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UVA-C-2182Rev. June 17, 2009

This case was prepared by Kristy Lilly (MBA ’03) and Liz Smith (MBA ’04) under the supervision of ProfessorMark Haskins. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling

of an administrative situation. Copyright © 2003 by the University of Virginia Darden School Foundation,Charlottesville, VA. All rights reserved. To order copies, send an e-mail to [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in

any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission

of the Darden School Foundation. Rev. 6/09. ◊

THE CRADDOCK CUP

Jose Rivaldo shuffled through the papers on his desk and sighed. As the general managerof the Craddock Youth Soccer League (CYSL), Rivaldo was committed to providing high-quality soccer activities to boys and girls in the area. In addition to managing regular CYSLoperations, Rivaldo was heavily involved in putting on a regional soccer tournament, theCraddock Cup, which brought approximately 32 premier high school soccer teams fromthroughout the region each May.

This year’s tournament, like its predecessors, had been considered a great success by

players, their families, and the local community. The weather had been beautiful, the refereeshad been fair, and the local hotels and restaurants had profited from the influx of people. Nevertheless, Rivaldo knew that the Craddock Cup was in trouble. Tournament expensescontinued to rise, while corporate sponsorships remained difficult to obtain. CYSL had foundedthe Craddock Cup, in part, to fund a field-acquisition program for the league, with theexpectation that the tournament would generate at least $6,000 annually toward that goal.Unfortunately, with tournament profits averaging a loss of almost $4,000 a year, CYSL’s boardof directors was beginning to express frustration with the lack of profits generated by theCraddock Cup. Rivaldo knew the Craddock Cup was in danger of being canceled, and that herisked losing his job with CYSL if he did not devise a plan to increase tournament profits. Hedecided to review the organization and expenses of the Craddock Cup to see if there was a way

to increase the cup’s profits and continue the tournament.

Background

The Craddock Cup was widely regarded as the premier tournament for high school soccer players in the region. The tournament consisted of a boys’ high school bracket and a girls’ highschool bracket, each with 16 teams. Through a series of rounds and consolation rounds, therankings of all the teams, from 1 to 16, were determined, with each team playing four gamesthroughout the course of the tournament. See Exhibit 1 for the current year’s Boys’ High SchoolDivision results and bracket structure.

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Funding for the tournament came from team registration fees, corporate sponsorships,T-shirt sales, concession sales, and participation fees for soccer clinics held during thetournament for the younger siblings of tournament participants. Each team paid a $295

registration fee to enter the tournament.

During the past few years, the Craddock Cup had evolved into a showcase event fortalented high school players. On average, about 25 college scouts attended the tournament eachyear for recruiting purposes. The Craddock Cup encouraged recruiters’ attendance by paying fortheir hotel rooms and by publishing a “face book” that included a photograph and profile of each player 16 years of age or older. The presence of the scouts enabled the tournament to attract theregion’s best high school teams.

Profit Statement Estimates

Rivaldo looked at the profit estimate for the next year’s Craddock Cup (Exhibit 2). He planned to use this information as the basis for his recommendations to the CYSL board. Heused the following data in compiling the profit statement:

1. CYSL purchased tournament T-shirts for $6 a shirt, and sold them for $15 each.Historically, the tournament sold 10 shirts per team.

2. The Craddock Cup expended the equivalent of $15 for food and beverages per player tostock the concession stands. These concessions were sold at a 100% markup.

3. The tournament hosted two soccer clinics (one on each day of the tournament) foryounger siblings of tournament participants. The participation fee was $10 per child perday; it cost CYSL $6 per child per day. The previous year, 216 children had participatedin the soccer clinics each day.

4. Corporate contributions averaged $14,000 a year. Despite Rivaldo’s best efforts, he had been unable to secure additional corporate sponsorships for the tournament.

5. CYSL was required to pay $1,500 every year to register the Craddock Cup with the stateYouth Soccer League, and also had to pay a $4 insurance premium per player. Onaverage, each team fielded 18 players.

6. CYSL rented 10 soccer fields from the city for 40 weeks a year for a total fee of $48,000.Although the Craddock Cup used the fields for only two days a year, Rivaldo allocated

one week’s rent to the Craddock Cup. In addition to the two days of tournament play,CYSL spent two days preparing the fields for the tournament and two days cleaning upafter the tournament.

7. Each team played four games during the course of the tournament, and each soccer fieldaccommodated four games a day. Currently, the Craddock Cup required the use of eightsoccer fields. Additional fields could be rented from local schools at a cost of $150 perday per field, while two goals for each additional field were rented at a cost of $60a day.

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8. Two soccer balls were purchased for each field at a cost of $27 per ball.

9. Three referees were hired for each game at a cost of $100 a game ($25 each for twolinesmen and $50 for the head referee).

10. Trophies were provided for each player on the winning team in each bracket. On average,each trophy cost $25.

11. The Craddock Cup defrayed approximately $80 a night in hotel costs for each collegescout attending the tournament. The scouts generally stayed for two nights.

12. Face books were published at a cost of $6 a book. The Craddock Cup published extraface books and sent them to colleges that requested a face book but did not send arepresentative to the tournament. The previous year, the tournament had published 75face books.

