Why the Edmonton Elks’ financial struggles led to a private owner

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Larry Thompson must be a stadium-half-full kind of guy.

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The first private owner of Edmonton’s Canadian Football League franchise took over the Elks in mid-August, when the on-field record was a dismal 2-7 and the off-field vibe was worse, with home crowds at cavernous Commonwealth Stadium averaging a meagre 18,072.

His team went on to finish the 2024 season at 7-11 and failed to make the playoffs for a fourth straight season. In related news, their final home game, an exciting but meaningless win over Toronto on Oct. 25, brought just 15,069 fans into the lower bowl, where capacity is about 33,000. Consequently, average attendance through nine home dates dropped to 20,499, the franchise’s lowest full-season average since 1971, when 19,925 fans regularly spun the stiles at old Clarke Stadium.

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Thompson became one of them in 1972, taking in games as an enthusiastic 12-year-old, and he maintained his love affair with the franchise for five decades.

Since capacity was just 20,667 back then, crowds of that size were not the drag on revenues they are today. So it is obvious Thompson led with his heart rather than his head for business when he took the one-time CFL flagship private after 75 years of community ownership.

He’s the former owner of Thompson Construction Group, a heavy civil contracting company that he built from the ground up and sold in 2023 to Hillcore Group. One public estimate suggested Thompson’s company was valued at about $600 million, but the sale price has not been reported.

‘Millions’ to be poured into franchise

Thompson would not divulge financial details of his football purchase when asked at a news conference on Aug. 15, but sources with knowledge of negotiations confirmed he took ownership of the mightily distressed asset for $1 and a commitment to cover all liabilities, present and future. They will be significant, as Thompson was told during the sale process.

“We presented a financial forecast that at the time I thought was reasonable,” said Rick LeLacheur, who was the Elks’ interim president and CEO until the hiring of his successor Chris Morris on Oct. 31.

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“You know you weren’t going to flip a switch and make this club profitable immediately. It’s going to be millions that he’s going to have to put into this club over the next at least three years, so there is a financial component and commitment.”

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Sources say Thompson was advised the Elks will likely lose between $3 million and $4 million annually for at least three more years, so he had to know he was locking horns with a dilemma, not herding a cash cow into his stable. That forecast fits with recent bottom-line performance, as the Elks lost $16.6 million over the past five years; another grim reality reflected in the purchase price.

And it could still get worse for Thompson before it gets better if arbiters side with a large group of former CFL players who claim to suffer from injuries related to concussions sustained prior to Oct. 31, 2023. Their grievances are due to be resolved through an arbitration process that does not cap claims for financial compensation.

Vancouver-based lawyer Robyn Wishart, who represents some of the complainants, said more than 200 players have filed grievances. She would not release their names, nor would she specify the amounts of compensation being sought. In theory, the Elks could be on the hook for one-ninth of whatever those players are awarded.

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Thompson all-in on Elks

Thompson declined a Postmedia request for an interview, but sources with knowledge of the negotiations said he was not fazed by the magnitude of the franchise’s financial challenges. One source said Thompson beat out the other short-listed suitors — there were at least three other groups — in part because he had the fattest wallet and said he wasn’t afraid to keep opening it.

Some of the other short-listers apparently capped their financial commitments at a certain level and said they would either try to sell the franchise to recoup some losses if that tolerance limit was reached, or hand it back to the CFL for another fire sale. Those admissions essentially eliminated them from contention, given Thompson’s commitment and passion for the franchise.

He was all-in from the opening whistle. Soon after taking the reins Thompson boosted the operations budget to invest in pre-game tailgate parties and kids area as well as post-game fireworks displays for the first three home games of his tenure.

“I think the fans had a great time and certainly winning some games helps, but it’s also an experience in the stadium,” said LeLacheur. “So he gave us some immediate resources to improve upon that, and we did. Now we’re making the plan for next year and will present that to him.”

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‘The revolving door is over’

The organization’s to-do list was and is extensive, and included the hiring of Morris to replace LeLacheur, who will continue to act as an advisor to Thompson.

Morris, a three-time Grey Cup winner when he was an EE offensive lineman, was more recently head coach of the University of Alberta Golden Bears. His hiring seemed a head-scratcher at first, given a dearth of business experience. However, he applied for the job at LeLacheur’s invitation, and so impressed Thompson and his wife Deb through an extensive, multi-interview process that they became convinced he was the man to lead their new venture and old love forward.

