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Volume Twenty-Eight Number One
                                                                   Fall 2004




Earned Income
In the new economic climate, museums are taking a fresh look at potential sources of earned income. In this issue
of NemaNews, we bring together articles on several of the most popular vehicles for earned income: facility
rentals, food services, and museum stores. In addition, we address some of the topics that are important to any
earned income program, including marketing and Unrelated Business Income Taxation.

                                  The Museum Meets the In-Laws:
                     Developing a Successful Facility Rental Program
A meeting space that sits unused after hours, a desire to • What contracts and other documentation, including
increase earned income and expand audiences…these               insurance and permits, will be required?
circumstances prompt many museums to initiate or              • How will the museum facility support the rental pro-
expand a facility rental program. Rentals can provide an        gram (with kitchen space, tables, AV equipment, park-
important stream of earned income and offer a museum            ing spaces, etc.)?
many ancillary benefits, including the opportunity to
attract new audiences and increase its involvement in
                                                              • How will the rental program affect other areas of
the local community.                                            museum operations?
                                                              • How much will it cost the museum to make the facility
Woe to the museum that thinks this is “easy money,”
                                                                available for the event?
however! As an extension of the museum’s public
dimension, and for their potential impact on other pro-       To explore these issues, NEMA interviewed function
grams and services, facility rentals require the same         managers at seven museums of art, history and science—
degree of forethought and care given to other museum          museums of different sizes, located in different settings.
programs.                                                                                                continued on page 4
All the components must first be in place to ensure a
successful event. While a museum may initially think
only in terms of the space it has available and the                     NEMA Annual Conference
potential income, there is, in fact, a wide range of issues
to consider. By the first strains of the “Macarena,” the
museum will have made, by deliberation or default, the
                                                                The Museum, the Baby & the Bathwater
following decisions:                                                      Authenticity in the Information Age
• What spaces will be available for rent? During what
   hours, and at what charge?
• What types of events will the museum host?
• What activities will be permitted (alcoholic bever-                            Burlington, Vermont
   ages, dancing, etc.) and under what conditions?
• What relationship will the museum have with caterers                         October 27-29, 2004
   and other vendors?
                                                                       For program and registration information see page 13.
• Who will staff the events on behalf of the museum?
                                                       1                                           NemaNews/Fall 2004
Developing a Successful Facility Rental Program continued from page 1
Instead of polling them on how they run      Q. 2. What 2 or 3 innovations in mu-           museum. The facility fee covers the cost
their facility rental programs, we asked     seum staffing have made the rental of          of a security guard, so that the only
questions that get at the heart of why       your facility a success? (This could           museum staff who are directly involved
they do what they do. There is no “one       include the number of staff on duty,           in the rental are the receptionist who
                                             the power they have to make deci-
size fits all” set of policies and proce-                                                   schedules the function and the mainte-
                                             sions, or their scheduling.)
dures for facility rentals. But by gaining   The museums we contacted offer nu-             nance staff.
insight into the decision-making pro-        merous models of staffing events, yet          Q. 3. What is the most important thing
cess at these seven museums, other           all have paid attention to three key as-       you do to prepare clients, their guests,
museums may find it easier to develop        pects of staffing that promote a suc-          or vendors for a successful event?
or expand their own successful rental        cessful function:                              “Communication” is the obvious an-
programs.                                                                                   swer. A museum should have a set of
                                             1. Maintaining good communication on-
Q.1. What persons or policies guide             site between staff, clients and vendors     policies for facility rentals that are clearly
your museum in deciding which                2. Staff training                              written and addressed to both the client
groups or events the museum will             3. Empowering staff to make decisions          and the vendors, and the museum should
host?                                           on-site                                     obtain a signed contract from the client
In some museums, the board of direc-                                                        stating that s/he agrees to abide by
tors has set guidelines concerning what      At the Portland Museum of Art, which
                                                                                            these policies. (The NEMA office has
types of events the museum will host.        averages one rental per week, the func-
                                                                                            sample policies and agreements that
For other museums, city and state ordi-      tion manager attends every event and
                                                                                            are available via its Policy Loan Ser-
nances dictate the use of their facility.    serves as the liaison between vendors
                                                                                            vice). These policies and agreements
Other institutions have no set policy;       and museum staff, including security
                                                                                            should be reviewed and amended peri-
instead, the director considers rental       and maintenance. At Strawbery Banke,
                                                                                            odically.
requests on a case-by-case basis.            the function manager also attends ev-
                                             ery event; additional staff are drawn          As Amy Sherwood, Events and Facility
Whether or not there is an established                                                      Rentals Manager of Strawbery Banke
policy, function managers rely on their      from other museum departments, and
                                             everyone is asked to participate at some       noted, however, “most issues arise when
own experience with different types of                                                      the parties aren’t ‘up front’ about their
clients to guide them in accepting rent-     point during the year. This has the ad-
                                             vantage of enlisting the support of the        expectations.” In this area, documents
als. Having a policy in place shouldn’t                                                     are no substitute for personal contact.
prevent a museum from saying “no” to         entire museum community in the facility
                                             rental program, but it also requires re-       The function manager at Blithewold
a particular request.                                                                       Mansion, Gardens, and Arboretum,
                                             training staff in event procedures and
The Worcester Art Museum stopped             can place some stress on individual            which hosts a large number of wed-
hosting private parties for young people     departments.                                   dings, spends a great deal of time work-
when they had more than one bad expe-                                                       ing with clients face-to-face and over
rience and museum staff realized that        At the Museum of Science, Boston, a
                                                                                            the phone. (One function manager esti-
they were unable to gain the informa-        function coordinator provides supervi-
                                                                                            mated that each 5-hour wedding takes a
tion they needed in advance to ensure        sion for each event. Although these
                                                                                            20-hour investment of time beforehand,
the safety of the facility. The museum’s     individuals work in the museum in vari-
                                                                                            and some brides visit a site two or three
education department runs children’s         ous capacities, they maintain a high
                                                                                            times before their wedding day.) Meet-
birthday parties in a separate space         level of training in event policies and fire
                                                                                            ings with museum staff often include
where clean-up is easier to manage.          safety, and they supervise functions on
                                                                                            both the client and the vendors. As Sara
                                             a regular basis.
Museums that are initiating a facility                                                      Murphy, Manager of Marketing and
rental program and have not previously       In contrast to these models, the Higgins       Special Events at the Higgins Armory
had a high demand for their space can        Armory Museum maintains a corps of             Museum noted, “a good caterer is worth
do targeted marketing to the groups          20 part-time staff who work only at func-      its weight in gold!”
they think they would like to host. At       tions. Each week they receive, via email,
                                                                                            Several function managers emphasized
the Wenham Museum, Director Emily            an updated calendar of events that con-
                                                                                            the importance of creating a floorplan of
Stearns used this approach to enter the      tains their assignments. They also re-
                                                                                            each event and doing a walk-through of
rental market in a measured way. She         ceive a rental staff contact list, to locate
                                                                                            the function space. As Janet Rosetti,
distilled the information she received       a replacement if they are unavailable for
                                                                                            Director of Special Events and Facilities
from her staff concerning various types      a particular date. All of these staff mem-
                                                                                            Rentals at the Worcester Art Museum
of groups and steadily formalized a          bers have been trained to work at func-
                                                                                            observed, “the floorplan gives the imagi-
policy that she brought to the board of      tions; three or four of them have been
                                                                                            nation a home.” Guests can visualize
directors for approval.                      trained as managers. The Wenham
                                                                                            the set-up more easily, and are prompted
                                             Museum provides function space that
                                                                                            to ask questions such as, “Why is the
                                             clients can access separately from the


NemaNews/Fall 2004                                                4
buffet table located here?” Having a          their rental program, but there is no
visual aid makes it easier to say “no” to     single type of event that they all think it
some requests, because clients can see        is important to pursue. Museums that                           Services
that the museum is not making an arbi-        already host a large number of wed-                         & Publications
trary decision.                               dings see room for growth in corporate
                                              rentals, as long as there is a concentra-         New & Recent Additions
Museum directors and function manag-
ers should follow their instincts in agree-   tion of businesses in their area. Since       2004 Product & Service
ing to work with potential clients. One       most weddings take place on weekends,         Directory
function manager, early in her career,        corporate business allows museums to          The P&S Directory specializes in compa-
had a strong sense that a particular          rent their facilities during the week.        nies and individuals that are located or mos
bridegroom was not going to respect           Other museums that typically provide          often work in New England. The P&S Di-
                                                                                            rectory offers help with a wide range of
the museum site. Her instincts were           groups with access to the their galleries     projects such as the search for a new
confirmed when he became heavily in-          and programs, such as the Museum of           director, audio tours, storage materials or
toxicated before the reception even be-       Science, see the potential to attract more    systems, capital campaigns, interpretation
gan and caused such a disruption that         private social events. These rentals are      plans, etc. 35 pages.
the police were required.                     usually organized around the use of the       $7.50 NEMA Members, $10 non-mem-
                                                                                            bers.
                                              function space alone.
Q. 4. What aspect of renting a facility
is the most time consuming?                   As you can see, there are tremendous          The Employer's Handbook: A Guide
                                              differences in the way museums con-           to Personnel Practices & Policies
This depends on the size of the museum
                                                                                            for Museums
and the type of business it attracts.         duct facility rentals. The “moral” of the
                                                                                            The revised June 2004 Handbook
Weddings and other social functions           story is that the museum is in the driver’s   includes expanded sections on personnel
such as showers and retirement parties,       seat in developing a rental program. For      policies, orientation and evaluation,
which have strong emotional signifi-          one thing, every museum is unique, with       employee benefits, and discipline and
cance, require function managers to           its own capabilities to host an event. No     termination. Information on state and
                                              museum should feel pressured to host a        Federal employment laws has been
spend a great deal of time working with
                                                                                            updated. HR professionals from throughout
clients prior to the event. The amount of     type of event that they do not believe        New England have offered their expertise
experience that the clients have with         they can carry out successfully. The          to ensure its accuracy. A complimentary
event planning also affects the amount        satisfaction and safety of the guests—        copy was mailed to all Institutional
of time function managers need to spend       not to mention the museum’s reputation        Members. 90 pages.
with them.                                    and resources—are on the line.                $15 NEMA Members, $25 non-members.

Function staff should never underesti-        Properly structured, a facility rental pro-   Loan Policy Service
mate the importance of internal museum        gram can be a tremendous asset to a           NEMA has broadened and expanded its
communication, or the amount of time          museum. It can provide much needed            Loan Resources. This service gives
required to ensure that every depart-         income; create new relationships with         Institutional Members access to more than
                                              potential visitors, donors, and volun-        16 categories of policies and reports
ment that will be affected by an event                                                      created by museums of all sizes and
stays up-to-date with any changes that        teers; promote greater staff involvement      disciplines. The complete list is available
occur. As Janet Rosetti remarked, “It         in the public dimension of the museum;        on the NEMA website. If you would like
makes a big difference when facilities        even encourage a museum to strengthen         advice on which ones to choose, call the
staff demonstrate to other departments        other areas of its operation, from the        NEMA office for personal assistance.
that they respect their place and author-     website to visitor safety. As museums         Academic Membership Programs
ity. I try to make sure that other depart-    continue to gain experience in this area      NEMA has created two new membership
ments know what I know as soon as I           and share their knowledge and sugges-         packages for universities and colleges
have new information.”                        tions with one another, they will be able     with programs that promote the education
                                              to expand their programs with more and        of future museum professionals. Please
Another time-consuming aspect of fa-                                                        contact Jane Coughlin, Operations Man-
cility rentals is often answering requests    more confidence and greater success.
                                                                                            ager & Membership Coordinator, for details
for information from people who may be        Many thanks to the museum profession-         at 781-641-0013.
interested in the site. Many museums          als who graciously gave their time to be      New Membership Category
make their rental program brochures           interviewed for this article: Dana Devoe,     NEMA has created a new Corporate Mem-
available in an .html or .pdf version; this   Blithewold Mansion, Gardens, and Ar-          bership category for Independent Museum
saves money on printing and postage.          boretum; Jen Harmon, Portland Mu-             Professionals, with Corporate benefits tai-
                                              seum of Art; Sara Murphy, Higgins Ar-         lored to meet the needs of these col-
Q. 5. What do you consider to be the                                                        leagues, including the opportunity to ap-
greatest area of potential growth in          mory Museum; Janet Rosetti, Worcester         pear in the On-Line Product & Service
your facility rental program?                 Art Museum; Amy Sherwood, Strawbery           Directory. Please visit our website for
All of the museums we interviewed had         Banke Museum; Emily Stearns, Wenham           further details.
considered how to expand the range of         Museum; and Sheryl White-Vincent,
                                              Museum of Science, Boston.