13. Marketing and advertising costs had been $2,200 the previous year.

14. Currently, CYSL employed Rivaldo full-time at $42,000 a year and three part-timeworkers at $12,000 a year each. Rivaldo worked on both the Craddock Cup and regularCYSL operations. He spent approximately 15% of his time on the Craddock Cup. One ofthe part-time employees, Renee Jansten, worked solely on the Craddock Cup, while theother two part-time employees did not work on the Craddock Cup at all. Office rent andutilities were allocated to the Craddock Cup based on the time Rivaldo spent working onthe Craddock Cup, as follows (Table 1).

Table 1. Craddock Youth Soccer League budget allocation.

CYSL Allocated to

Cost % Allocated Craddock CupRivaldo’s salary $ 42,000 15% $ 6,300Jansten’s salary 12,000 100% 12,000Rent, utilities 18,000 15% 2,700Total $ 72,000 $ 21,000

Rivaldo thought about the overhead expenses allocated to the Craddock Cup andwondered whether the allocation was accurate or even whether overhead should be allocated tothe Craddock Cup at all. If the tournament were discontinued, CYSL would still incur field-rental expenses for 40 weeks. Furthermore, CYSL would still have the same salary expenses forRivaldo and two of the other employees, though Jansten’s position would be eliminated. Rivaldo

wondered what the tournament’s true operating profit really was, as a portion of thetournament’s costs was allocated from CYSL.

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The Future of the Craddock Cup

Looking at the profit data, Rivaldo thought about what changes, if any, could be made

before next year’s tournament to improve profitability and convince CYSL’s board to continuehosting the event. One easy way to raise additional revenue would be to increase the size of thetournament by adding two middle-school brackets, one for boys and one for girls. This movewould increase the number of participating teams from 32 to 64. Because most of the high-school teams had a corresponding middle-school team, Rivaldo thought he could easily doublethe size of the tournament with little effort. Rivaldo knew the Craddock area had enough fields,equipment, hotels, and referees to support a tournament with 64 teams. Above this number,Rivaldo estimated that the costs for additional fields, rented goals, and referees would increasesignificantly.

The CYSL board had also asked Rivaldo to determine the profit impact of increasing the

marketing and advertising expenses. The board was hoping that a big advertising push wouldincrease the visibility and prestige of the tournament. Rivaldo thought that by spending anadditional $1,000 on marketing and advertising, he might attract about 15 more college recruitersto the tournament. This action would require CYSL to increase the number of published face books to 95. Rivaldo thought that this strategy might allow CYSL to charge a higher registrationfee for the tournament.

In preparing for his meeting with the board, Rivaldo decided that he needed to review theoverhead-expense allocations and determine the impact of adding 32 teams to the Craddock Cup.Finally, Rivaldo planned to calculate the financial impact of increasing the tournament’sadvertising budget by $1,000 and to determine how much the registration fees for 64 teamswould have to be raised in order to fund this initiative.

Required

1. In determining whether to keep or drop the Craddock Cup, review the overhead-expenseallocations made from CYSL to the Craddock Cup to see if they should be revised oreliminated.

2. Calculate the expected financial impact of adding 32 more teams to the tournamentschedule.

3. Calculate the break-even increase in registration fees per team for 64 teams given a

$1,000 increase in advertising expense, 15 more college recruiters, and 20 additional face books.

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Exhibit 1THE CRADDOCK CUP

This Year’s Boys’ High School Division Tournament Results

Team #1 Team #9

Team #1 Team #10

Team #2 Team #10

Team #4 Team #12

Team #3 Team #11

Team #4 Team #12

Team #4 Team #12

Team #4 v. Team #12

Team #5 Team #13

Team #6 Team #12 Team #13

Team #6 Team #14

Team #6 Team #16

Team #7 Team #15

Team #7 Team #16

Team #8 Team #16

Consolation - 3rd and 4th Place:

Team #6 v. Team #16

Team #6

Consolatio n - 5th and 6th Place:

Team #1 Team #10

Consolation 7th and 8th Place:

Team #1 v. Team #13 Team #7 v. Team #10

Team #1 Team #7

Team #7 Team #13


Team #2 Team #9

Team #2 Team #9

Team #3 Team #11 Consolation 11th and 12th Place:


Team #5 Team #9 Team #14 Team #15

Team #5 Team #15

Team #8 Team #15


Team #3 Team #11



Team #8 Team #11

Team #8 Team #14

1st Team #12 9th Team #9

2nd Team #4 10th Team #2

3rd Team #6 11th Team #15

4th Team #16 12th Team #5





Final Results

Source: Created by case writer.

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Exhibit 2

THE CRADDOCK CUP

Profit Statement

Source: Created by case writer.

Current

Size

Registration fees 9,440$

T-shirts 4,800

Concessions 17,280 Soccer clinic 4,320

Contributions 14,000

Total revenue 49,840$

T-shirts 1,920

Concessions 8,640

Soccer clinic 2,592

Player insurance 2,304

Registration with state YSL 1,500

City field rental 1,200

Soccer balls 432

Referees 6,400

Trophies 900

Hotels 4,000

Face books 450

Marketing and advertising 2,200

CYSL salaries 18,300

CYSL rent 2,700

Total expenses 53,538$

Profit (loss) (3,698)$

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