“He’s been more on the coaching side, but as I told him when I asked him if he was interested, he had to sell sponsorships, he had to sell the alumni on funding, he had to sell recruits on coming to the University of Alberta,” said LeLacheur. “So while he didn’t know it, maybe, he did a lot of sales work. And he’s got that passion and he’s got the leadership ability. So we’ve got a great team here.”

Morris’s tenure started with an impressive, passion-filled pledge to put a championship-calibre team on the field and halt the revolving door that spit out presidents, coaches, general managers and players at an alarming and debilitating rate.

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“Our culture here will be one that values everyone,” he said during an introductory news conference. “From the player on the field, to the persons in the front office, to the people selling our tickets, as an organization we will know what our jobs are and we will value each other. And this will not be a culture of disposable people where people come and go on a regular basis. We will build continuity here.

“The revolving door is over.”

Weeks later, Morris re-installed Ed Hervey as general manager and vice-president of football operations, who then hired former Stampeders assistant Mark Kilam as head coach.

Hervey began his second stint in the front office by declaring an end to the shenanigans that he said had turned the EE into “a laughing stock.”

They have been that, for sure.

Overcoming past missteps

The EE brass got it wrong when they hired Eric Tillman as their GM in 2010, when they fired Hervey as GM in 2017 and head coach Jason Maas in 2019, when they hired Victor Cui as president in 2022, and Chris Jones a second time as GM and head coach that same year, and when they smeared the legacy of long-time equipment manager Dwayne Mandrusiak in 2020 by cutting him loose after his 49th season.

There were too many missteps and unfulfilled promises to reconnect with the fan base and honour the history of a once-proud franchise. Morris said that behaviour is over, too.

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“We will build this thing around integrity. When you talk to the Edmonton Elks, you will know that when they say something, it will get done. And when it’s hard and when it’s tough and when things aren’t going well, you will be able to count on us to make sure that we did what we said we were going to do.”

In an obvious nod to improved community outreach, long-time Sherwood Park Rams head coach Jim Skitsko was hired in late November as the Elks ambassador for amateur football. His appointment seems a small step in the right direction, which in this case is back in time.

The EE model used to be the one to emulate, almost from the beginning in 1949. Business leaders believed in the franchise, and the community supported it.

There were particularly good times in the 1950s, with three Grey Cup wins, but there were problems to come. When the on-field product faltered in the early 1960s, the 28-member board was deemed too meddlesome, dysfunctional and unwieldy, and in 1964, the number of directors was pared to a more workable nine.

He’s making an investment in the franchise to get this club back to where he wants it to be, and that’s the winning ways on the field and off the field, and a leader in the CFL.

Rick LeLacheur, on Elks owner Larry Thompson

Edmonton lawyer Jack Agrios, just 25 then, was one of them.

The team was in trouble on and off the field, and needed revenue-generating ideas, so they stole, er, borrowed one. The $100-a-plate dinner, a lucrative fundraiser that did wonders for the Saskatchewan Roughriders, was key to keeping the green and gold in the black for long stretches of time.

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“The first year, we sold over 500 tickets. About three years later, we sold over 700 tickets,” said Agrios, whose last year on the board was 1971.

“The support and the spirit was amazing. You’ve got to remember, we were the only game in town at that time. That dinner was incredibly important to the financial health of the organization. Without that event, we would not have survived. The money that used to be raised, together with the Grey Cup profits over the years, was immensely important to the success of this club.”

‘We couldn’t sustain the club financially’

The franchise got back on its feet, and the Grey Cup wins kept coming, with five in a row in the late 1970s and early 1980s; the nine-member board adopted and maintained a hands-off approach to day-to-day operations; and the team was profitable as often as it was in the red. According to published accounts, through its 75-year run as a community-owned franchise the EE reported profits in 39 years and losses in 36.

Using Consumer Price Index conversions to 2024 dollars, the franchise was down a combined $2.2 million through 2023, but that doesn’t really paint the picture properly. After losing $16.6 million from 2019 through 2023, the organization was essentially out of money and time. It needed a massive injection of cash.

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“Looking at the financials, you just knew that we couldn’t sustain the club financially for a long period of time,” said LeLacheur. “So to try to get that back in revenues quickly we knew was going to be a challenge, and as we forecast what the balance of 2023 was going to be and 24, it was pretty factual we were going to run out of money at some point.

“Capital was required and then you’re looking at the choices.”

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Selling to a private owner was just one of the choices. The Elks’ board struck a five-person special committee to review the ownership structure, and considered borrowing their way out of immediate trouble.

Former board member Lindsay Dodd said directors also examined 100 community-owned sports franchises around the world, including the Green Bay Packers of the National Football League, and many European soccer teams, all in search of solutions to their money problem.

