wagering facilities in the United States. The pari-mutuel business accounts for about half of Delaware North’s yearly revenue. Sportservice specializes in large venue food service, most notably at sports arenas. Sportservice provides the concessions for six major league baseball teams, three National Hockey League teams, and one member each of the National Basketball Association and the National Football League. It also operates concessions at convention centers and parks. Food service and concessions account for about 31 percent of Delaware North’s revenue. Delaware North also owns the Boston Garden, home to the NBA’s Boston Celtics and the NHL’s Boston Bruins, while the Bruins team is owned by Delaware North owner Jeremy Jacobs. Through its Concession Air Corporation subsidiary, Delaware North provides airport and in-flight food service to over 250 million travelers each year. Further areas in which Delaware North businesses operate include publishing, metals, and typography.

The three Jacobs brothers, Marvin, Charles, and Louis, began the concession business that would grow to become Delaware North in 1915. Their parents, Polish immigrants, had moved the family to Buffalo from Manhattan’s Lower East Side around the turn of the century. From a very early age, the brothers were hawking food and services at public gathering places. Louis sold peanuts at Buffalo’s ball park and popcorn at a local burlesque house. His older brothers worked the Delaware Park Lake, renting canoes, shining shoes, and selling newspapers. From these humble roots, they learned the trade and saved the money to open more concession booths.

Furthermore, the brothers opened stands in theaters in other cities and their first baseball park concession operation at the old field in Jersey City. Their baseball business grew quickly after World War I, expanding in 1919 into the ballpark occupied by the Baltimore team of the International League. They began operating the concessions at Buffalo Bisons baseball games back home as well. The Jacobs brothers would eventually become shareholders, and later, outright owners of that team. The company’s first major break came in 1927, when it was awarded its first major league concession contract by Frank Navin, owner of the Detroit Tigers. Overseen by Louis, the first year operations at Navin Field were so successful that the company brought in twice as much money as the previous operator had. At the end of the season, Louis gave Navin a check for $12,500, explaining that the contract had been unfair and the owner deserved a bigger cut. Needless to say, this gesture played well around the league, and the Jacobses began receiving calls from team owners throughout the country. Sportservice was still handling concessions for the Tigers 65 years later.

As Sportservice Co., the company made further inroads into major league baseball concessions in the 1930s, with Louis Jacobs in charge. An important tactic for Jacobs was to loan money to struggling sports franchises in return for guaranteed concessions contracts. During this time, Jacobs dealt with several well-known figures in baseball, including Bill Veeck, who worked with Jacobs on franchise deals in Milwaukee, Cleveland, St. Louis, and Chicago. Although decreased baseball attendance due to the Depression pushed Sportservice to the brink of bankruptcy in 1932, the company was bailed out by a group of baseball owners led by Navin and the Pittsburgh Pirates’ Barney Dreyfuss. Thus the relationship between the Jacobses and baseball owners was cemented. Another example of this special tie occurred in 1951, when the legendary Connie Mack borrowed $250,000 interest-free from Jacobs to assist his financially struggling Philadelphia Athletics. Jacobs later helped Mack sell the team, which was then moved to Kansas City.

The company began to diversify in the 1930s and 1940s, especially into professional hockey and pari-mutuel racing, first as foodservice providers, and later owning some facilities. In the mid-1930s, Sportservice invented the ice show. The earliest ice shows were merely exhibitions put on by skating clubs, bearing little resemblance to such lavish modern descendants as the Ice Capades. Sportservice was active in the formation of the Arena Managers Association, which underwrote attractions that single arenas could not afford to produce. The Ice Follies first appeared in Minneapolis, then moved to a Chicago hotel, where they were initially a major flop. In 1937, Jacobs joined with a group of investors to help support the floundering Syracuse team of the International Hockey League. When all of the other members of the group dropped out one by one, Jacobs became the team’s owner by default. The team was moved to Buffalo, but it never really recovered financially. It was eventually sold to the Chicago Blackhawks system. In 1939, Sportservice made an agreement with the American Hockey League franchise in Providence that covered not only concession rights, but also granted Sportservice final authority on any sale or transfer of the club until 1999. This incredible contract was not publicly known until the late 1960s, when a Boston financial consultant tried to buy the Providence team and the Rhode Island Auditorium. The deal was nearly complete before he uncovered the remarkable 60-year agreement. It turned out later that Sportservice owned even the land on which the auditorium was built.

Sportservice received a long-term contract in 1939 for the concession operations at Washington National Airport. The company’s income from this new pursuit was held back at first by a struggle for jurisdiction over the airport between the District of Columbia and the Commonwealth of Virginia. Virginia won, which meant that no alcohol could be served in airport restaurants, a prohibition Jacobs had not figured into his bid. The company began serving food at drive-in movie theaters in the early 1940s, beginning in western New York and quickly spreading throughout the United States. Among the racing facilities at which Sportservice began handling concessions in the 1940s was Hazel Park Raceway, located just outside of Detroit. The company later acquired a 12 percent interest in that facility, a holding which would later draw much negative attention, since the track was largely controlled by reputed organized crime members, and this control was largely financed by Jacobs.