                                                                  5                                       NemaNews/Fall 2004
The Museum and the Caterer: A Value-Added Relationship
                                                         By Jim Lawler
A generation ago, most museums would         borne by the museum. In particular,           An effective visitor food service can
have considered it somewhat undigni-         smaller properties can outsource their        also bring significant ancillary benefits.
fied to aggressively pursue event rental     entire marketing effort, subject to ap-       Food service can increase the length of
and catering business. Today, even fa-       propriate contractual guarantees. In          stay, which will enhance per capita
cilities with modest attendance have         most cases, a caterer must agree to a         spending in the museum shop and will
discovered that these activities can of-     minimum site-specific marketing com-          be a factor in promoting membership.
fer a significant annual income stream,      mitment as part of its contractual obliga-    Restaurant discounts or member reser-
regardless of the economic climate.          tions.                                        vation policies can be part of the added
Many museums with an annual atten-           The issue always arises as to whether         value package for donors. With the ex-
dance of fewer than 100,000 realize six-     an exclusive caterer can provide the          ception of the highest attendance facili-
figure income. The two major income          creativity and the range of price points      ties, visitor food service, whether it be
streams are rental fees and catering com-    to satisfy a diverse market. In part, this    a snack bar, a café, or a table service
missions. Often, other components of         is a contractual question, dependent          restaurant is a loss leader economically,
events, such as rented equipment, mu-        upon the museum’s assessment of the           although a superior café or restaurant
sic, and flowers are also commissionable.    resources within its marketplace. There       may prove to be an important adjunct to
In the past, many museums allowed a          are many off-premises caterers that can       the museum’s development activities.
wide variety of caterers to use their        operate at a broad variety of price points,   Typically, visitor food service is a loss
facilities because they believed that this   provided that the contract with the in-       leader from the caterer’s perspective as
policy removed a deterrent to rentals for    stitution allows them to do so and that       well, although he or she may receive
those clients with a marked caterer pref-    they receive clear direction from the         business from other events that are held
erence. In practice, however, clients in     client.                                       after hours, elsewhere on the museum
search of alternate venues clearly select                                                  grounds, or in conjunction with local
the venue first and the caterer second.                                                    events. There are institutions that pro-
                                               Visitor food service is an
Most museums believe that working                                                          vide food and beverage service for
                                               equally vital part of the
with an exclusive caterer or maintaining                                                   themed candlelight dinners; car, boat,
                                               equation... Any museum
a very short list of approved caterers                                                     or antique shows; and concession
                                               with a length of stay of an
leads to the most effective stewardship                                                    stands at community festivals. Whether
                                               hour or more will find that
of museum property. They also believe                                                      or not these events are commissionable,
                                               visitors demand some type
that these relationships offer an incen-                                                   museums may also benefit, since par-
                                               of refreshment.
tive to caterers to share revenue.                                                         ticipation in these events often repre-
Museum policies concerning eligibility                                                     sents outreach to a diverse community.
and rental fees will often determine the     In-house Catering                             Most museums are considering the best
magnitude of the catering opportunity.       Internal catering offers museums major        ways to utilize the real estate value of
Life cycle events, particularly weddings,    benefits. It must be clearly understood       their space when the exhibits are closed
offer the highest sales volume to cater-     that the client institution is the most       to the public. Implementation of an ag-
ers, but by their nature they are high       favored nation. Our firm generally ne-        gressive rental program is a particularly
maintenance business. Other important        gotiates a combination of discounts for       effective strategy. We have worked with
categories in many markets include ga-       smaller events and, for galas and larger      a variety of clients to develop yield
las for other not-for-profits and con-       events, sets the price at cost plus a small   management programs similar to those
vention or meeting business. For a mu-       percentage. The annual savings can be         used by the on-premise catering and
seum, the economic impact may be sig-        considerable.                                 airline industries.
nificant, even as the events it chooses      Visitor food service is an equally vital      In summation, these revenue streams
to host influence its community pres-        part of the equation, although it does        are “low hanging fruit” in comparison to
ence.                                        not drive the income stream. Any mu-          multi-year development efforts. The
Commissions ranging from 10% to as           seum with a length of stay of an hour or      impact of a well-conceived event rental
high as 25% (depending upon operat-          more will find that visitors demand some      and catering program can be an income
ing circumstances and the sales base to      type of refreshment. With a two-hour          stream that is self-renewing with little
which the percentage is applied) often       length of stay, some food service be-         respect to the business cycle.
equal or exceed rental revenues. In ad-      comes essential to prolong the visitor
                                             experience. In fact, tour operators will      Jim Lawler is president of JGL Management
dition, an exclusive caterer frequently
                                             often consider restaurant, café, or box       Services—food and beverage consultants
assumes the cost of marketing the rental                                                   with specialization in the arts. He can be
facility, covering both production and       lunch programs as important elements
                                                                                           reached at 609-683-1227 or by email at
media charges that otherwise would be        in the development of their packages.         jglmgtserv@msn.com.


NemaNews/Fall 2004                                               6
Vending Machines Provide Food, Beverages and Possibly Profits
                                                      By Arthur M. Manask
Vending machines are a cost-effective—       and other venues that offer high visibil-     machines with your own staff, collect-
and possibly income-producing—way for        ity for their product line.                   ing the sales and using the sales to pay
many museums to provide refreshments         Sometimes local bottlers will rent cold       the machine rent. Not counting the cost
to visitors. This article addresses how to   beverage machines to an institution and       of labor, storage and inventory, this is
obtain and maintain this equipment for the   sell the institution the product (sodas,      probably the best first option to con-
institution’s greatest benefit.              bottled water, juices, etc.). The institu-    sider. This option is generally not avail-
There are two primary sources for vend-      tion stocks the machines and collects         able for snack (candy, chips, danish,
ing machines: local soda bottlers (Coca-     the revenue, profiting when money is          cookies, etc.) machines.
Cola and Pepsi Cola) for cold beverage       left after paying for the machine rental      There are other ways to maximize the
machines, and route vending machine          and beverages.                                return on vending machines, by making
companies that offer a variety of ma-        Route vending machine companies nor-          sure that they are placed in popular
chines with different beverages and          mally provide museums with the equip-         locations and attractively maintained.
food. The local bottlers will usually pro-   ment and always provide the product           In particular, if you are a small institu-
vide, fill and maintain the cold beverage    and related services, as well as collect      tion and vending machines represent
machines at no cost to the institution.      the revenue. Depending on the total           your primary visitor food service, put
They also collect the revenue and, de-       revenue versus the number of machines,        them in highly visible places—high traf-
pending on the total sales volume gen-       the company may pay a percentage of           fic paths, visitor entrances and exits,
erated, pay a percentage of the revenue      the revenue to the institution.               staff/volunteer areas and outdoor tour-
to the institution.                                                                        ing spaces are ideal locations.
                                             Commissions from either bottlers or
Local bottlers may be interested in an       route vending machine companies run           The machines certainly don’t have to
exclusive rights agreement if your insti-    at about 10% of revenue. However, this        look ugly. Some vending machine pro-
tution has a high profile in the commu-      percentage may be less, or zero, de-          viders allow exteriors to be customized
nity, hosts a large number of special        pending on the revenue generated in           (with color and even personalization) to
events or facility rentals, and/or wel-      comparison to the company’s capital           fit in with your interior or exterior décor.
comes many children as visitors. The         investment for the machines, service,         Enclosures can be made to hide the top,
agreement usually stipulates that the        repairs and maintenance. If the machines      sides and back of the machines, so visi-
bottler’s product line will be used exclu-   are in a highly visible location and          tors see only the front product display.
sively at your institution for all food      100,000 visitors per year each spend an       A small seating area or tables and chairs
services, both visitor service and spe-      average of 50 cents ($50,000), the ma-        and trash receptacles near the machines
cial events. In exchange, your museum        chines could return about $5,000.             make them more inviting.
will receive cash and/or in-kind contri-                                                   Keep outdoor machines in weatherproof
butions, corporate sponsorship, mar-         If your institution is very small (visitor
                                             count and paid/volunteer staff) it is im-     enclosures, and if necessary, install se-
keting, or promotion. An annual cash                                                       curity doors. Place a sign on the ma-
donation could amount to approximately       portant to talk to the local vending ma-
                                             chine providers to determine their mini-      chines stating that cash is emptied daily.
$5,000 if your institution has about
200,000 visitors annually.                   mum (sales) requirements. Normally            With careful planning, and for a modest
                                             vending machine suppliers will require        investment of resources, vending ma-
Before entering into any agreement, care-    each individual machine to do a mini-         chines may prove to be the answer for
fully review the bottler’s pricing for all   mum weekly $ amount of sales in order         many museums that wish to expand
products and supplies (cups, etc., if        to justify having it onsite. This may         visitor services, increase the average
necessary). Have the pricing reviewed        mean in a seasonal location, that the         length of stay, and improve the comfort
by the companies that cater the special      machine will require a subsidy (out of        of visitors and staff alike. In many situ-
events at your museum and, if appli-         pocket payment by your institution to         ations, vending machines represent an
cable, by the visitor food service opera-    the vending machine company) during           opportunity for increasing the museum’s
tor. Vendors should provide market-          some months and in busier (visitor)           corporate support and earned income;
competitive pricing for all products and     months you may earn income that will          at the very least, a bit of additional rev-
services. The prices should not be el-       offset the subsidy.                           enue is icing on the (packaged) cupcake!
evated and returned to you as a dona-
tion, rebate, or corporate sponsorship.      Potentially the most cost-effective ap-       © 2003 Arthur M. Manask. Manask is presi-
                                             proach for an institution that primarily is   dent/CEO of Arthur M. Manask & Associ-
Most Coca-Cola and Pepsi bottlers are        interested in beverage (juice, water and      ates and author of the book The Complete
very familiar with these agreements and      sodas) vending, would be renting the          Guide to Foodservice in Cultural Institu-
usually like entering into them, espe-       machine(s) from the local Coca-Cola or        tions: Keys to Success in Restaurants, Ca-
cially at museums of science and natural     Pepsi-Cola bottling company, purchas-         tering, and Special Events. He can be reached
history, children’s museums, aquariums       ing the product from them, filling the        at 800-686-8813, or by e-mail at
                                                                                           artm@manask.com.

                                                                 7                                         NemaNews/Fall 2004
Achieving Success in Your Museum Store
                                                     By Judy Flam and Arch Horst
Performance in the retail industry con-          How Much Money Can The                        have approximately one square foot for
tinues to be lackluster and the impres-          Museum Store Make?                            every 175 visitors. A store that is too
sive growth experienced in the museum            How much money a store can contribute         small will not be able to reach its sales
retail field in the late 1990’s will be diffi-   to the museum’s operating funds de-           potential; a store that is too large will
cult, if not impossible, to achieve in the       pends on five factors: merchandise se-        either look barren or have excessively
near future. And now, more than ever,            lection, the number of visitors, store        high inventory costs just to keep it fully
museums need to optimize earned in-              size, store location and the store’s man-     merchandised.
come to support their programs. In a             agement practices.
                                                                                               The location of the store within the
period of slow (or no) retail growth, how        Merchandise selection has a profound          museum will also have a significant ef-
does a museum administrator or store             impact on gross sales and on the extent       fect on its performance. We have seen
manager assess whether their store is a          to which a store achieves its mission of      too many stores that are relegated to off
success, providing a reasonable amount           “extending” the museum visit. As dis-         the beaten path, left-over space. Too
of earned income, or whether there is            cussed in greater detail below, a store       few visitors find these stores and no
potential for further growth?                    without merchandise to appeal to all of       amount of clever merchandising can
The Attributes of a Successful                   its market segments will not live up to its   overcome their bad location. The store
Museum Store                                     financial potential. Nor will a poorly        should be located near the main en-
Success for a museum store is threefold.         merchandised store reflect well on its        trance/exit so that visitors will notice it
                                                 institution. It is essential that the shop    upon entering and stop to shop when
• “Extending” the visitor’s experience           manager and buyers constantly seek            leaving. In the ideal location, the store
  by offering merchandise that is ex-            out new products that relate to both the      does not overly influence the visitors’
  pressive of the museum’s holdings,             museum’s mission and the interest of          first impressions of the museum but is
  exhibits, and programs.                        the visitors.                                 easily accessible to the visitor after expe-
• Providing an important (and expected)                                                        riencing the exhibits or to the destination
                                                 The more visitors who attend a museum,
  visitor amenity that reinforces the                                                          shopper who is not a museum visitor.
                                                 the greater is the potential for gross
  visitor’s positive impression of the
                                                 sales and net revenue. The most com-          Finally, because a museum shop is a
  museum’s image.
                                                 monly used standard of performance in         business, its success is also dependent
• Generating funds that support the              museum retailing is gross sales per visi-     on good management practices, par-
  museum’s programs.                             tor, and it varies with the type of insti-    ticularly buying and pricing procedures.
There are many successful museum                 tution. MarketPlace Associates has            The museum store manager must buy
stores that have met the three criteria of       worked with over 90 museums, cultural         larger quantities of fast moving items so
success. Each store featured a merchan-          institutions and park stores, and has         as to never be out of stock, set the price
dise mix that reflected the museum mis-          tracked the museum retail industry for        of merchandise to realize the maximum
sion and visitor experience, covering a          over 20 years. We believe that the fol-       profit and put the “dogs” on sale to
variety of price ranges as well as prod-         lowing sales ranges are indicative of         make room for new, more profitable
ucts that were enticing to those who             well performing stores:                       merchandise.
visited the museum. Each store was an            • Aquariums and Children’s Museums:           Because the variables influencing fi-
attractively designed and merchandised              $1.50 to $3.00/visitor
                                                                                               nancial performance are complex, there
visitor amenity that reflected well on the       • Fine Art Museums:
                                                    $2.50 to $4.00/visitor                     is not a simple rule-of-thumb for estab-
museum. And each store had converted
                                                 • History Museums:                            lishing a reasonable net profit (after
these qualities into a financially suc-
                                                    $3.00 to $5.00/visitor                     accounting for all of the store’s operat-
cessful operation.
                                                 • Science Museums:                            ing costs) for a successful museum
We believe that these three attributes of           $2.00 to $3.50/visitor                     store. The net profit in a successful
a successful museum store are mutually                                                         store in a small museum might be only
                                                 There is not a gross sales per visitor
supportive and very achievable. But                                                            10%, while a successful store in a large
                                                 figure that works for all museums within
how does one assess what is a “suc-                                                            museum (over 500,000 visitors) can real-
                                                 a given category; but these ranges per-
cessful” museum store in times of gen-                                                         ize a net profit in excess of 25%.
                                                 mit one to judge whether a store is
erally stagnant retail performance? Here
                                                 grossly under performing or surpassing        Is the Store Serving the
are our answers to the questions that
                                                 industry standards.                           Museum’s Market?
can lead a museum and its store manager
                                                 The size of the store also influences         Given the importance museums place
to a more complete understanding of a
                                                 success. A store in a small museum            on their mission, it is natural to think that
store’s potential and to the strategies
                                                 should have approximately one square          all decisions affecting a museum store
required to sustain or achieve success.
                                                 foot for every 75 to 100 visitors. Larger     should be made from the museum’s
                                                 museums (over 300,000 visitors) should        curatorial and educational perspective.

