When North Coast Professional Sports Ltd. sealed the deal last December to buy the Cleveland Crunch from George Hoffman, it was the culmination of a nearly year-long endeavor to purchase what Michael Gibbons, the group’s chairman, calls “an undervalued property.”
Gibbons — also senior managing director of investment banking firm Brown, Gibbons, Lang & Co. — and his majority partners, Paul Garofolo and Richard Dietrich, knew they were inheriting a winning indoor soccer franchise. But the group, which also includes minority owner Gary Zdolshek, also acquired a business with a poorly developed infrastructure that barely broke even each year and participated in a league that lacked strong leadership and seemed to constantly teeter on the brink of disaster.
“It wasn’t much of an organization,” says Dietrich, the group’s CEO and owner of three Northeast Ohio machinery manufacturers. “We essentially built a new franchise. What we bought was a winning soccer team, not a company in the normal sense of the word. The business aspects were nonexistent.”
With that in mind, Gibbons, Garofolo and Dietrich spent the bulk of 1999 developing a strategic plan designed to solve those off-the-field problems and, at the same time, keep the Crunch successful on the field. So when North Coast assumed ownership on Dec. 10, 1999, Gibbons and his partners weren’t in a position to make drastic changes.
Instead, they sat tight during the remainder of the season and watched the Crunch reach the finals, only to lose to the Milwaukee Wave. Only then did they embark on an ambitious off-season initiative that set in place a new operational model and a new attitude.
Today, as Gibbons, Garofolo and Dietrich ready themselves for their first full year of team ownership, things couldn’t be more different. Only the Crunch’s winning ways seem to remain. In fact, Garofolo says he’s reminded of the old Cleveland Force glory days, when then-owner Bart Wolstein ran a formidable soccer industry in Northeast Ohio and legions of fans packed Richfield Coliseum for every game.
“Any business is made up of people,” Dietrich says. “The team is simply a department of the business. You have to be consistent all the way through in order to have a successful business, and you have to be committed to making it happen.”
So far, the changes are working. Season ticket sales are the highest they’ve been since the 1980s. The organization’s support staff has doubled. There is a greater emphasis on community involvement through Crunch-sponsored soccer camps.
And, later this month, the National Professional Soccer League will announce a new commissioner that Gibbons and his partners helped handpick from the ranks of the NHL.
Here’s how this unlikely trio of business partners has affected change in the professional indoor soccer industry without incurring unnecessary penalty kicks or harming their core product.
Develop a business infrastructure
Among the three majority owners, Gibbons, Garofolo and Dietrich have owned six businesses and founded two sports leagues. They’ve experienced — and beat — the overwhelming odds of making a business successful, both from start-up and from inheriting existing ventures.
“This is a for-profit business,” Dietrich says. “As much as we want to win, our true measurement will be winning on the balance sheet.”
Though they declined to share the purchase price of the team or its current payroll, professional soccer team price tags pale in comparison to the $530 million paid by Al Lerner for the Cleveland Browns or the Indians’ $70 million-plus payroll. For example, owners of the most recent NPSL expansion team, the Toronto Thunderhawks, paid a $250,000 franchise fee earlier this year to buy into the league.
Out-of-pocket expenses aside — Gibbons says the four partners put up all the money — Garofolo, the group’s president, says North Coast is committed to investing however much money it will take to succeed.
“There’s a tremendous opportunity to rebuild this organization and get it back to the levels of financial success that the Force experienced,” he says. “It’s a matter of getting the structure in place and information into the community.”
To that end, Garofolo has doubled his staff — from 10 employees to 20 — and tripled the office space for the Crunch’s corporate offices, moving from a small Solon building to a larger one in Warrensville Heights. Whereas Hoffman relied on hiring employees directly from college to fill the support staff, Garofolo went with experience, including a former vice president of ticket sales from the Cleveland Cavaliers organization.
He also plucked from one of Dietrich’s companies a comptroller who is charged with overseeing the financial side of the business. And, Garofolo introduced technology where it hadn’t been used before, installing a state-of-the-art computer network to help the staff coordinate all aspects of the business.
All of this has been with one goal in mind — reaching or exceeding the level of business success that the original Cleveland Force had in the 1980s.
Getting back there, however, isn’t expected to be an easy task.
“There’s been a significant drop in support since 1988, when Bart Wolstein tried to sell the team to George Hoffman,” Garofolo says. “The deal didn’t work out, so Hoffman took a one-year leave and came back as the Crunch. Getting back to those levels will take some time.”
But consider what Garofolo, Gibbons and Dietrich have accomplished so far. Season ticket revenue through the end of August exceeds all ticket revenue from the 1999-2000 season. More groups have been booked in advance of this season than the number that attended all of last year. And, 82 percent of season ticket holders renewed their tickets for the 2000-2001 season.
“You have to go out and solicit the orders,” explains Dietrich. “And, you have to go on the offensive.”
An unlikely alliance
Garofolo, Gibbons and Dietrich had never met before 1994, when Gibbons and Garofolo were introduced on a plane on their way to a meeting with investors for a potential deal.