In 1948, Jacobs moved the headquarters of the Sportservice operation into a cramped second floor office at 703 Main Street in Buffalo, where it remained for decades. Sportservice’s move to become a corporate giant began in the early 1950s, when Charles and Marvin Jacobs retired. They sold their shares in the company to Louis, leaving him in complete control of the business. In 1952, the company began in-flight foodservice on planes bound out of Buffalo, an operation formerly handled by an outfit called Sky Chefs. The race track business also expanded briskly in the 1950s. Among Sportservice’s acquisitions in the area was Magnolia Park in Louisiana, later called Jefferson Downs. Sportservice began running concessions there in 1954, and ended up controlling the facility when it came close to bankruptcy several years later, another episode that yielded bad press and corruption allegations for the company.

The 1960s were a decade of remarkable growth for Sportservice. The company entered the decade by operating the concessions for the 1960 Olympic Games in Rome. In 1961, Jacobs formed the Emprise Corporation, a holding company whose function was to keep separate the company’s proprietorship of racetracks and sports arenas from the operations of Sportservice, its principal subsidiary. Emprise began to dabble in real estate and distributorships as well, including among its acquisitions the Joseph Strauss Co., western New York’s Zenith distributorship. In 1963, the Jacobs family obtained controlling interest in the Cincinnati Royals professional basketball team and the Cincinnati Gardens, the site of the Royals’ home court. Louis had invested in the Gardens when it was first constructed, and as the arena’s finances required, had increased his stake to 40 percent. In the 1963 acquisition, the family paid just over $400,000 for an additional 40 percent of the Gardens and 56 percent of the team. Max Jacobs, one of Louis’s sons, was later elected chair of the Royals’ board.

Emprise’s expansion in the 1960s was international as well. Sportservice became concessionaire to royalty in the early 1960s, when it began serving food at England’s Royal Ascot Race Track. The company also won concession rights for the New York World’s Fair and for Expo ‘67 in Montreal. In 1968, a year after the deaths of brothers Charles and Marvin, Louis Jacobs died—at his desk as he had long predicted. Shortly after Louis’s death, an editorial appeared in The Sporting News recommending that Louis and his brothers be enshrined in the Baseball Hall of Fame at Cooperstown, New York for their unique contribution to the game. By this time, the company had grown to over 30 times its 1953 size. Sportservice had over 500 operating units, and sold concessions in more race tracks and sports stadiums than anyone else. The company was feeding fans in such diverse settings as Puerto Rican racetracks, posh Florida jai alai frontons, and middle American bowling alleys. Sportservice’s estimated gross revenues for 1968 were around $50 million.

Leadership of Emprise was assumed by Louis Jacobs’s two sons, Jeremy and Max. Jeremy had learned the business at his father’s side over the previous fourteen years, and he became president of Emprise at age 28. Max, three years older than Jeremy, had joined the company only two years earlier, after a moderately successful stretch as a Broadway actor. He became executive vice-president and secretary. The company did not lose a step through the generational leadership transition. The company continued to loan millions of dollars to strapped baseball teams. The Jacobs brothers loaned $2 million to the Montreal Expos and received a multi-year exclusive concession contract. A similar deal was cut with the Seattle Pilots, who, after their move to Milwaukee in 1970, awarded Sportservice concession rights for 25 years. $12 million in financing for Busch Stadium in St. Louis resulted in another multi-decade concession arrangement for Sportservice.

However, Emprise was rocked by a series of scandals, accusations, and convictions in the early 1970s. In 1972, the U.S. Justice Department began investigating Emprise in regard to possible antitrust violations. Papers filed in Buffalo suggested that Emprise’s lending power gave it an unfair edge over other companies in competition for sports concession business. A similar antitrust action was undertaken in Atlanta to investigate Emprise’s racetrack operations in the southeastern part of the country. The Justice Department also began to look into several of the company’s labor union contracts. Later that year, the House Select Committee on Crime began to hold hearings concerning Emprise’s connections with organized crime figures. Much of this attention focused on Emprises well-documented associations with Anthony Zerilli and Michael Polizzi, two of Emprise’s co-investors in Detroit’s Hazel Park Racing Association. Investigations revealed that Louis Jacobs had made interest-free loans in the 1950s to Zerilli and to Jack Tocco, a reputed member of the Detroit Mafia. In a related case, Emprise and six individuals, including Zerilli and Polizzi, were convicted of concealing ownership of the Frontier Hotel and Casino in Las Vegas. The defendants were also found guilty of related racketeering charges. In the aftermath of these convictions, Emprise was forced to give up control of a number of its betting facilities. The company’s dog racing operations in Arizona were placed under the legal authority of a trustee appointed by the Arizona State Racing Commission. The liquor control authorities in Missouri also put the Emprise units operating concessions at Busch Stadium, the St. Louis Arena, and Kiel Auditorium into trusteeship.