NemaNews/Fall 2004                                                   8
This point of view, however, overlooks         sons change so do the visitors, and the       special, which aspects of the institution
the fact that if the customers’ needs and      location of merchandise and the empha-        are most popular and what merchandise
interests are not met then there will be       sis given to certain merchandise also         will best extend the visit. Combining the
no retail transaction and, consequently,       needs to change if each season’s cus-         results of the research with his/her retail
less profit and less support for museum        tomers are to be well served.                 experience and creative skills, the buyer
operations.                                    Each museum shop should establish for         is able to create a mix of merchandise
To ensure that a store serves the visi-        itself what are its largest, and most lu-     that is a true reflection of the institution.
tors, the successful museum retailer           crative, market segments. Only then can       The immediate payoff for such diligent
continuously refines his or her sense of       the shop begin to effectively organize        preparation is that the merchandise that
the museum’s visitors/customers by             its merchandise categories and its sell-      most relates to the museum will prove to
answering the following questions:             ing space. There are many methods that        be some of your store’s best sellers. For
Where do they come from? What is the           can be used to accurately identify the        instance, a museum with a multi-cultural
age range? Generally, what are their           market; the underlying principle of each      orientation will find it easier to sell
income levels? Why did they come to            is to discard all preconceptions and          origami paper or shadow puppets than
the museum? How long did they stay?            look with a fresh eye at who is visiting      a science museum.
What did they do during their visit?           the museum, who is shopping in the            When developing a buying strategy,
What did they like about the visit?            store, who is buying the most, and what       product range and price points should
Answers to these questions will reveal         is being sold.                                also be considered. A rule of thumb that
visitor preferences and valuable clues         If a museum shop has maximized its            will prove useful is: “the larger a
for creating a visitor-focused store. In-      ability to sell to its primary market — its   museum’s attendance, the larger the
terestingly, answers to these same ques-       visitors — it can investigate broaden-        shop, the broader the product line and
tions can also help museum staff refine        ing its market. Reasonable strategies to      the wider the price points should be.”
the programs and services provided for         consider are: promoting the store with        The buyer for a small shop must be more
the visitors.                                  special events (book signings, story          precise in product selection as there is
Understanding the visitors’ interests          telling, “holiday” shops); attracting the     less space and capital for product clas-
and needs does not require that the            attention of motorists and pedestrians        sifications of great breadth.
museum’s cultural and educational mis-         with creative window displays, attrac-        Where can the store find new merchan-
sion be overwhelmed by “crass con-             tive signage or striking building improve-    dise? The good news is that untapped
sumerism.” The mere fact that the visi-        ments; and ensuring that all museum           merchandise resources abound. Local
tors have chosen to visit a particular         literature and group registration materi-     and national trade shows take place
museum indicates that there is a signifi-      als prominently mention the store and         throughout the winter and spring and
cant overlap of the visitors’ and              emphasize its mission and merchandise.        again in the late summer/early fall. The
museum’s concerns. For instance, when          It is possible to attract “Destination        Museum Store Association Annual
planning the store for the United States       Shoppers”; many successful museum             Meeting Trade Show and the New En-
Holocaust Memorial Museum, we re-              stores have monthly sales figures that        gland Booksellers Association Fall
peatedly asked: “What will the visitor’s       do not track with visitation. But reach-      Show are also excellent sources for
experience be like?” “Will they be look-       ing the non-visitor market is not a sub-      museum quality merchandise. Many
ing for a store?” “What will they want to      stitute for selling well to the museum        major cities across the country have
buy?” The answers to these and other           visitors; it is a benefit of successful       permanent wholesale markets that are
questions led us to establish a merchan-       retailing to those visitors.                  open through the year. And catalogs,
dise mix that was almost exclusively                                                         trade magazines and sales representa-
books–a merchandise mix that met the           Is the Store Selling the Right                tives can be invaluable resources as
needs of the visitors and was reflective       Merchandise?                                  well. A successful buyer leaves no stone
of the museum’s mission, collections,          The answer to this question begins with       unturned, including constantly shop-
exhibits and programs.                         “know thy museum.” A skilled buyer,           ping other stores.
                                               before exploring the marketplace to re-
Understanding the visitors often means                                                       Is the Store Enticing to the
                                               search and select merchandise, will study
that the store needs to change periodi-                                                      Museum’s Visitors?
                                               the museum’s mission, exhibits, pro-
cally. This is a retail reality that might                                                   A successful museum store is engaging
                                               grams and collection. An excellent way
seem indecisive, lacking in commitment.                                                      and visual merchandising—the loca-
                                               to ensure that the store well represents
In fact, retailers have learned that if they                                                 tion and arrangement of merchandise—
                                               the museum’s mission and exhibits is
are to increase sales and better serve                                                       is critical to engaging the customer. The
                                               for the manager and critical store staff to
their customer they must continually                                                         featured displays should be artfully ar-
                                               periodically tour the exhibits and par-
adjust the merchandise mix, relocate                                                         ranged, the merchandise grouped by
                                               ticipate in programs as if they were “visi-
merchandise in the store and mark down                                                       category to ensure maximum exposure,
                                               tors.” In doing this, they will refresh
poor selling or no longer related mer-                                                       the shelves kept well-stocked and well-
                                               their sense of what makes their museum
chandise. In many museums, as the sea-                                                                            continued on page 14


                                                                   9                                         NemaNews/Fall 2004
Focus Your Promotion Efforts with a Marketing Plan
                                                          By Becki Swinehart
(This article orginally appeared in Museum     If your store doesn’t already have a           Threats may include that state funding
Store, vol. 32, issue 1, Spring 2004)          mission statement and brand statement,         for the arts has been cut and a similar for-
A special event is coming up, so you run       it’s useful to develop those before start-     profit retail store just opened down the
an ad in the local newspaper. Your mu-         ing the marketing plan. After all, if you      street from the museum.
seum sends a newsletter to members, so         don’t know what you’re marketing, it           It’s often useful to collect thoughts
you write an article about the store for       will be impossible to market it effec-         from multiple people for a SWOT analy-
it. A television reporter called before the    tively. For insights on developing these       sis. What one person sees as a threat,
holidays to include your store in a piece      statements, see the Summer 1998 issue          another may see as an opportunity. The
about places to shop, so you cordon off        of Museum Store.                               more honest and complete the SWOT
a portion of the store to do an interview      You probably already have at least some        analysis, the better handle you will have
with her.                                      information on the store’s audience            on what goals are realistic.
All of these marketing efforts likely          demographics — percentages by age,
                                                                                              The meat of the plan
helped bring a few more people into the        sex, approximate income, zip code, edu-
                                                                                              Before you even started the research,
store, but were they the best use of your      cation level, etc. You should also gather
                                                                                              you probably had at least a couple goals
time and money? Should you have done           the museum’s demographics, which may
                                                                                              in mind for the marketing plan — in-
a bag stuffer instead of, or in addition to,   be slightly different.
                                                                                              crease sales, perhaps raise the store’s
an ad for the special event? Should you        Compare your stores demographics with          profile within the community. The infor-
spend your time writing press releases         the museum’s demographics. Are there           mation you gathered may have inspired
for the media instead of a newsletter          certain types of visitors who don’t buy        some additional goals — increase sales
article?                                       anything at the store? For example, some       to school groups or make the store more
Creating a marketing plan will help you        museums get a lot of school groups as          visible within the museum itself.
answer these questions as well as better       visitors but they don’t make time to stop
                                                                                              These are all good goals, but they must
understand your audience, help you             in the store. If so, one goal of the market-
                                                                                              be developed a bit further to include a
spend your marketing time more effi-           ing plan may be to draw more of those
                                                                                              form of measurement. If the goal doesn’t
ciently and, ultimately, get the best bang     visitors in and increase sales to them.
                                                                                              include a measurement, how will you
for your undoubtedly limited bucks.            Also look beyond the basic demograph-          know when you’ve reached it?
                                               ics to other audience characteristics like
Getting started                                                                               Some sample goals may be:
Long before you start placing ads or           lifestyle and cultural influences. Al-
                                               though the patrons of an art museum            • Increase sales per visitor by 5 percent
writing articles, you need to do research.                                                      between June and December of this
Chances are you already know some of           and those of a history museum may
                                               have similar ages and incomes, other             year.
the important information for develop-
                                               factors draw one group to art and an-          • Increase capture rate (number of mu-
ing a marketing plan — such as the
                                               other group to history.                          seum visitors who make a purchase)
demographics of your customers — but
                                               The strengths, weaknesses, opportuni-            by 10 percent within 12 months.
getting other information may require a
bit more digging.                              ties and threats (SWOT) analysis should        • Improve inventory turnover by 0.5
                                               take into account not only internal fac-         turns within 18 months.
Most marketing plans include a fair
amount of background information that          tors, but external influences as well. For     You may come up with quite a few goals
sets the stage for the meat of the plan:       example, when examining the store’s            that could require a lot of time and re-
the goals, strategies and tactics. The         strengths you may include quality prod-        sources to reach. If so, you may want to
background is critical because it helps        ucts and excellent merchandising as well       consult with your supervisor or even
guide decisions on which strategies and        as your city’s strong tourism draw and         the museum director to help prioritize
tactics to use. Marketers have dozens          your museum’s place as a stop on sev-          them.
of tactics at their disposal — from Super      eral regular bus tours.                        For each goal, you’ll need to come up
Bowl commercials to fliers on car wind-        Weaknesses might be that the store is in       with some basic strategies and then
shields — but smart marketers use the          the basement of the museum, much of            more specific tactics to reach the goal.
ones that are most effective based on          the merchandise is out of style and            Strategies for increasing sales per visi-
their research.                                shifting U.S. demographics project             tor could he these:
Background information can include,            population decline in your typical cus-
                                               tomer base.
                                                                                              • Encourage add-on sales to existing
but isn’t limited to, your museum’s and                                                         customers.
store’s mission statement and brand            Examples of opportunities are that your
                                                                                              • Get more visitors into the store.
statement; audience demographics; and          museum is planning a renovation and
a strengths, weaknesses, opportunities         expansion, and that you just got ap-           Tactics for the strategy of encouraging
and threats analysis.                          proval to start an online store.               add-on sales could be these:

NemaNews/Fall 2004                                                 10
• Train staff to suggest related prod-       bring hordes of shoppers to your store,         What Marketing Budget?
  ucts to customers, such as a book on       begging to buy more. Now the chal-               Tips for Small Stores
  the artist to go with a poster.            lenge is finding the time and resources                By Becki Swinehart
• Create displays that “suggest” prod-       to implement it.                              So your store’s total sales are less than
  ucts to purchase together, such as a       Some tactics are quick, easy and inex-        The Met’s marketing budget — that
  necklace, earrings and bracelet next       pensive to implement, like creating at-       doesn’t mean you shouldn’t create a
  to each other in a case.                   tractive merchandise displays. Many           marketing plan. You’ll just have to be a
Possible tactics for getting more visi-      — like printed materials and special          bit more creative with no-cost and low-
tors into the store may be these:            events — require a fair amount of time        cost tactics.
• Add signage within the museum to           and money. To reasonably allocate these       E-mail. Collect e-mail addresses from
                                             resources, you should create an imple-        customers and ask them to forward your
  direct visitors to the store.
                                             mentation plan.                               e-mail messages to their friends.
• Include mention of the store’s loca-
  tion and hours on all museum ads.          First, find a calendar. If any of your        Media coverage. If your store offers
                                             goals are date-specific — perhaps tied
• Include the store on the museum’s                                                        unique products or activities, let local
                                             to a special exhibit — plug in the tactics    reporters know via a press release. Be
  map of the building/grounds.
                                             for those first. Be aware that certain        sure to say that the store’s proceeds
• Educate docents/tour guides about          tactics, such as direct mail and advertis-
  the store’s merchandise and encour-                                                      support the museum.
                                             ing, require a certain amount of lead time
  age them to mention the store in their     to create and then to reach their target      Customer service. It certainly doesn’t
  presentation.                              audience.                                     cost you or your staff anything to smile
You may find it useful to create a master                                                  and treat customers with respect and
                                             Consider working on some marketing            kindness. Thrilled customers will mar-
list of general marketing tactics that you   initiatives during times that are less busy
can select from and customize based on                                                     ket your store for you through word-of-
                                             for you and your store. Be realistic about    mouth.
the goal, strategy and audience.             how much you can accomplish on top of
Some general marketing tactics include       your existing responsibilities and how        Museum staff and volunteers. Explain
these:                                       much you can expect other staff to            to co-workers how store sales benefit
                                             handle.                                       the whole museum, and then provide
• advertising — newspaper, magazine,
                                                                                           some examples of how they might en-
  radio, television, billboard, public       Depending on how your institution’s           courage visitors to stop by the store.
  transportation signage                     and store’s budget is structured, you
• public relations — press release, event    may have to adjust your marketing plans
  participation/sponsorship                  around cash flow as well. Although the             NEMA Benefit!
• direct mail — postcard, special piece,     adage “you have to spend money to
  newsletter                                 make money” is often true, your
                                             museum’s finance director may have
                                                                                                     NEMA and
• e-mail — special announcement
• e-newsletter
                                             some limitations on when that money is                 W.B. Mason
                                             spent.
• special events — book signing, cura-       In the end, developing a marketing plan        Discount Office Supplies
  tor presentation, toy demonstration        will help you focus on your store’s
• printed materials — brochure, flier,       goals as well as provide a frame-work for          NEMA & W.B. Mason have
  bookmark                                   reaching them. Instead of haphazardly           partnered to bring you the benefit
• signage — within institution, in local     sending out a press release here and a            of discounted office supplies.
  neighborhood                               postcard there, you’ll have a more coor-       From pens & paper-clips to binders
• in-store — staff, displays                 dinated effort that you can measure and         & colored paper, we have negoti-
                                             evaluate, then adjust for the future.           ated unbeatable prices on the 100
Remember that your tactics should be
                                             Becki Swinehart was involved in de-             supplies most used by museums.
selected based on the audience you’re
trying to reach. For example, if your        veloping MSA’s first comprehensive              In addition, W.B. Mason will meet
audience demographics closely match          marketing plan.                                  or beat any advertised price you
those of a local magazine with a limited     Reprinted with permission from the                        find elsewhere.
circulation, it may be more cost-effective   Museum Store Association. This ar-               Order by phone, fax or on-line.
to advertise in that publication than in     ticle orginally appeared in Museum             Free, next day delivery for all orders
the more widely read daily newspaper.        Store, vol. 32, issue 1 (Spring 2004). All             received by 1:00 pm.
                                             rights reserved, ©2004.
Making it all happen
                                                                                            For information or to set up an account
So, you’ve developed a comprehensive                                                        call W. B. Mason Sales Manager
marketing plan that you just know will                                                      Keegan Holt at 888-926-2766, ext. 1674.