“We looked at everybody to say, is there a business model that has a good guaranteed outcome? Saskatchewan did try and raise some money through their shareholders. It was not successful. They were not able to raise the money they needed. So it can be difficult,” said Dodd.

“Green Bay did better because they were raising money for a stadium (renovation), and it’s easier to raise money for things than to keep a club viable, per se.”

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Former board chair Bruce Bentley, who chaired the special committee, said the Saskatchewan share offering idea didn’t hold enough promise for Edmonton’s particular needs.

“It didn’t really seem to have the ability to generate a ton of money. It wasn’t going to be sufficient to hold the team over.”

The inevitable sale

The Elks’ monthly burn rate was too high, the annual revenue generation far too low. It was time for the so-called Part 9 non-profit company to part with its community-owned history.

“As the committee got to work and looked at it, it was pretty apparent that the decision had to be we’ve got to sell it,” said LeLacheur. “It was a big step, but the way it was structured, no one was going to put in capital without some sort of ownership, and it just made sense to look for a buyer.”

That decision was announced in November of 2023, a few months after LeLacheur came out of retirement in mid-August of that year to shepherd the organization into its next phase of existence. Cui had departed a week earlier, allegedly by mutual agreement with the club.

“I’ll tell you what, if Rick hadn’t come back, I fear they would have gone,” said Agrios. “He was the perfect steward for the last steps. Outstanding.”

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LeLacheur came in to shore up the confidence of a front office staff that did not enjoy much success under Cui’s frenetic brand of leadership. At the same time, the team was a disaster on the field. It wasn’t a simple mandate.

“I vividly remember the first day I came in here. On the news that night was whatever the number was, 2,000 and something days since the Elks won a home game,” said LeLacheur. “Pretty tough to sell against that. The first game we won against Ottawa, 80 per cent of our office staff had never seen the club win at home.”

Record of futility

It was actually 1,415 days between home wins, but it probably felt like 2,000.

That kind of thing happens when the team is setting a North American pro-sports record for futility. Edmonton lost 22 consecutive games at Commonwealth Stadium before finally getting past the Redblacks 30-20 on Aug. 27, 2023. The Elks finished the year at 4-14 and missed the playoffs again. When the team started 0-5 this year, LeLacheur had little choice but to jettison Jones.

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So the body count grew. Between 2016 and this fall, the organization went through four presidents, four GMs, five head coaches and too many players to count or name. That’s the revolving door Morris mentioned.

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LeLacheur is essentially on his way out now, too, but it’s a more measured departure.

During his two stints as president and CEO, he’s been the mostly steady hand on the wheel, and as the well-connected keeper of institutional knowledge, he will advise Thompson and mentor Morris going forward.

But it will be up to Thompson, Morris and Hervey to rebuild an organization that used to get it right more often than wrong, a franchise that knew who to hire and how to treat them.

“He’s making an investment in the franchise to get this club back to where he wants it to be, and that’s the winning ways on the field and off the field, and a leader in the CFL,” LeLacheur said of Thompson.

Profitable years behind them

Edmonton hasn’t been able to claim that elevated status for ages. Average attendance in 1982, at the tail end of the five-in-a-row Grey Cup spurt, was a whopping 57,900. It declined to 40,000 by 1986, dropped below 35,000 in 2011, fell under 30,000 in 2019 and has gone sub-25,000 for three straight seasons. The corresponding financial toll has been significant.

The last great run along the bottom line occurred from 2011 to 2018, when Len Rhodes was president. The team made money every single season, as much as $3.59 million in 2014, and as little as $207,060 in 2012. Rhodes declined an interview request from Postmedia, but issued a statement by text message.

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“I don’t feel it is my place to comment on the EE anymore now that I have left. I will say that I have great pride in having the best financial success during my seven-plus years with them. We made record revenue based on ticket sales, biggest corporate partnerships, food and beverage, merchandise and of course radio and TV broadcast rights.

“As well, when we hosted the sold-out Grey Cup game and festival in 2018, it was an extraordinary economic and financial success, creating an estimated $90 million in economic impact for the city; something I was very happy about, given I was co-chair of that event while also chairing the Edmonton Chamber of Commerce that year. I am proud that my final event was sold out.”

Brad Sparrow was board chair in 2017 and 2018, at the tail end of Rhodes’ tenure, and he has mostly good memories of his stint at the helm, which included six prior years as a director.

“My term financially was good. The club was very disciplined and had good marketing, good attendance and a growing sort of league sponsorship presence. So the entire time I was around, pre-COVID I guess, everything was good. We made money pretty much every year, sort of $1 million to $3 million, and we invested it in the stadium and all kinds of things.”

