The National Hockey League (NHL) faces the same struggles as most franchise systems. There are many issues when looking at the NHL from the business perspective of running a franchise system. Not unlike other systems, the NHL is constantly battling to keep all of its locations, or teams, or in other words stores, profitable.
Reports suggest that only twelve teams in the NHL are actually making money. The NHL has had a hard time in the sale of franchises evidenced by their inability to sell the Phoenix Coyotes, to find a local buyer for the Atlanta Thrasher’s and countless other reported teams currently on the market without buyers.
The NHL has established model franchises in cities such as Toronto, Detroit and New York. Those franchises are among the eight teams that have been reported to be creating the majority of profit. The NHL has proven success in those markets, however there are no more markets like that left for the NHL.
So the answer in the mid nineties was to create a new model franchise that included large state of the art arenas with lots of luxury suites and large markets where TV revenue could be had. The NHL strongly believed in their model and were out promoting it in an expansion through the United States.
This is typical of how franchise systems expand. The hype surrounding the expansion led to new owners in cities throughout the USA. Hockey hotbeds that could not cut it financially in Winnipeg, Manitoba (Winnipeg Jets) and Quebec City (Quebec Nordiques) with their small markets, nonconforming arenas and weak dollar, relocated as they didn’t belong in the new NHL. That model failed and now some 17 years later the NHL is still dealing with the problems; this is typical of how franchise systems stall.
With a disproportionate share of bad locations, an ability to deal with those troubled franchises is key to long-term viability. The process in the NHL is, on a case by case basis, to fight to save each team. This has led the NHL to make decisions which lead to under-capitalized, undesirable owners, the same problems faced by most franchisors in the hopes that the situation works out.
Miraculously, during this time, Mr. Bettman, commissioner of the league, has guided the organization to a better place. Getting the top-tier of the NHL teams to agree to profit-sharing and having the players accept a salary cap all while dramatically increasing league revenue. The NHL seems to have successfully created two working models: that of a large market team and now with the re-ignition of the Winnipeg Jets a small market model. In spite of these achievements the NHL is still in troubled waters as the salary cap and revenue sharing are imperfect systems not solving the teams financial woes.
Fixing the franchise system requires bringing more teams to profitability and moving the teams that are still not successful to other markets that mirror their model locations, or closing them altogether. The NHL should release a business plan that outlines a clear plan of action, addressing what to do with the existing troubles, determining what it takes to move away from fighting fires to growing the business. Rallying public support, Commissioner Bettman should work with the owners and players during the current collective bargaining agreement (CBA), to achieve those goals for the benefit of all involved.