                                                                11                                        NemaNews/Fall 2004
Candlelight, A Glass of Wine and UBIT: A Food and Facilities Tax Primer
                                                        By Jeffrey Hurwit

Most readers probably have some fa-          we now have museum architectural de-        sioner, T.C. Memo 1997-395. That may
miliarity with the basic premise of the      sign created by UBIT regulation.            be the case even if an exhibit opening,
UBIT (Unrelated Business Income Taxa-        A recent case has imposed additional        tour or other educational component is
tion) rules. Simply put: If your museum      limits on the convenience exclusion. In     included in the event.
makes money on activities unrelated to       IRS Technical Advice Memorandum 97-
its tax-exempt purposes, the profit is       20-002 (1996), a museum opened an           Exclusion #3:
taxed at for-profit business rates. More                                                 Passive Rental of Museum Facilities
                                             upscale restaurant larger than needed
technically, unrelated business income       for visitors and staff. The IRS deter-      The rental of real property, including
is net income derived from a trade or        mined that since it was designed partly     function facilities, is not considered the
business regularly carried on which does     as a public restaurant and was adver-       “active conduct of a trade or business”,
not contribute importantly to the ac-        tised regularly in magazines, the conve-    but rather the “passive” receipt of rev-
complishment of the museum’s tax-ex-         nience exclusion did not apply. Note        enues. So called passive revenues, such
empt functions.                              the fact that restaurant patrons did not    as endowment investment income, have
This article focuses on the three major      have to pay museum admittance fees          long been excluded from UBIT. Internal
exclusions to UBIT relating to museum        was one factor weighed in the decision,     Revenue Code Section 512(b)(3). How-
food service. These exclusions likely        but was not itself determinative.           ever, if a museum provides services,
mean that most of your food and facili-                                                  such as labor, food, catering, linens,
                                             To museums’ benefit, the rule of “frag-     etc., in addition to simply renting out a
ties profits are not taxable. However, the   mentation” applies in calculating net
UBIT rules are continually being re-                                                     facility then the rental arrangement is
                                             income. Museums may “fragment” res-         subject to tax. IRS Technical Advice
fined and at times seem to involve al-       taurant sales (by separately recording
most microscopic hair splitting.                                                         Memorandum 97-02003.
                                             sales to museum visitors and to the
                                             general public), and pay taxes only on      As you can see, the factual variations
Exclusion #1:                                sales to the general public.                and legal distinctions relating even to
Vending Machines to Four-Star Meals:                                                     these three exclusions leave many open
Nontaxable As A Convenience to Visi-                                                     questions. Hopefully, this brief primer
                                             Exclusion #2:
tors, Employees
                                             Outside Museum Facility Use for Edu-        gives you a sense of the legal param-
Whether snack bar, cafe, or fine restau-     cational Purposes                           eters for the majority of UBIT situations
rant, whether Snickers or crème brulée,      Increasingly, museums use their facili-     you will encounter.
on premise food sales to employees and       ties for outside business and social af-
visitors contribute to accomplishing tax-    fairs.                                      Jeffrey M. Hurwit is founder of Hurwit
exempt purposes because they 1) allow                                                    & Associates which provides compre-
visitors to devote more time to the          The legal issue is then whether an event    hensive legal counsel to tax-exempt
museum’s educational exhibits, and 2)        is held primarily for business purposes     organizations throughout the U.S. and
enhance efficient museum operation by        or museum/educational purposes (in          abroad.
enabling staff to remain on-site through-    which case food/entertainment is inci-
out the day. Food sales, like water cool-    dental). Suppose an outside sponsor         Copyright © 2004 Hurwit & Associ-
ers, restrooms, and exhibit room benches,    asks a museum to create an educational      ates. All Rights Reserved.
facilitate and enhance the museum ex-        program for its participants, focusing
perience. Thus, resulting revenues are       on an exhibit, lecture or tour, and inci-
not taxable. Revenue Ruling 74-399           dentally food and other services are        UBIT Sources & Resources
(1974).                                      provided. Such an event contributes to
                                             accomplishing the museum’s purposes         Internal Revenue Service’s Publica-
At least that’s the legal conclusion. For    and is therefore not subject to tax. IRS    tion 598, Tax on Unrelated Business
now. Usually.                                Technical Advice Memorandum 97-02-          Income of Exempt Organizations.
                                             003 (1996).                                 www.irs.gov/pub/irs-pdf/p598.pdf.
But as an example of how small facts
make big legal differences, if a dining                                                  Nonprofit Law Resource Library,
                                             However, if the event is primarily fo-
facility is accessible not only through                                                  www.hurwitassociates.com, contains
                                             cused around, for example, a cocktail
the museum but also through a door                                                       dozens of legal resources for museums
                                             and dinner dance, a business meeting,
directly to the street, then it has been                                                 and other nonprofit organizations and
                                             or an awards ceremony, then the educa-
held by the IRS not to be primarily for                                                  foundations.
                                             tional aspects are secondary to other
visitor convenience but for general pub-     business purposes, and it is not “sub-
lic use, and therefore taxable. Ibid. Thus   stantially related.” Madden v. Commis-



NemaNews/Fall 2004                                              12
The Museum, the Baby & the Bathwater
                                            Bathwater
                                Authenticity in the Information Age
                          N EMA A n n u a l C o n f e re n c e October 27-29, 2004
 Join us in Burlington, VT for three days of great sessions, networking with colleagues & special events.
3 Days of Professional Development                                               Exhibit Hall
More than 60 concurrent sessions are scheduled so that each timeslot             You’ll be amazed at the variety of products and services presented in the
represents a wide variety of disciplines. Whether you work in Collections,       Exhibit Hall, open from 8:00 a.m. Wednesday ‘til 4:00 p.m. Thursday.
Education, Exhibitions, External Affairs, or Museum Administration, you’ll
discover a thought-provoking, high-quality program, led by presenters from       Save on Costs
around the corner and across the country.                                        Need to catch a ride to the conference? Want to save on lodging expenses?
                                                                                 Save on the cost of your attendance by sharing with a colleague. Limited
For a closer look at museums in the Burlington area, sign up for an off-site
                                                                                 openings are also available for conference volunteers, who save on
program or an evening event—there’s something for everyone!
                                                                                 conference registration fees. Call the NEMA office (781-641-0013) with your
NEW! 101 Track                                                                   information.
For those new to the field or anyone who wants to brush up on the basics,        Conference Registration
we’ve created a multidisciplinary program of 101 sessions on a variety of
                                                                                 Member rates: Full Registration: $150 (3-days), One Day: $95
topics. (Look for this symbol 101 in every time-slot!)                           Early Bird Deadline: September 21, 2004
Jobs Center                                                                      For More Information
Positions to fill, or looking for employment? Place or peruse job openings at
                                                                                 Visit the NEMA website at www.nemanet.org for a downloadable program
New England museums. Resumes can be left or collected during the
                                                                                 book, including details on how to register for sessions and events, and obtain
conference.                                                                      hotel reservations. Please call the office at 781-641-0013 with any questions.




                                                           Thank you!
                          N E M A A n n u a l C o n f e re n c e S p o n s o r s
Principal Sponsor                                  Welcome Sponsor                                            Supporting Sponsors
Directors and Trustees Luncheon                    Wake-Up Coffee: October 28, 8:00 am                        Coffee Break: October 27, 3:15 pm
Henderson Phillips Fine Arts Co.                   Art Shipping International Ltd.                            Richard White Sons, Inc.
Bill Allen, Managing Director                      Bill O’Connors, President                                  Kenneth R. White, Director of Business
Lynn Marcin, Assistant Vice President              PO Box 285288, Logan Int’l Airport                         Development
1627 I Street, NW, Suite 800                       Boston, MA 02228                                           70 Rowe St., Auburndale, MA 02466-1596
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202-223-5860 / 202-223-5866 (fax)                  800-480-8977 (toll free)                                   krwhite@rwsons.com; www.rwsons.com
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programCertMuseum.htm                              John Dunphy, Director of Marketing                         1838 Elm Street
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                                                                            13                                                NemaNews/Fall 2004
Achieving Success in Your Museum Store continued from page 9                                         EARNED INCOME
organized, and the lighting should cre-        answer. Their retailing instincts were             SOURCES & RESOURCES
                                                                                                 Please note that the following is a sampling on
ate drama and emphasis. Museum stores          confirmed; the larger store has seen a
                                                                                                 the topic of earned income resources.
are competing with hundreds, if not            50% increase in sales. But adjusting the
thousands, of other stores for the visi-       size of a store is not a panacea by itself        NEMA 2004 Annual Conference
tor/customer’s attention, and success-         and should only be considered after               A number of conference sessions will relate to
                                                                                                 the topic of this newsletter. They include:
ful museum retailers utilize the full range    addressing the other critical retailing           Special Events Safety & Security; Facility
of visual merchandise techniques as            questions discussed in this article.              Rentals; Paperless Marketing; Museum
well as emphasizing the mission and            The merchandising and construction                Branding; Value Added Experiences; Muse-
image of their institution.                    budgets available for improving an ex-            ums as Social Experiences.
Also essential to engaging the visitor is      isting store or for building a new store          Administration, Facilities & Services
customer service. For a museum store to        are often limited or non-existent. Be-            Professional Affinity Group
                                                                                                 The PAG Lunch at conference will focus on
reach its potential, it is vitally important   cause every dollar spent on museum                Museum Store Marketing and Management.
that the entire store staff be familiar with   store improvements cannot be spent on             Please see www.nemanet.org/conf04.html for
the museum’s exhibits and programs,            operations, museums are naturally un-             complete details. See page 21 for contact infor-
appreciate how the merchandise relates         comfortable appearing to invest too               mation regarding this PAG.
to the exhibits and programs, and be           much in store improvements. However,
                                                                                                 Museum Stores
comfortable talking with customers             nothing depresses sales (and therefore
                                                                                                 Museum Store Association, http://
about the merchandise and the institu-         the store’s long-term support of mu-              museumdistrict.com. Provides resources for
tion. The goal is for the store to be          seum operations) more than a store that           museum stores. Website contains downloadable
known for its well-designed merchan-           appears tired or cobbled together. Suc-           articles on topics relating to but not limited to
dise, it attractive appearance and also        cessful stores are those that reflect and         museum stores. 4100 E. Mississippi Ave., Suite
for its customer service, giving it a de-      support the image of the museum. In               800, Denver, CO 80246-3055, Phone: 303-504-
cisive advantage over local corporate          some instances this mandates a more               9223.
retailers and the internet. The level of       extensive investment; in others only              Museum Store Association’s Managers
customer service in many for-profit            careful planning and merchandising is             Guide: Basic Guidelines for the New Mu-
                                                                                                 seum Store Manager (Museum Store Asso-
stores is declining and museum stores          required, or can be justified. In either
                                                                                                 ciation, 2004). A comprehensive manual for
that provide a higher level of service are     case, store improvements should be seen           managing a nonprofit store, from administering
able to realize higher sales per transac-      as an investment in a future income               financial data to marketing.
tion and attract repeat business.              stream, not as an expense.                        The New Store Workbook: MSA’s Guide
Typically, successful museum stores            An Exhortation                                    to the Essential Steps from Business Plan
are properly sized and well located. This      Retailing is a fact of museum life: Few           to Opening Day (Museum Store Associa-
                                                                                                 tion)
is often a challenge; floor space within       museums can afford to ignore the poten-
a museum can be at a premium and               tial income, and a creatively merchan-            Theobald, Mary Miley. Museum Store Man-
                                                                                                 agement (AltaMira Press, 2000). Offers store
achieving the right design can be diffi-       dised store is an opportunity to further          managers advice and tools to develop initial
cult. The optimum size for a store is          educate and serve the visitors. In this           store conceptualization and to improve prof-
dependent on the number of merchan-            regard, all museum stores–in history,             itability.
dise items for sale, the number of visi-       fine art, science and children’s museums,
tors and the fluctuations in visitor traf-     zoos, aquariums and parks–have an im-             Food Services & Facility Rentals
fic. A store that is too large can be just                                                       NEMA Policy Loan Service. This service
                                               portant institutional role to play. It is the
                                                                                                 gives Institutional Members access to more
as disadvantaged as a store that is too        role of the museum director and program           than 16 categories of polices and reports,
small. We have adjusted the size of            staff to appreciate what the store can            including Facility Rental Polices. A complete
stores, up and down, to better serve the       contribute, programmatically and finan-           list is available on the NEMA website.
customers and better present the mer-          cially, to the museum; and it is the re-          Function Managers of Historic Sites and
chandise. Most recently, at the                sponsibility of the museum store man-             Museums. An informal group of Function
Sugarlands Visitor Center in the Great         ager and staff to strive for success.             Managers from the region. For more information
Smoky Mountains National Park, we              Judy Flam and Arch Horst are principals of        or if you have a question e-mail
designed a new store that was four                                                               fmhsm@msn.com.
                                               MarketPlace Associates, a retail consulting
times larger than the previous store. In       and design firm in Cambridge, Massachusetts.      Allen, Judy. The Business of Event Plan-
this case, the goal was to better accom-       Judy Flam is the former retail director of the    ning: Behind-the-Scenes Secrets of Suc-
modate the surges of visitors in the peak      Museum Shop at the Boston Children’s              cessful Special Events (John Wiley & Sons,
                                               Museum. Arch Horst is an architect specializing   Inc., 2002)
seasons and the pulses of visitors arriv-
ing on tour buses. The store’s manage-         in museum retail design. MarketPlace              Manask, Arthur T. and Mitchell E. Schechter.
                                               Associates advises museums throughout the         Complete Guide to Foodservice in Cul-
ment had observed that sales dipped
                                               country on issues of retail feasibility, store    tural Institutions: Keys to Success in Res-
precipitously in those situations and          performance, product development, store           taurants, Catering, & Special Events (John
reasoned that a larger store was the           operations and store design.                      Wiley & Sons, Inc., 2001)