In the fall of 1975, Sportservice, and Jeremy, Max, and Lawrence Jacobs individually, purchased the Boston Bruins of the NHL, plus their home stadium, the Boston Garden, from Storer Broadcasting Company. However, the investigations of Emprise continued into this period, and by the end of 1976, the company’s fitness to retain its contracts had been challenged in eight of the 28 states in which it held liquor licenses, and six of the nine states in which it had pari-mutuel operations. Although several states restored Emprise’s operating licenses on appeal, the company’s plea for a presidential pardon in 1977 was rejected, leading a number of states to deny Emprise licenses according to those states’ laws prohibiting convicted felons from holding liquor licenses. In 1977, a new parent holding company, Sportsystems Corporation, was developed. The company’s revenues were estimated that year at $275 million. Of that total, $125 million came from arena food service, $80 million from subsidiaries in steel, smelting, and appliance distribution, and $70 million from the eight horse tracks, eight dog tracks, and two jai alai fronton the company owned, either wholly or in part.

Emprise was dissolved in 1978, and as Sportsystems, the company diversified further into the metals industry during the late 1970s. In 1977, Sportsystems acquired Fitzsimons Steel Co., a manufacturer of cold-finished bars based in Youngstown, Ohio. Sportsystems already owned Ramco Steel Inc. of Buffalo by that time. Two years later, Pennsylvania Steel Foundry and Machine Co. was purchased, and one additional metal concern, Aluminum Smelting and Refining Co. of Maple Heights, Ohio, was also acquired during this period.

In 1980, the name of the parent company was changed from Sportsystems to Delaware North Companies Incorporated. Sportsystems continued to exist as the subsidiary that owned and managed pari-mutuel facilities. In the early 1980s, Sport-service tapped into the southern Florida leisure market by acquiring the concession rights for the elaborate new Miami Metrozoo. The company’s revenue from foodservice alone in 1981 reached $174 million. Sportservice embarked on a campaign around that time to modernize its stadium concession facilities. $12 million was spent refurbishing the concession areas and restaurants, and an ambitious training program for employees was added as well. These efforts produced a 200 percent jump in sales at the company’s five major league ball parks.

Through the 1980s, Delaware North seemed to recover completely from the controversy surrounding it during the 1970s. The company’s public image was enhanced by such programs as Sportservice’s temperance campaign of 1985, in which concession stand workers were trained to recognize intoxicated patrons and limit sales of alcohol to such patrons. In the next few years, Sportservice expanded its convention center concession business. Two such venues were added in 1987, the San Jose Convention and Cultural Center and the Bakersfield Civic Auditorium. With these facilities added, the company’s convention center operations contributed over $50 million to annual revenues. Sportservice also expanded its minor league concession business, which included food service for Nashville Sounds and Louisville Redbirds games. Sportservice used the minor league operations much as the teams themselves did: to prepare managers for future promotion to a big league ballpark.

In the late 1980s, Delaware North began to focus even more on its bread-and-butter businesses, dog- and horse-racing, airport concessions, and sports concessions. The company’s airport concession operations were given a major boost by the purchase of the restaurant and concession division of Sky Chefs from Onyx Capital Corp., and its merger with Delaware North’s Air Terminal Services subsidiary. This lifted the company’s Concession Air Corp. subsidiary into the number two spot nationally among airport food service companies. During this period, Delaware North built a new dog track in Phoenix, converted a Florida jai alai facility into a dog track, and purchased three existing dog-racing sites. In 1989 and 1990, the company made somewhat of an exit from the parking facilities business, both in the United States and in Europe. By 1991, parking accounted for only about 8 percent of company revenue, down from 23 percent in 1985.

Delaware North expanded its international operations substantially in the early 1990s. The company maintained its parking operations in Australia and Hungary when most of its domestic parking business was sold off. Concession operations in Australia and New Zealand were beefed up by the purchase of three Australian companies. Additionally, concession contracts were obtained for two Budapest horse-racing tracks. In late 1991, Delaware North, in a joint venture with a company based in the United Arab Emirates, won the food service contract for the fire-fighting and engineering efforts in Kuwait’s oil fields following the war there. In 1992, the company’s Australian subsidiary was awarded a ten-year contract worth $70 million for food service at Melbourne’s Tullamarine Airport. Later that year, Delaware North signed with the Moscow Circus to provide food and souvenir concessions for 40 years. Domestically, the Sport-service subsidiary gained concession rights for a number of sports teams in 1992. These included the San Francisco Giants of major league baseball, the NFL’s Buffalo Bills, the Charlotte Hornets of the NBA, and the NHL’s Tampa Bay Lightning. With long-term concession contracts in every major sport, racetrack holdings throughout America, and airport concession contracts throughout the world, Delaware North seems to have a secure future as long as people continue to enjoy airline travel, gambling, and sporting events.

Principal Subsidiaries

Sportservice Corporation; Sportsystems Corporation; Concession Air Corporation; New Boston Garden Corporation; Boston Professional Hockey Association, Inc.; Delaware North (Australia) Pty. Ltd.; Halsey Publishing Company; Arrow Typographers, Inc.