Group Created with Sketch.
Volume 21 No. 2
  • Created with Sketch.
  • Created with Sketch.
  • Created with Sketch.

Cycling race owner takes long view

In its first three years, Colorado’s USA Pro Cycling Challenge bicycle race has drained approximately $18.5 million from the pockets of its owner, Rick Schaden. But despite the losses, Schaden, who founded the Quiznos and SmashBurger restaurant chains, said the event’s financials are headed in the right direction.

“This is not a two- or three-year business plan,” Schaden said shortly before the third running of the event. “It’s a similar type of business plan as with SmashBurger — it requires an entrepreneur willing to invest.”

The USA Pro Cycling Challenge “requires an entrepreneur willing to invest,” owner Rick Schaden says.
According to Schaden, the race’s annual operating budget is approximately $10 million. In 2011, its first year, the event faced a budget shortfall of $9.5 million, he said. In 2012 that number was $6 million, and this year the race lost $3 million.

The seven-day stage race across Colorado was scheduled to finish in Denver on Sunday. This year the event attracted a smattering of Tour de France-caliber cycling teams as well as the 2013 Tour champion, Chris Froome of Great Britain. It also had a domestic TV contract with NBC Sports Group and was shown across continental Europe on Eurosport.

Like the Amgen Tour of California, the USA Pro Cycling Challenge does not collect a rights fee from domestic TV or gate fees. Instead, the event relies on sponsorship sales, revenue from its foreign TV deal and payment from cities that host the start and finish of stages.
But the event faces steep overhead costs, including the transportation and housing of the professional teams, licensing fees to police and state officials, and advertising.

Shawn Hunter, the race’s CEO, said his goal is to break even by 2015, the race’s fifth year. Hunter said the sizable loss during the first year came from startup costs, as the race management purchased infrastructure such as semi-truck trailers, signage and movable grandstands.

“It takes private investment for an event like this to succeed,” Hunter said. “If we were publicly funded we wouldn’t have made it past the first year.”

But Hunter said the sale of the race’s founding level partnerships has helped reduce the shortfall. Currently the race has 14 founding partnerships valued in the mid- to high six figures, including with Coca-Cola, New Belgium Brewery and Nissan. The deals include spots on the domestic broadcast, the online tour tracker and signage along the course.

“It’s hard to get authentically integrated into other sports,” said J Schaffer, senior marketing manager at Nissan North America. “At a bike race our cars are part of the race.”

Hunter said the growth in revenue from the partnerships and revenue from foreign TV will likely reduce the race’s loss to below $2 million next year. He said the race also is speaking with four potential partners to take on a title role. Hunter did not give a value for the title sponsorship but said it would likely top $1 million.

“If we get a title sponsor for 2014, then we could end up beating our plan by one year,” he said. “When we secure a title, the race will enjoy a long life.”

Fred Dreier is a writer in Colorado.