NemaNews/Fall 2004                                                   14
GOVERNMENT AFFAIRS                                                                             HIRING
                                                                                        a director or curator?
Senate Finance Committee Scrutinizes Nonprofit Community
                                                                                      a development director?
This summer, the Senate Finance Com-     white paper, released in conjunction            NEED HELP WITH
mittee has been examining fraudulent     with the hearing, was the subject of a              Recruiting?
and abusive practices within the non-    July 22 roundtable hosted by the Fi-            Reference checks?
profit sector and the need for better    nance staff. Nearly 20 individuals from
enforcement and oversight of chari-      the nonprofit, foundation, academic,                 M useum
ties. Committee Chairman Charles         and legal communities were formally           S earch & R eference
Grassley (R-Iowa) has indicated he is    invited to participate and nearly 80
planning to introduce reform legisla-    more in the audience had the opportu-            Marilyn Hoffman
tion this fall. The erosion of public    nity to comment on the dialogue.                      Principal
trust in the corporate sector and gov-
ernment and recent high profile scan-    Independent Sector has taken a lead              Executive Search &
dals involving charities and founda-     role in representing the interests of            Reference Checking
tions has led many to call for greater   the charitable community. They have                 “Full Search or
public accountability and transpar-      created 13 task forces—two led by             Just the Help You Need”
ency in the nonprofit community.         AAM (valuation and accreditation)—
                                         to advise them on their response to         Manchester, NH / Boston, MA
While nonprofit museums should not       the white paper and in the ongoing         A “headhunter” you can afford
anticipate any immediate changes to      discussion with the Senate Finance             CALL OR E-MAIL TODAY
current law, the more than 30 recom-     Committee.                                   TO DISCUSS YOUR NEEDS.
mendations being circulated in a Fi-                                               No obligation - A la carte services
nance Committee white paper could, if    Independent Sector’s initial response               603-432-7929
approved, change nonprofit report-       to the white paper is available at              Hoffman M ar@aol.com
ing requirements and governance          www.independentsector.org. Most                 www.museumsearch
                                         notable is the strong recommendation             andreference.com
practices and how charitable dona-
tions of tangible and intangible prop-   against the federal government en-
erty are valued. The American Asso-      gaging directly or indirectly in ac-
ciation of Museums (AAM), however,       creditation of nonprofits. This view
is encouraging museums to be familiar    was echoed at the roundtable by those
with the implications of the Sarbanes-   well-known for their strong views in
Oxley Act of 2002. While the new law     favor of nonprofit regulation.
is aimed primarily at reforming the      Reform legislation may be introduced
corporate sector, there are two provi-   by Sen. Grassley as early as Septem-
sions that apply to nonprofits.          ber. Advocates anticipate that it will    Designers and consultants for
                                         be the first among many measures             the most sophisticated
To help guide nonprofits, Board
Source, a national nonprofit focused     aimed at ending abusive practices in      High-density storage systems.
on strengthening nonprofit boards,       nonprofits. For additional information,
and Independent Sector, a national       contact Eileen Goldspiel, AAM assis-           A s ,d s r b t r o
                                                                                         lo itiuos f
coalition for nonprofit organizations,   tant director of Government and Pub-
                                         lic Affairs, at 202-289-9125 or
                                                                                        Montel Systems and
have issued a paper, which is avail-                                                     S e lF x u e M g
                                                                                          te itrs f.
able at www.boardsource.org. Orga-       egoldspiel@aam-us.org. To let your
nizations representing the nonprofit     elected officials know your views, join
community, including AAM, are ac-        AAM’s Museum Advocacy Team®
                                         by contacting mat@aam-us.org.               www.bibliodesignltd.com
tively talking with Senate Finance
Committee staff about proposals for      This report is compiled from a recent
charitable reform.                       series of articles published in AAM’s        1240 Park Ave. Suite 1F
                                         Newsletter Aviso. Copyright American         New York, NY 10128-1754
At a June 22 committee hearing, three
                                         Association of Museums. Reprinted            Tel: 212-876-1114
panels presented testimony on en-
                                         with permission.                             Fax: 212-369-1872
forcement, fraudulent and abusive
practices in nonprofits, and the need                                                 Ebrown1240@aol.com
for better oversight of the nonprofit                                                 Peter Diemand, Pres.
community. The Finance Committee                                                      Elaine Brown, VP



                                                           15                                  NemaNews/Fall 2004

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Fall 2004 nema news earned income