At the time, Garofolo was acting as a consultant to a friend, Gary Russell, and his North American Sports Camps company, who was looking to break into the football and soccer camp business. Garofolo was considering becoming part of the deal. Gibbons was brought in to assess the deal and, if it looked viable, have Brown, Gibbons, Lang & Co. act as the money source.
“I was there to help raise money for the deal,” Gibbons says. “But we determined that he (Russell) only needed a few million. We (Brown, Gibbons, Lang & Co.) normally deal with a $10 million investment. The deal just wasn’t economical for us to be in.”
Gibbons helped lead Russell toward investors who could fund the project and, as it turned out, Garofolo chose to pass on becoming a partner. Instead, Gibbons and Garofolo were tapped for the company’s board of advisers, positions they still hold today.
It was on that board of advisers that Garofolo and Gibbons began talking about other sports-related businesses they could pursue.
“Paul said we should meet with George Hoffman because the Crunch was an undervalued property,” Gibbons says. “He had the background with soccer and sports marketing, and I wasn’t very knowledgeable about it, but it seemed like something worth pursuing.”
Garofolo had followed the Crunch for more than just financial reasons. He was vice president and general manager of the Force under Wolstein. When the Force folded, he left to join the international sports marketing firm ProServ Inc., where he gained a different skill set.
He oversaw national sporting events and marketing efforts and worked with top agents David Falk and Jerry Solomon and clients such as Michael Jordan, Dominique Wilkins, Patrick Ewing, Jimmy Connors and Greg Lemond.
In 1992, Garofolo founded Signature Sports and Marketing, which focused on athlete representation; consulting to corporations, sports properties and their leagues in strategic planning, marketing, licensing and execution; and event management and marketing. He also co-founded the International Basketball League.
So when the late ’90s rolled around, he was itching for yet another sports opportunity. To him, the combination of meeting Gibbons and the opportunity to buy the Crunch must have seemed like fate.
Dietrich linked up with the duo through mutual business services representation. He and Gibbons shared accountants and attorneys. Dietrich, who owns Glass Equipment Development Inc. in Twinsburg and Edge Seal Technologies and Leading Edge Distributors, both in Walton Hills, founded a youth soccer program in 1982, and by the late ’90s, was considering getting involved in something larger.
An avid soccer fan — he played in high school and college before coaching youth soccer at the high school level — he met Gibbons and Garofolo around the time they were looking for sports-related deals.
“We were considering buying the Crunch and doing a sort of roll-up of soccer complexes around Northeast Ohio,” Garofolo says. “That’s how we met Dick. We eventually decided not to pursue that idea. The risks outweighed the benefits. Instead, we focused on buying the Crunch.”
The three owners realized their unique backgrounds would bring a combination of business ownership, league front office experience and financial savvy to the Crunch’s boardroom table.
“It was something that had been lacking,” Garofolo says.
Strengthen the process and product
While other plans to develop the organization were in motion, Garofolo says North Coast made a strong push to build community awareness about the Crunch and get fans excited. The team was, after all, the most successful franchise on the field in Northeast Ohio, having captured NPSL titles in 1994, 1996 and 1999, and reaching the finals nearly every year.
The first push was to get the players out in the community in front of fans.
“What really separates soccer from other sports is that our athletes are still willing to accept the term role model and work in the community,” Garofolo says. “And, unlike other sports’ athletes, ours are basically normal-sized guys.”
North Coast increased the number of soccer camps the Crunch and its players were involved with this past summer. In 1999, the Crunch hosted 13 weeklong soccer camps for 600 children; this year, the team hosted 54 camps with more than 3,500 participants.
“The sport is truly a grassroots sport,” Garofolo says, adding that with an average ticket price of $12, it’s a much more affordable entertainment option than baseball, football or basketball.
But, building awareness and getting more people to the games would be all for naught if the league wasn’t stable. That had been a serious problem with indoor soccer, going back to the Force days, Dietrich says. It’s one reason why team owners leaguewide forced Steve Paxos, former NPSL commissioner, to step down after 12 years while they undertook a worldwide search for a strong leader.
Gibbons, Garofolo and Dietrich spearheaded that search, and later this month, Steve Ryan will be announced as new NPSL commissioner.
Ryan is the former president of NHL Enterprises, the sponsorship arm of the NHL. He’s credited, says Dietrich, with putting the NHL on the map. Under Ryan’s tenure, he took sponsorship revenue from $2.1 million to $45 million and licensing revenue from $30 million a year to $1 billion a year.
“The NHL isn’t the blueprint for us,” Dietrich admits. “But, our intent is to see the league elevated in status. We have a good entertainment product. It just has to be marketed better.”
Dietrich says strong leadership will help stabilize the NPSL, allowing him and his partners to move forward with their plans of building up the entire Crunch organization.
“He (Ryan) has inherited a league with no infrastructure, much in the same way we inherited the Crunch,” Dietrich says. “You’re going to start seeing changes in the league now. But those changes will be intentional ones.
“And, if we do our job correctly, we’ll help build the sport of soccer, not just in Cleveland but leaguewide.” How to reach: Cleveland Crunch, (216) 896-1140
Dustin Klein ([email protected]) is editor of SBN.