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They contributed to the addition of a bigger video board, a reliable Wi-Fi network, upgraded sound system, LED sign boards and training equipment for the players and coaches. The good times were rolling, and nobody was talking about private ownership, at least not at the board level.

“Our trust fund was building up into the mid-teens,” said Sparrow. “So we had $15 million in the bank, growing conservatively with professional investment advice.

“We were healthy and the problem children were everywhere else in the country — Toronto, Montreal, Vancouver. There was a lot of time on the CFL Board of Governors spent talking about those franchises. Not our own. We were stable.

“And the reason a non-profit like Edmonton does well is because we’re all disciplined business professionals. And it’s not our money. So we have to balance the books. We have to live within our means because there’s no big credit card. There’s no billionaire owner.”

Their revenue emanated from three main sources, as Sparrow explained.

“You have your season seats and game-day seats as one pillar; another is your local sponsorship and local marketing, local advertising, all your boards, all your sponsorship programs; and the third is the league revenue, led by TSN.”

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The television network pays an estimated $50 million per season for the exclusive Canadian broadcast rights to all regular season and playoff games and the Grey Cup. It is enough to cover most of each team’s player salary cap.

Financial headwinds and COVID catastrophe

When all three pillars deliver, the bottom line is healthy. But in 2018, the team then known as the Eskimos ran into serious headwinds.

“We started having issues with the name in 2018,” said Sparrow. “Len Rhodes and I had to work through those things. We did lots of consulting with people in the North and decided, if you recall, we weren’t changing our name.”

That stance could not and did not last, given that the name was deemed offensive to an identifiable group of people. The board’s resolve eventually crumbled in the face of pressure from sponsors who would no longer risk taint by association.

“I think when push came to shove for sponsors, certain crowds wanted the name changed — and that’s also when you started having a poor team on the field — and sponsors were starting to say, ‘Well, geez, I’m not sure we can sponsor if you’re going to keep this name.’ So 2019 was sort of the beginning of some lower revenues, but you also had a poor performing team,” said Sparrow.

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“And then COVID hit.”

Like a ton of bricks. The league shut down entirely in 2020, each franchise operated on bare-bones staffing, and the Elks still lost $7.2 million because revenues went to near zero.

“Our responsibility through that is, is there a path to viability, especially with a black-swan type event like COVID, where your revenue goes to zero,” said former board chair Lindsay Dodd.

“And, you know, board members and management are working to figure out, OK, if revenue is going to be at zero, what are costs going to be? And, you know, how can we reduce those costs without impacting the long-term viability of the organization?

“If you just fired everybody and shut it down, could you bring it back up as a viable organization? There were no easy answers. That’s the discussion around the table at that point. Is the organization viable? But even bigger is, is the league viable?”

CFL commissioner Randy Ambrosie went hat-in-hand to a Parliamentary committee in early 2020, admitting the league routinely lost $10 million to $20 million per year, and needed financial help to emerge intact from the pandemic. He did not get the answer or the money he wanted, and the league scrapped the 2020 season. The eventual sale of the Elks to Thompson has some of its roots in that worldwide health crisis.

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“You see the operating results year over year, and we just know that at some point, unless you can raise $10 or $20 million, you’re going to have to figure out some way to get capital into the company,” said Dodd. “When you’re thinking about the long-term viability of a club, private ownership generally is the safest bet because those owners are committed generally to funding the capital.

“The billionaire with big pockets, which is about a third of the ownership in the CFL, they generally are pretty safe bets until they tire of writing cheques. The corporate ownership, you can do well with them because they generally have pretty deep pockets. But again, they’ve got a commitment to shareholders not to lose money year over year over year. So, you’ve got to make sure you’ve got a profitable club. And then as long as the club’s profitable, community ownership’s a great way to go.

“But when times get tough, it can be a tough thing to sustain. And times got tough because of COVID. And then correspondingly, the attendance just kept dropping and dropping and dropping.”

Challenge of attracting new fans; alienating old ones

Their season ticket base was aging out, they weren’t attracting young fans or new Canadians. Dodd thinks the move to one-year player contracts is a contributing factor because it’s too hard for fans to identify with an ever-changing roster.

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The league got back on the field in 2021, though the season was shortened to 14 games. In the middle of that chaos, Edmonton finally made the move to rebrand. It was a costly process and the team lost $1.1 million that year. They also shed more fans, some angered by the perceived wokeness of the decision to rebrand, others because the team dragged its feet for so long before making the change.