  • 1. Volume Twenty-Eight Number One Fall 2004 Earned Income In the new economic climate, museums are taking a fresh look at potential sources of earned income. In this issue of NemaNews, we bring together articles on several of the most popular vehicles for earned income: facility rentals, food services, and museum stores. In addition, we address some of the topics that are important to any earned income program, including marketing and Unrelated Business Income Taxation. The Museum Meets the In-Laws: Developing a Successful Facility Rental Program A meeting space that sits unused after hours, a desire to • What contracts and other documentation, including increase earned income and expand audiences…these insurance and permits, will be required? circumstances prompt many museums to initiate or • How will the museum facility support the rental pro- expand a facility rental program. Rentals can provide an gram (with kitchen space, tables, AV equipment, park- important stream of earned income and offer a museum ing spaces, etc.)? many ancillary benefits, including the opportunity to attract new audiences and increase its involvement in • How will the rental program affect other areas of the local community. museum operations? • How much will it cost the museum to make the facility Woe to the museum that thinks this is “easy money,” available for the event? however! As an extension of the museum’s public dimension, and for their potential impact on other pro- To explore these issues, NEMA interviewed function grams and services, facility rentals require the same managers at seven museums of art, history and science— degree of forethought and care given to other museum museums of different sizes, located in different settings. programs. continued on page 4 All the components must first be in place to ensure a successful event. While a museum may initially think only in terms of the space it has available and the NEMA Annual Conference potential income, there is, in fact, a wide range of issues to consider. By the first strains of the “Macarena,” the museum will have made, by deliberation or default, the The Museum, the Baby & the Bathwater following decisions: Authenticity in the Information Age • What spaces will be available for rent? During what hours, and at what charge? • What types of events will the museum host? • What activities will be permitted (alcoholic bever- Burlington, Vermont ages, dancing, etc.) and under what conditions? • What relationship will the museum have with caterers October 27-29, 2004 and other vendors? For program and registration information see page 13. • Who will staff the events on behalf of the museum? 1 NemaNews/Fall 2004
  • 2. Developing a Successful Facility Rental Program continued from page 1 Instead of polling them on how they run Q. 2. What 2 or 3 innovations in mu- museum. The facility fee covers the cost their facility rental programs, we asked seum staffing have made the rental of of a security guard, so that the only questions that get at the heart of why your facility a success? (This could museum staff who are directly involved they do what they do. There is no “one include the number of staff on duty, in the rental are the receptionist who the power they have to make deci- size fits all” set of policies and proce- schedules the function and the mainte- sions, or their scheduling.) dures for facility rentals. But by gaining The museums we contacted offer nu- nance staff. insight into the decision-making pro- merous models of staffing events, yet Q. 3. What is the most important thing cess at these seven museums, other all have paid attention to three key as- you do to prepare clients, their guests, museums may find it easier to develop pects of staffing that promote a suc- or vendors for a successful event? or expand their own successful rental cessful function: “Communication” is the obvious an- programs. swer. A museum should have a set of 1. Maintaining good communication on- Q.1. What persons or policies guide site between staff, clients and vendors policies for facility rentals that are clearly your museum in deciding which 2. Staff training written and addressed to both the client groups or events the museum will 3. Empowering staff to make decisions and the vendors, and the museum should host? on-site obtain a signed contract from the client In some museums, the board of direc- stating that s/he agrees to abide by tors has set guidelines concerning what At the Portland Museum of Art, which these policies. (The NEMA office has types of events the museum will host. averages one rental per week, the func- sample policies and agreements that For other museums, city and state ordi- tion manager attends every event and are available via its Policy Loan Ser- nances dictate the use of their facility. serves as the liaison between vendors vice). These policies and agreements Other institutions have no set policy; and museum staff, including security should be reviewed and amended peri- instead, the director considers rental and maintenance. At Strawbery Banke, odically. requests on a case-by-case basis. the function manager also attends ev- ery event; additional staff are drawn As Amy Sherwood, Events and Facility Whether or not there is an established Rentals Manager of Strawbery Banke policy, function managers rely on their from other museum departments, and everyone is asked to participate at some noted, however, “most issues arise when own experience with different types of the parties aren’t ‘up front’ about their clients to guide them in accepting rent- point during the year. This has the ad- vantage of enlisting the support of the expectations.” In this area, documents als. Having a policy in place shouldn’t are no substitute for personal contact. prevent a museum from saying “no” to entire museum community in the facility rental program, but it also requires re- The function manager at Blithewold a particular request. Mansion, Gardens, and Arboretum, training staff in event procedures and The Worcester Art Museum stopped can place some stress on individual which hosts a large number of wed- hosting private parties for young people departments. dings, spends a great deal of time work- when they had more than one bad expe- ing with clients face-to-face and over rience and museum staff realized that At the Museum of Science, Boston, a the phone. (One function manager esti- they were unable to gain the informa- function coordinator provides supervi- mated that each 5-hour wedding takes a tion they needed in advance to ensure sion for each event. Although these 20-hour investment of time beforehand, the safety of the facility. The museum’s individuals work in the museum in vari- and some brides visit a site two or three education department runs children’s ous capacities, they maintain a high times before their wedding day.) Meet- birthday parties in a separate space level of training in event policies and fire ings with museum staff often include where clean-up is easier to manage. safety, and they supervise functions on both the client and the vendors. As Sara a regular basis. Museums that are initiating a facility Murphy, Manager of Marketing and rental program and have not previously In contrast to these models, the Higgins Special Events at the Higgins Armory had a high demand for their space can Armory Museum maintains a corps of Museum noted, “a good caterer is worth do targeted marketing to the groups 20 part-time staff who work only at func- its weight in gold!” they think they would like to host. At tions. Each week they receive, via email, Several function managers emphasized the Wenham Museum, Director Emily an updated calendar of events that con- the importance of creating a floorplan of Stearns used this approach to enter the tains their assignments. They also re- each event and doing a walk-through of rental market in a measured way. She ceive a rental staff contact list, to locate the function space. As Janet Rosetti, distilled the information she received a replacement if they are unavailable for Director of Special Events and Facilities from her staff concerning various types a particular date. All of these staff mem- Rentals at the Worcester Art Museum of groups and steadily formalized a bers have been trained to work at func- observed, “the floorplan gives the imagi- policy that she brought to the board of tions; three or four of them have been nation a home.” Guests can visualize directors for approval. trained as managers. The Wenham the set-up more easily, and are prompted Museum provides function space that to ask questions such as, “Why is the clients can access separately from the NemaNews/Fall 2004 4
  • 3. buffet table located here?” Having a their rental program, but there is no visual aid makes it easier to say “no” to single type of event that they all think it some requests, because clients can see is important to pursue. Museums that Services that the museum is not making an arbi- already host a large number of wed- & Publications trary decision. dings see room for growth in corporate rentals, as long as there is a concentra- New & Recent Additions Museum directors and function manag- ers should follow their instincts in agree- tion of businesses in their area. Since 2004 Product & Service ing to work with potential clients. One most weddings take place on weekends, Directory function manager, early in her career, corporate business allows museums to The P&S Directory specializes in compa- had a strong sense that a particular rent their facilities during the week. nies and individuals that are located or mos bridegroom was not going to respect Other museums that typically provide often work in New England. The P&S Di- rectory offers help with a wide range of the museum site. Her instincts were groups with access to the their galleries projects such as the search for a new confirmed when he became heavily in- and programs, such as the Museum of director, audio tours, storage materials or toxicated before the reception even be- Science, see the potential to attract more systems, capital campaigns, interpretation gan and caused such a disruption that private social events. These rentals are plans, etc. 35 pages. the police were required. usually organized around the use of the $7.50 NEMA Members, $10 non-mem- bers. function space alone. Q. 4. What aspect of renting a facility is the most time consuming? As you can see, there are tremendous The Employer's Handbook: A Guide differences in the way museums con- to Personnel Practices & Policies This depends on the size of the museum for Museums and the type of business it attracts. duct facility rentals. The “moral” of the The revised June 2004 Handbook Weddings and other social functions story is that the museum is in the driver’s includes expanded sections on personnel such as showers and retirement parties, seat in developing a rental program. For policies, orientation and evaluation, which have strong emotional signifi- one thing, every museum is unique, with employee benefits, and discipline and cance, require function managers to its own capabilities to host an event. No termination. Information on state and museum should feel pressured to host a Federal employment laws has been spend a great deal of time working with updated. HR professionals from throughout clients prior to the event. The amount of type of event that they do not believe New England have offered their expertise experience that the clients have with they can carry out successfully. The to ensure its accuracy. A complimentary event planning also affects the amount satisfaction and safety of the guests— copy was mailed to all Institutional of time function managers need to spend not to mention the museum’s reputation Members. 90 pages. with them. and resources—are on the line. $15 NEMA Members, $25 non-members. Function staff should never underesti- Properly structured, a facility rental pro- Loan Policy Service mate the importance of internal museum gram can be a tremendous asset to a NEMA has broadened and expanded its communication, or the amount of time museum. It can provide much needed Loan Resources. This service gives required to ensure that every depart- income; create new relationships with Institutional Members access to more than potential visitors, donors, and volun- 16 categories of policies and reports ment that will be affected by an event created by museums of all sizes and stays up-to-date with any changes that teers; promote greater staff involvement disciplines. The complete list is available occur. As Janet Rosetti remarked, “It in the public dimension of the museum; on the NEMA website. If you would like makes a big difference when facilities even encourage a museum to strengthen advice on which ones to choose, call the staff demonstrate to other departments other areas of its operation, from the NEMA office for personal assistance. that they respect their place and author- website to visitor safety. As museums Academic Membership Programs ity. I try to make sure that other depart- continue to gain experience in this area NEMA has created two new membership ments know what I know as soon as I and share their knowledge and sugges- packages for universities and colleges have new information.” tions with one another, they will be able with programs that promote the education to expand their programs with more and of future museum professionals. Please Another time-consuming aspect of fa- contact Jane Coughlin, Operations Man- cility rentals is often answering requests more confidence and greater success. ager & Membership Coordinator, for details for information from people who may be Many thanks to the museum profession- at 781-641-0013. interested in the site. Many museums als who graciously gave their time to be New Membership Category make their rental program brochures interviewed for this article: Dana Devoe, NEMA has created a new Corporate Mem- available in an .html or .pdf version; this Blithewold Mansion, Gardens, and Ar- bership category for Independent Museum saves money on printing and postage. boretum; Jen Harmon, Portland Mu- Professionals, with Corporate benefits tai- seum of Art; Sara Murphy, Higgins Ar- lored to meet the needs of these col- Q. 5. What do you consider to be the leagues, including the opportunity to ap- greatest area of potential growth in mory Museum; Janet Rosetti, Worcester pear in the On-Line Product & Service your facility rental program? Art Museum; Amy Sherwood, Strawbery Directory. Please visit our website for All of the museums we interviewed had Banke Museum; Emily Stearns, Wenham further details. considered how to expand the range of Museum; and Sheryl White-Vincent, Museum of Science, Boston. 5 NemaNews/Fall 2004
  • 4. The Museum and the Caterer: A Value-Added Relationship By Jim Lawler A generation ago, most museums would borne by the museum. In particular, An effective visitor food service can have considered it somewhat undigni- smaller properties can outsource their also bring significant ancillary benefits. fied to aggressively pursue event rental entire marketing effort, subject to ap- Food service can increase the length of and catering business. Today, even fa- propriate contractual guarantees. In stay, which will enhance per capita cilities with modest attendance have most cases, a caterer must agree to a spending in the museum shop and will discovered that these activities can of- minimum site-specific marketing com- be a factor in promoting membership. fer a significant annual income stream, mitment as part of its contractual obliga- Restaurant discounts or member reser- regardless of the economic climate. tions. vation policies can be part of the added Many museums with an annual atten- The issue always arises as to whether value package for donors. With the ex- dance of fewer than 100,000 realize six- an exclusive caterer can provide the ception of the highest attendance facili- figure income. The two major income creativity and the range of price points ties, visitor food service, whether it be streams are rental fees and catering com- to satisfy a diverse market. In part, this a snack bar, a café, or a table service missions. Often, other components of is a contractual question, dependent restaurant is a loss leader economically, events, such as rented equipment, mu- upon the museum’s assessment of the although a superior café or restaurant sic, and flowers are also commissionable. resources within its marketplace. There may prove to be an important adjunct to In the past, many museums allowed a are many off-premises caterers that can the museum’s development activities. wide variety of caterers to use their operate at a broad variety of price points, Typically, visitor food service is a loss facilities because they believed that this provided that the contract with the in- leader from the caterer’s perspective as policy removed a deterrent to rentals for stitution allows them to do so and that well, although he or she may receive those clients with a marked caterer pref- they receive clear direction from the business from other events that are held erence. In practice, however, clients in client. after hours, elsewhere on the museum search of alternate venues clearly select grounds, or in conjunction with local the venue first and the caterer second. events. There are institutions that pro- Visitor food service is an Most museums believe that working vide food and beverage service for equally vital part of the with an exclusive caterer or maintaining themed candlelight dinners; car, boat, equation... Any museum a very short list of approved caterers or antique shows; and concession with a length of stay of an leads to the most effective stewardship stands at community festivals. Whether hour or more will find that of museum property. They also believe or not these events are commissionable, visitors demand some type that these relationships offer an incen- museums may also benefit, since par- of refreshment. tive to caterers to share revenue. ticipation in these events often repre- Museum policies concerning eligibility sents outreach to a diverse community. and rental fees will often determine the In-house Catering Most museums are considering the best magnitude of the catering opportunity. Internal catering offers museums major ways to utilize the real estate value of Life cycle events, particularly weddings, benefits. It must be clearly understood their space when the exhibits are closed offer the highest sales volume to cater- that the client institution is the most to the public. Implementation of an ag- ers, but by their nature they are high favored nation. Our firm generally ne- gressive rental program is a particularly maintenance business. Other important gotiates a combination of discounts for effective strategy. We have worked with categories in many markets include ga- smaller events and, for galas and larger a variety of clients to develop yield las for other not-for-profits and con- events, sets the price at cost plus a small management programs similar to those vention or meeting business. For a mu- percentage. The annual savings can be used by the on-premise catering and seum, the economic impact may be sig- considerable. airline industries. nificant, even as the events it chooses Visitor food service is an equally vital In summation, these revenue streams to host influence its community pres- part of the equation, although it does are “low hanging fruit” in comparison to ence. not drive the income stream. Any mu- multi-year development efforts. The Commissions ranging from 10% to as seum with a length of stay of an hour or impact of a well-conceived event rental high as 25% (depending upon operat- more will find that visitors demand some and catering program can be an income ing circumstances and the sales base to type of refreshment. With a two-hour stream that is self-renewing with little which the percentage is applied) often length of stay, some food service be- respect to the business cycle. equal or exceed rental revenues. In ad- comes essential to prolong the visitor experience. In fact, tour operators will Jim Lawler is president of JGL Management dition, an exclusive caterer frequently often consider restaurant, café, or box Services—food and beverage consultants assumes the cost of marketing the rental with specialization in the arts. He can be facility, covering both production and lunch programs as important elements reached at 609-683-1227 or by email at media charges that otherwise would be in the development of their packages. jglmgtserv@msn.com. NemaNews/Fall 2004 6
  • 5. Vending Machines Provide Food, Beverages and Possibly Profits By Arthur M. Manask Vending machines are a cost-effective— and other venues that offer high visibil- machines with your own staff, collect- and possibly income-producing—way for ity for their product line. ing the sales and using the sales to pay many museums to provide refreshments Sometimes local bottlers will rent cold the machine rent. Not counting the cost to visitors. This article addresses how to beverage machines to an institution and of labor, storage and inventory, this is obtain and maintain this equipment for the sell the institution the product (sodas, probably the best first option to con- institution’s greatest benefit. bottled water, juices, etc.). The institu- sider. This option is generally not avail- There are two primary sources for vend- tion stocks the machines and collects able for snack (candy, chips, danish, ing machines: local soda bottlers (Coca- the revenue, profiting when money is cookies, etc.) machines. Cola and Pepsi Cola) for cold beverage left after paying for the machine rental There are other ways to maximize the machines, and route vending machine and beverages. return on vending machines, by making companies that offer a variety of ma- Route vending machine companies nor- sure that they are placed in popular chines with different beverages and mally provide museums with the equip- locations and attractively maintained. food. The local bottlers will usually pro- ment and always provide the product In particular, if you are a small institu- vide, fill and maintain the cold beverage and related services, as well as collect tion and vending machines represent machines at no cost to the institution. the revenue. Depending on the total your primary visitor food service, put They also collect the revenue and, de- revenue versus the number of machines, them in highly visible places—high traf- pending on the total sales volume gen- the company may pay a percentage of fic paths, visitor entrances and exits, erated, pay a percentage of the revenue the revenue to the institution. staff/volunteer areas and outdoor tour- to the institution. ing spaces are ideal locations. Commissions from either bottlers or Local bottlers may be interested in an route vending machine companies run The machines certainly don’t have to exclusive rights agreement if your insti- at about 10% of revenue. However, this look ugly. Some vending machine pro- tution has a high profile in the commu- percentage may be less, or zero, de- viders allow exteriors to be customized nity, hosts a large number of special pending on the revenue generated in (with color and even personalization) to events or facility rentals, and/or wel- comparison to the company’s capital fit in with your interior or exterior décor. comes many children as visitors. The investment for the machines, service, Enclosures can be made to hide the top, agreement usually stipulates that the repairs and maintenance. If the machines sides and back of the machines, so visi- bottler’s product line will be used exclu- are in a highly visible location and tors see only the front product display. sively at your institution for all food 100,000 visitors per year each spend an A small seating area or tables and chairs services, both visitor service and spe- average of 50 cents ($50,000), the ma- and trash receptacles near the machines cial events. In exchange, your museum chines could return about $5,000. make them more inviting. will receive cash and/or in-kind contri- Keep outdoor machines in weatherproof butions, corporate sponsorship, mar- If your institution is very small (visitor count and paid/volunteer staff) it is im- enclosures, and if necessary, install se- keting, or promotion. An annual cash curity doors. Place a sign on the ma- donation could amount to approximately portant to talk to the local vending ma- chine providers to determine their mini- chines stating that cash is emptied daily. $5,000 if your institution has about 200,000 visitors annually. mum (sales) requirements. Normally With careful planning, and for a modest vending machine suppliers will require investment of resources, vending ma- Before entering into any agreement, care- each individual machine to do a mini- chines may prove to be the answer for fully review the bottler’s pricing for all mum weekly $ amount of sales in order many museums that wish to expand products and supplies (cups, etc., if to justify having it onsite. This may visitor services, increase the average necessary). Have the pricing reviewed mean in a seasonal location, that the length of stay, and improve the comfort by the companies that cater the special machine will require a subsidy (out of of visitors and staff alike. In many situ- events at your museum and, if appli- pocket payment by your institution to ations, vending machines represent an cable, by the visitor food service opera- the vending machine company) during opportunity for increasing the museum’s tor. Vendors should provide market- some months and in busier (visitor) corporate support and earned income; competitive pricing for all products and months you may earn income that will at the very least, a bit of additional rev- services. The prices should not be el- offset the subsidy. enue is icing on the (packaged) cupcake! evated and returned to you as a dona- tion, rebate, or corporate sponsorship. Potentially the most cost-effective ap- © 2003 Arthur M. Manask. Manask is presi- proach for an institution that primarily is dent/CEO of Arthur M. Manask & Associ- Most Coca-Cola and Pepsi bottlers are interested in beverage (juice, water and ates and author of the book The Complete very familiar with these agreements and sodas) vending, would be renting the Guide to Foodservice in Cultural Institu- usually like entering into them, espe- machine(s) from the local Coca-Cola or tions: Keys to Success in Restaurants, Ca- cially at museums of science and natural Pepsi-Cola bottling company, purchas- tering, and Special Events. He can be reached history, children’s museums, aquariums ing the product from them, filling the at 800-686-8813, or by e-mail at artm@manask.com. 7 NemaNews/Fall 2004
  • 6. Achieving Success in Your Museum Store By Judy Flam and Arch Horst Performance in the retail industry con- How Much Money Can The have approximately one square foot for tinues to be lackluster and the impres- Museum Store Make? every 175 visitors. A store that is too sive growth experienced in the museum How much money a store can contribute small will not be able to reach its sales retail field in the late 1990’s will be diffi- to the museum’s operating funds de- potential; a store that is too large will cult, if not impossible, to achieve in the pends on five factors: merchandise se- either look barren or have excessively near future. And now, more than ever, lection, the number of visitors, store high inventory costs just to keep it fully museums need to optimize earned in- size, store location and the store’s man- merchandised. come to support their programs. In a agement practices. The location of the store within the period of slow (or no) retail growth, how Merchandise selection has a profound museum will also have a significant ef- does a museum administrator or store impact on gross sales and on the extent fect on its performance. We have seen manager assess whether their store is a to which a store achieves its mission of too many stores that are relegated to off success, providing a reasonable amount “extending” the museum visit. As dis- the beaten path, left-over space. Too of earned income, or whether there is cussed in greater detail below, a store few visitors find these stores and no potential for further growth? without merchandise to appeal to all of amount of clever merchandising can The Attributes of a Successful its market segments will not live up to its overcome their bad location. The store Museum Store financial potential. Nor will a poorly should be located near the main en- Success for a museum store is threefold. merchandised store reflect well on its trance/exit so that visitors will notice it institution. It is essential that the shop upon entering and stop to shop when • “Extending” the visitor’s experience manager and buyers constantly seek leaving. In the ideal location, the store by offering merchandise that is ex- out new products that relate to both the does not overly influence the visitors’ pressive of the museum’s holdings, museum’s mission and the interest of first impressions of the museum but is exhibits, and programs. the visitors. easily accessible to the visitor after expe- • Providing an important (and expected) riencing the exhibits or to the destination The more visitors who attend a museum, visitor amenity that reinforces the shopper who is not a museum visitor. the greater is the potential for gross visitor’s positive impression of the sales and net revenue. The most com- Finally, because a museum shop is a museum’s image. monly used standard of performance in business, its success is also dependent • Generating funds that support the museum retailing is gross sales per visi- on good management practices, par- museum’s programs. tor, and it varies with the type of insti- ticularly buying and pricing procedures. There are many successful museum tution. MarketPlace Associates has The museum store manager must buy stores that have met the three criteria of worked with over 90 museums, cultural larger quantities of fast moving items so success. Each store featured a merchan- institutions and park stores, and has as to never be out of stock, set the price dise mix that reflected the museum mis- tracked the museum retail industry for of merchandise to realize the maximum sion and visitor experience, covering a over 20 years. We believe that the fol- profit and put the “dogs” on sale to variety of price ranges as well as prod- lowing sales ranges are indicative of make room for new, more profitable ucts that were enticing to those who well performing stores: merchandise. visited the museum. Each store was an • Aquariums and Children’s Museums: Because the variables influencing fi- attractively designed and merchandised $1.50 to $3.00/visitor nancial performance are complex, there visitor amenity that reflected well on the • Fine Art Museums: $2.50 to $4.00/visitor is not a simple rule-of-thumb for estab- museum. And each store had converted • History Museums: lishing a reasonable net profit (after these qualities into a financially suc- $3.00 to $5.00/visitor accounting for all of the store’s operat- cessful operation. • Science Museums: ing costs) for a successful museum We believe that these three attributes of $2.00 to $3.50/visitor store. The net profit in a successful a successful museum store are mutually store in a small museum might be only There is not a gross sales per visitor supportive and very achievable. But 10%, while a successful store in a large figure that works for all museums within how does one assess what is a “suc- museum (over 500,000 visitors) can real- a given category; but these ranges per- cessful” museum store in times of gen- ize a net profit in excess of 25%. mit one to judge whether a store is erally stagnant retail performance? Here grossly under performing or surpassing Is the Store Serving the are our answers to the questions that industry standards. Museum’s Market? can lead a museum and its store manager The size of the store also influences Given the importance museums place to a more complete understanding of a success. A store in a small museum on their mission, it is natural to think that store’s potential and to the strategies should have approximately one square all decisions affecting a museum store required to sustain or achieve success. foot for every 75 to 100 visitors. Larger should be made from the museum’s museums (over 300,000 visitors) should curatorial and educational perspective. NemaNews/Fall 2004 8
  • 7. This point of view, however, overlooks sons change so do the visitors, and the special, which aspects of the institution the fact that if the customers’ needs and location of merchandise and the empha- are most popular and what merchandise interests are not met then there will be sis given to certain merchandise also will best extend the visit. Combining the no retail transaction and, consequently, needs to change if each season’s cus- results of the research with his/her retail less profit and less support for museum tomers are to be well served. experience and creative skills, the buyer operations. Each museum shop should establish for is able to create a mix of merchandise To ensure that a store serves the visi- itself what are its largest, and most lu- that is a true reflection of the institution. tors, the successful museum retailer crative, market segments. Only then can The immediate payoff for such diligent continuously refines his or her sense of the shop begin to effectively organize preparation is that the merchandise that the museum’s visitors/customers by its merchandise categories and its sell- most relates to the museum will prove to answering the following questions: ing space. There are many methods that be some of your store’s best sellers. For Where do they come from? What is the can be used to accurately identify the instance, a museum with a multi-cultural age range? Generally, what are their market; the underlying principle of each orientation will find it easier to sell income levels? Why did they come to is to discard all preconceptions and origami paper or shadow puppets than the museum? How long did they stay? look with a fresh eye at who is visiting a science museum. What did they do during their visit? the museum, who is shopping in the When developing a buying strategy, What did they like about the visit? store, who is buying the most, and what product range and price points should Answers to these questions will reveal is being sold. also be considered. A rule of thumb that visitor preferences and valuable clues If a museum shop has maximized its will prove useful is: “the larger a for creating a visitor-focused store. In- ability to sell to its primary market — its museum’s attendance, the larger the terestingly, answers to these same ques- visitors — it can investigate broaden- shop, the broader the product line and tions can also help museum staff refine ing its market. Reasonable strategies to the wider the price points should be.” the programs and services provided for consider are: promoting the store with The buyer for a small shop must be more the visitors. special events (book signings, story precise in product selection as there is Understanding the visitors’ interests telling, “holiday” shops); attracting the less space and capital for product clas- and needs does not require that the attention of motorists and pedestrians sifications of great breadth. museum’s cultural and educational mis- with creative window displays, attrac- Where can the store find new merchan- sion be overwhelmed by “crass con- tive signage or striking building improve- dise? The good news is that untapped sumerism.” The mere fact that the visi- ments; and ensuring that all museum merchandise resources abound. Local tors have chosen to visit a particular literature and group registration materi- and national trade shows take place museum indicates that there is a signifi- als prominently mention the store and throughout the winter and spring and cant overlap of the visitors’ and emphasize its mission and merchandise. again in the late summer/early fall. The museum’s concerns. For instance, when It is possible to attract “Destination Museum Store Association Annual planning the store for the United States Shoppers”; many successful museum Meeting Trade Show and the New En- Holocaust Memorial Museum, we re- stores have monthly sales figures that gland Booksellers Association Fall peatedly asked: “What will the visitor’s do not track with visitation. But reach- Show are also excellent sources for experience be like?” “Will they be look- ing the non-visitor market is not a sub- museum quality merchandise. Many ing for a store?” “What will they want to stitute for selling well to the museum major cities across the country have buy?” The answers to these and other visitors; it is a benefit of successful permanent wholesale markets that are questions led us to establish a merchan- retailing to those visitors. open through the year. And catalogs, dise mix that was almost exclusively trade magazines and sales representa- books–a merchandise mix that met the Is the Store Selling the Right tives can be invaluable resources as needs of the visitors and was reflective Merchandise? well. A successful buyer leaves no stone of the museum’s mission, collections, The answer to this question begins with unturned, including constantly shop- exhibits and programs. “know thy museum.” A skilled buyer, ping other stores. before exploring the marketplace to re- Understanding the visitors often means Is the Store Enticing to the search and select merchandise, will study that the store needs to change periodi- Museum’s Visitors? the museum’s mission, exhibits, pro- cally. This is a retail reality that might A successful museum store is engaging grams and collection. An excellent way seem indecisive, lacking in commitment. and visual merchandising—the loca- to ensure that the store well represents In fact, retailers have learned that if they tion and arrangement of merchandise— the museum’s mission and exhibits is are to increase sales and better serve is critical to engaging the customer. The for the manager and critical store staff to their customer they must continually featured displays should be artfully ar- periodically tour the exhibits and par- adjust the merchandise mix, relocate ranged, the merchandise grouped by ticipate in programs as if they were “visi- merchandise in the store and mark down category to ensure maximum exposure, tors.” In doing this, they will refresh poor selling or no longer related mer- the shelves kept well-stocked and well- their sense of what makes their museum chandise. In many museums, as the sea- continued on page 14 9 NemaNews/Fall 2004