The lingering effects of COVID also kept some people at bay. Increased competition for the entertainment dollar was a contributing factor, poor team performance was another, and failure to connect with a new generation of fans and loss of connection with their core also hurt.

After announcing a thorough house-cleaning that kicked former president Chris Presson, head coach Jaime Elizondo and GM Brock Sunderland to the curb, then-board chair Ian Murray unintentionally and infamously riled up the fan base with an ill-considered broadside.

“We’re not engaging with the multicultural community. Our demographics are brutal — they’re disproportionately old, male and white, which isn’t representative of our community,” he said.

Old, white males have money to spend and some of them clearly decided to spend it elsewhere from that point onward. The team could ill afford to alienate anyone, let alone their core fans. But that was just one factor among many that hastened the move to private ownership.

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“If COVID wouldn’t have happened and the club would have been a bit better and we managed to keep north of 20,000 people coming into the stands every game, I don’t think we’d be here,” Sparrow said.

And where are they? In better hands, one would think.

Morris and Hervey will report to Thompson, not a nine-member board, and decision-making should be easier. And if Thompson is indeed prepared to keep writing cheques, they should be fine at least in the short term. He could have used a financial leg up from the CFL’s Grey Cup selection committee, but they preferred Calgary’s bid to Edmonton’s and awarded the 2026 tilt to Cowtown.

Upgrading Commonwealth, managing costs

The Elks might have better luck with the City of Edmonton, as they discuss potential renovations to Commonwealth Stadium.

With a capacity of 58,000, it is decidedly too large for the current level of CFL appeal. The lower bowl holds 33,000, which still gives the Elks the third-highest capacity in the league, and they only came close to filling it once this season.

LeLacheur said the city is “committed to help us wherever they can and they’re committed to some upgrades, trying to get things done where it becomes more fan-friendly and we’re just going to have to see what that is in the next few years.”

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The current lease deal was ultra-friendly as the city waived the license fee through 2023 and 2024. But the Elks are on the hook for $200,000 in 2025 and 2.5 per cent more in each of 2026 and 2027.

“That’s a reasonable deal,” said LeLacheur. “We still have to pay some money, of course. It would be nice if it was free, but it costs a lot to operate this stadium.”

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Costs are only half of the equation, and they aren’t about to go down. The Elks will have to work harder and perhaps smarter on the revenue side. Recent financial statements documented a steady reduction in operating revenue, from a peak of $25.1 million in 2018, down to $23.5 million in 2019, just $3.8 million in 2020 because the season was cancelled, $20.8 million in 2021, $22 million in 2022 and $21 million in 2023.

Again, all those signs were pointing the board toward private ownership.

“The difference between being private or being non-profit isn’t that much if it’s going well,” said Sparrow. “If it’s going poorly, then you’ve got a bigger question.”

When it goes as poorly as it has for half a dozen years, the team runs out of cash, as hard as that might have been to believe way back in the day when the then-Eskimos’ reserve fund was the envy of the CFL. The fire-sale purchase and subsequent sale of the Edmonton Trappers baseball franchise, another distressed asset, bulked up that fund, and a couple of successful stints as Grey Cup host padded it out even more.

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The Eskimos bought the Trappers from Alberta Treasury Branches out of receivership for CAD $8 million in 1999. They borrowed a good chunk of money, took some out of their own reserve fund, and tapped into their extensive network of well-heeled friends, getting $100,000 donations from the likes of Bruce Saville, the late Jim Hole and former players Dave Fennell and Warren Moon.

The club sold off the Trappers a few years later for a whopping US $10.4 million, and the bottom line was never healthier. The board members squirrelled away some of the profits, spread a fair bit around the local football community, and with the fund acting as a cushion, the organization persevered through some tough times until there were simply too many to stave off an asset sale. So began a new era of private ownership with Thompson at the helm.

“I’m not a person that gets caught up in the emotion of it,” said Bentley. “Yes, on some level, of course it would have been wonderful if the team could have lived forever as a non-profit, but it was pretty clear that it wasn’t going to. So setting that aside, you’ve got to do the best you can.

“And I think the board worked incredibly hard and the committee worked incredibly hard and Rick and the people in the organization, gosh, they were trying to run a football team with all this going on in the background. The ability to keep people motivated and keep going forward, that was a real skill, and I give Rick a ton of credit for pulling that off,” Bentley continued.

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“And on top of it all, Larry is the right guy. Setting aside the fact that he has the resources and that he’s a fan and all that stuff, all of which is super important, he is really just a genuine human being. And if we could move it from quasi-community ownership to the next stage in the hands of somebody like him and his family, I think it’s by far and away the best result.”

dbarnes@postmedia.com

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