  • 8. Focus Your Promotion Efforts with a Marketing Plan By Becki Swinehart (This article orginally appeared in Museum If your store doesn’t already have a Threats may include that state funding Store, vol. 32, issue 1, Spring 2004) mission statement and brand statement, for the arts has been cut and a similar for- A special event is coming up, so you run it’s useful to develop those before start- profit retail store just opened down the an ad in the local newspaper. Your mu- ing the marketing plan. After all, if you street from the museum. seum sends a newsletter to members, so don’t know what you’re marketing, it It’s often useful to collect thoughts you write an article about the store for will be impossible to market it effec- from multiple people for a SWOT analy- it. A television reporter called before the tively. For insights on developing these sis. What one person sees as a threat, holidays to include your store in a piece statements, see the Summer 1998 issue another may see as an opportunity. The about places to shop, so you cordon off of Museum Store. more honest and complete the SWOT a portion of the store to do an interview You probably already have at least some analysis, the better handle you will have with her. information on the store’s audience on what goals are realistic. All of these marketing efforts likely demographics — percentages by age, The meat of the plan helped bring a few more people into the sex, approximate income, zip code, edu- Before you even started the research, store, but were they the best use of your cation level, etc. You should also gather you probably had at least a couple goals time and money? Should you have done the museum’s demographics, which may in mind for the marketing plan — in- a bag stuffer instead of, or in addition to, be slightly different. crease sales, perhaps raise the store’s an ad for the special event? Should you Compare your stores demographics with profile within the community. The infor- spend your time writing press releases the museum’s demographics. Are there mation you gathered may have inspired for the media instead of a newsletter certain types of visitors who don’t buy some additional goals — increase sales article? anything at the store? For example, some to school groups or make the store more Creating a marketing plan will help you museums get a lot of school groups as visible within the museum itself. answer these questions as well as better visitors but they don’t make time to stop These are all good goals, but they must understand your audience, help you in the store. If so, one goal of the market- be developed a bit further to include a spend your marketing time more effi- ing plan may be to draw more of those form of measurement. If the goal doesn’t ciently and, ultimately, get the best bang visitors in and increase sales to them. include a measurement, how will you for your undoubtedly limited bucks. Also look beyond the basic demograph- know when you’ve reached it? ics to other audience characteristics like Getting started Some sample goals may be: Long before you start placing ads or lifestyle and cultural influences. Al- though the patrons of an art museum • Increase sales per visitor by 5 percent writing articles, you need to do research. between June and December of this Chances are you already know some of and those of a history museum may have similar ages and incomes, other year. the important information for develop- factors draw one group to art and an- • Increase capture rate (number of mu- ing a marketing plan — such as the other group to history. seum visitors who make a purchase) demographics of your customers — but The strengths, weaknesses, opportuni- by 10 percent within 12 months. getting other information may require a bit more digging. ties and threats (SWOT) analysis should • Improve inventory turnover by 0.5 take into account not only internal fac- turns within 18 months. Most marketing plans include a fair amount of background information that tors, but external influences as well. For You may come up with quite a few goals sets the stage for the meat of the plan: example, when examining the store’s that could require a lot of time and re- the goals, strategies and tactics. The strengths you may include quality prod- sources to reach. If so, you may want to background is critical because it helps ucts and excellent merchandising as well consult with your supervisor or even guide decisions on which strategies and as your city’s strong tourism draw and the museum director to help prioritize tactics to use. Marketers have dozens your museum’s place as a stop on sev- them. of tactics at their disposal — from Super eral regular bus tours. For each goal, you’ll need to come up Bowl commercials to fliers on car wind- Weaknesses might be that the store is in with some basic strategies and then shields — but smart marketers use the the basement of the museum, much of more specific tactics to reach the goal. ones that are most effective based on the merchandise is out of style and Strategies for increasing sales per visi- their research. shifting U.S. demographics project tor could he these: Background information can include, population decline in your typical cus- tomer base. • Encourage add-on sales to existing but isn’t limited to, your museum’s and customers. store’s mission statement and brand Examples of opportunities are that your • Get more visitors into the store. statement; audience demographics; and museum is planning a renovation and a strengths, weaknesses, opportunities expansion, and that you just got ap- Tactics for the strategy of encouraging and threats analysis. proval to start an online store. add-on sales could be these: NemaNews/Fall 2004 10
  • 9. • Train staff to suggest related prod- bring hordes of shoppers to your store, What Marketing Budget? ucts to customers, such as a book on begging to buy more. Now the chal- Tips for Small Stores the artist to go with a poster. lenge is finding the time and resources By Becki Swinehart • Create displays that “suggest” prod- to implement it. So your store’s total sales are less than ucts to purchase together, such as a Some tactics are quick, easy and inex- The Met’s marketing budget — that necklace, earrings and bracelet next pensive to implement, like creating at- doesn’t mean you shouldn’t create a to each other in a case. tractive merchandise displays. Many marketing plan. You’ll just have to be a Possible tactics for getting more visi- — like printed materials and special bit more creative with no-cost and low- tors into the store may be these: events — require a fair amount of time cost tactics. • Add signage within the museum to and money. To reasonably allocate these E-mail. Collect e-mail addresses from resources, you should create an imple- customers and ask them to forward your direct visitors to the store. mentation plan. e-mail messages to their friends. • Include mention of the store’s loca- tion and hours on all museum ads. First, find a calendar. If any of your Media coverage. If your store offers goals are date-specific — perhaps tied • Include the store on the museum’s unique products or activities, let local to a special exhibit — plug in the tactics reporters know via a press release. Be map of the building/grounds. for those first. Be aware that certain sure to say that the store’s proceeds • Educate docents/tour guides about tactics, such as direct mail and advertis- the store’s merchandise and encour- support the museum. ing, require a certain amount of lead time age them to mention the store in their to create and then to reach their target Customer service. It certainly doesn’t presentation. audience. cost you or your staff anything to smile You may find it useful to create a master and treat customers with respect and Consider working on some marketing kindness. Thrilled customers will mar- list of general marketing tactics that you initiatives during times that are less busy can select from and customize based on ket your store for you through word-of- for you and your store. Be realistic about mouth. the goal, strategy and audience. how much you can accomplish on top of Some general marketing tactics include your existing responsibilities and how Museum staff and volunteers. Explain these: much you can expect other staff to to co-workers how store sales benefit handle. the whole museum, and then provide • advertising — newspaper, magazine, some examples of how they might en- radio, television, billboard, public Depending on how your institution’s courage visitors to stop by the store. transportation signage and store’s budget is structured, you • public relations — press release, event may have to adjust your marketing plans participation/sponsorship around cash flow as well. Although the NEMA Benefit! • direct mail — postcard, special piece, adage “you have to spend money to newsletter make money” is often true, your museum’s finance director may have NEMA and • e-mail — special announcement • e-newsletter some limitations on when that money is W.B. Mason spent. • special events — book signing, cura- In the end, developing a marketing plan Discount Office Supplies tor presentation, toy demonstration will help you focus on your store’s • printed materials — brochure, flier, goals as well as provide a frame-work for NEMA & W.B. Mason have bookmark reaching them. Instead of haphazardly partnered to bring you the benefit • signage — within institution, in local sending out a press release here and a of discounted office supplies. neighborhood postcard there, you’ll have a more coor- From pens & paper-clips to binders • in-store — staff, displays dinated effort that you can measure and & colored paper, we have negoti- evaluate, then adjust for the future. ated unbeatable prices on the 100 Remember that your tactics should be Becki Swinehart was involved in de- supplies most used by museums. selected based on the audience you’re trying to reach. For example, if your veloping MSA’s first comprehensive In addition, W.B. Mason will meet audience demographics closely match marketing plan. or beat any advertised price you those of a local magazine with a limited Reprinted with permission from the find elsewhere. circulation, it may be more cost-effective Museum Store Association. This ar- Order by phone, fax or on-line. to advertise in that publication than in ticle orginally appeared in Museum Free, next day delivery for all orders the more widely read daily newspaper. Store, vol. 32, issue 1 (Spring 2004). All received by 1:00 pm. rights reserved, ©2004. Making it all happen For information or to set up an account So, you’ve developed a comprehensive call W. B. Mason Sales Manager marketing plan that you just know will Keegan Holt at 888-926-2766, ext. 1674. 11 NemaNews/Fall 2004
  • 10. Candlelight, A Glass of Wine and UBIT: A Food and Facilities Tax Primer By Jeffrey Hurwit Most readers probably have some fa- we now have museum architectural de- sioner, T.C. Memo 1997-395. That may miliarity with the basic premise of the sign created by UBIT regulation. be the case even if an exhibit opening, UBIT (Unrelated Business Income Taxa- A recent case has imposed additional tour or other educational component is tion) rules. Simply put: If your museum limits on the convenience exclusion. In included in the event. makes money on activities unrelated to IRS Technical Advice Memorandum 97- its tax-exempt purposes, the profit is 20-002 (1996), a museum opened an Exclusion #3: taxed at for-profit business rates. More Passive Rental of Museum Facilities upscale restaurant larger than needed technically, unrelated business income for visitors and staff. The IRS deter- The rental of real property, including is net income derived from a trade or mined that since it was designed partly function facilities, is not considered the business regularly carried on which does as a public restaurant and was adver- “active conduct of a trade or business”, not contribute importantly to the ac- tised regularly in magazines, the conve- but rather the “passive” receipt of rev- complishment of the museum’s tax-ex- nience exclusion did not apply. Note enues. So called passive revenues, such empt functions. the fact that restaurant patrons did not as endowment investment income, have This article focuses on the three major have to pay museum admittance fees long been excluded from UBIT. Internal exclusions to UBIT relating to museum was one factor weighed in the decision, Revenue Code Section 512(b)(3). How- food service. These exclusions likely but was not itself determinative. ever, if a museum provides services, mean that most of your food and facili- such as labor, food, catering, linens, To museums’ benefit, the rule of “frag- etc., in addition to simply renting out a ties profits are not taxable. However, the mentation” applies in calculating net UBIT rules are continually being re- facility then the rental arrangement is income. Museums may “fragment” res- subject to tax. IRS Technical Advice fined and at times seem to involve al- taurant sales (by separately recording most microscopic hair splitting. Memorandum 97-02003. sales to museum visitors and to the general public), and pay taxes only on As you can see, the factual variations Exclusion #1: sales to the general public. and legal distinctions relating even to Vending Machines to Four-Star Meals: these three exclusions leave many open Nontaxable As A Convenience to Visi- questions. Hopefully, this brief primer Exclusion #2: tors, Employees Outside Museum Facility Use for Edu- gives you a sense of the legal param- Whether snack bar, cafe, or fine restau- cational Purposes eters for the majority of UBIT situations rant, whether Snickers or crème brulée, Increasingly, museums use their facili- you will encounter. on premise food sales to employees and ties for outside business and social af- visitors contribute to accomplishing tax- fairs. Jeffrey M. Hurwit is founder of Hurwit exempt purposes because they 1) allow & Associates which provides compre- visitors to devote more time to the The legal issue is then whether an event hensive legal counsel to tax-exempt museum’s educational exhibits, and 2) is held primarily for business purposes organizations throughout the U.S. and enhance efficient museum operation by or museum/educational purposes (in abroad. enabling staff to remain on-site through- which case food/entertainment is inci- out the day. Food sales, like water cool- dental). Suppose an outside sponsor Copyright © 2004 Hurwit & Associ- ers, restrooms, and exhibit room benches, asks a museum to create an educational ates. All Rights Reserved. facilitate and enhance the museum ex- program for its participants, focusing perience. Thus, resulting revenues are on an exhibit, lecture or tour, and inci- not taxable. Revenue Ruling 74-399 dentally food and other services are UBIT Sources & Resources (1974). provided. Such an event contributes to accomplishing the museum’s purposes Internal Revenue Service’s Publica- At least that’s the legal conclusion. For and is therefore not subject to tax. IRS tion 598, Tax on Unrelated Business now. Usually. Technical Advice Memorandum 97-02- Income of Exempt Organizations. 003 (1996). www.irs.gov/pub/irs-pdf/p598.pdf. But as an example of how small facts make big legal differences, if a dining Nonprofit Law Resource Library, However, if the event is primarily fo- facility is accessible not only through www.hurwitassociates.com, contains cused around, for example, a cocktail the museum but also through a door dozens of legal resources for museums and dinner dance, a business meeting, directly to the street, then it has been and other nonprofit organizations and or an awards ceremony, then the educa- held by the IRS not to be primarily for foundations. tional aspects are secondary to other visitor convenience but for general pub- business purposes, and it is not “sub- lic use, and therefore taxable. Ibid. Thus stantially related.” Madden v. Commis- NemaNews/Fall 2004 12
  • 11. The Museum, the Baby & the Bathwater Bathwater Authenticity in the Information Age N EMA A n n u a l C o n f e re n c e October 27-29, 2004 Join us in Burlington, VT for three days of great sessions, networking with colleagues & special events. 3 Days of Professional Development Exhibit Hall More than 60 concurrent sessions are scheduled so that each timeslot You’ll be amazed at the variety of products and services presented in the represents a wide variety of disciplines. Whether you work in Collections, Exhibit Hall, open from 8:00 a.m. Wednesday ‘til 4:00 p.m. Thursday. Education, Exhibitions, External Affairs, or Museum Administration, you’ll discover a thought-provoking, high-quality program, led by presenters from Save on Costs around the corner and across the country. Need to catch a ride to the conference? Want to save on lodging expenses? Save on the cost of your attendance by sharing with a colleague. Limited For a closer look at museums in the Burlington area, sign up for an off-site openings are also available for conference volunteers, who save on program or an evening event—there’s something for everyone! conference registration fees. Call the NEMA office (781-641-0013) with your NEW! 101 Track information. For those new to the field or anyone who wants to brush up on the basics, Conference Registration we’ve created a multidisciplinary program of 101 sessions on a variety of Member rates: Full Registration: $150 (3-days), One Day: $95 topics. (Look for this symbol 101 in every time-slot!) Early Bird Deadline: September 21, 2004 Jobs Center For More Information Positions to fill, or looking for employment? Place or peruse job openings at Visit the NEMA website at www.nemanet.org for a downloadable program New England museums. Resumes can be left or collected during the book, including details on how to register for sessions and events, and obtain conference. hotel reservations. Please call the office at 781-641-0013 with any questions. Thank you! N E M A A n n u a l C o n f e re n c e S p o n s o r s Principal Sponsor Welcome Sponsor Supporting Sponsors Directors and Trustees Luncheon Wake-Up Coffee: October 28, 8:00 am Coffee Break: October 27, 3:15 pm Henderson Phillips Fine Arts Co. Art Shipping International Ltd. Richard White Sons, Inc. Bill Allen, Managing Director Bill O’Connors, President Kenneth R. White, Director of Business Lynn Marcin, Assistant Vice President PO Box 285288, Logan Int’l Airport Development 1627 I Street, NW, Suite 800 Boston, MA 02228 70 Rowe St., Auburndale, MA 02466-1596 Washington, DC 20006 781- 477 -9800 / 781-477-0400 (fax) 617-332-9500 / 617-965-8868 (fax) 202-223-5860 / 202-223-5866 (fax) 800-480-8977 (toll free) krwhite@rwsons.com; www.rwsons.com info@artshipint.com; www.artshipint.com Coffee Break: October 28, 10:30 am Reception Sponsor Exhibit Hall Reception Laura B. Roberts Scholarship Discover Europe, Ltd. Roberts Consulting Mike Induni, U.S. Director Tufts University Museum Studies Laura B. Roberts PO Box 435, Dublin, NH 03444 Certificate Program 1715 Cambridge Street, Cambridge, MA 02138 603-563-7077 / 603-563-7137 (FAX) Angela Foss, Office of Graduate and 617-492-5048 / 617-491-3566 (fax) 866-563-7077 (toll free) Professional Studies laura@lauraroberts.com discovereurope@earthlink.net Tufts University www.lauraroberts.com www.discovereuropeltd.com Medford MA 02155 617-627-3395 / 617-627-3016 (fax) University Products Curatorial Coffee Break pcs@ase.tufts.edu Fellowship BaileyDonovan, LLC http://ase.tufts.edu/gradstudy/ University Products, Inc. Betsy Bailey, Paula Donovan programCertMuseum.htm John Dunphy, Director of Marketing 1838 Elm Street PO Box 101, Holyoke, MA 01041 Manchester, NH 03104 800-628-1912 / 800-532-9281(fax) 603-625-9933 / 603-218-6065 (fax) jadunphy@universityproducts.com www.baileydonovan.com www.universityproducts.com 13 NemaNews/Fall 2004
  • 12. Achieving Success in Your Museum Store continued from page 9 EARNED INCOME organized, and the lighting should cre- answer. Their retailing instincts were SOURCES & RESOURCES Please note that the following is a sampling on ate drama and emphasis. Museum stores confirmed; the larger store has seen a the topic of earned income resources. are competing with hundreds, if not 50% increase in sales. But adjusting the thousands, of other stores for the visi- size of a store is not a panacea by itself NEMA 2004 Annual Conference tor/customer’s attention, and success- and should only be considered after A number of conference sessions will relate to the topic of this newsletter. They include: ful museum retailers utilize the full range addressing the other critical retailing Special Events Safety & Security; Facility of visual merchandise techniques as questions discussed in this article. Rentals; Paperless Marketing; Museum well as emphasizing the mission and The merchandising and construction Branding; Value Added Experiences; Muse- image of their institution. budgets available for improving an ex- ums as Social Experiences. Also essential to engaging the visitor is isting store or for building a new store Administration, Facilities & Services customer service. For a museum store to are often limited or non-existent. Be- Professional Affinity Group The PAG Lunch at conference will focus on reach its potential, it is vitally important cause every dollar spent on museum Museum Store Marketing and Management. that the entire store staff be familiar with store improvements cannot be spent on Please see www.nemanet.org/conf04.html for the museum’s exhibits and programs, operations, museums are naturally un- complete details. See page 21 for contact infor- appreciate how the merchandise relates comfortable appearing to invest too mation regarding this PAG. to the exhibits and programs, and be much in store improvements. However, Museum Stores comfortable talking with customers nothing depresses sales (and therefore Museum Store Association, http:// about the merchandise and the institu- the store’s long-term support of mu- museumdistrict.com. Provides resources for tion. The goal is for the store to be seum operations) more than a store that museum stores. Website contains downloadable known for its well-designed merchan- appears tired or cobbled together. Suc- articles on topics relating to but not limited to dise, it attractive appearance and also cessful stores are those that reflect and museum stores. 4100 E. Mississippi Ave., Suite for its customer service, giving it a de- support the image of the museum. In 800, Denver, CO 80246-3055, Phone: 303-504- cisive advantage over local corporate some instances this mandates a more 9223. retailers and the internet. The level of extensive investment; in others only Museum Store Association’s Managers customer service in many for-profit careful planning and merchandising is Guide: Basic Guidelines for the New Mu- seum Store Manager (Museum Store Asso- stores is declining and museum stores required, or can be justified. In either ciation, 2004). A comprehensive manual for that provide a higher level of service are case, store improvements should be seen managing a nonprofit store, from administering able to realize higher sales per transac- as an investment in a future income financial data to marketing. tion and attract repeat business. stream, not as an expense. The New Store Workbook: MSA’s Guide Typically, successful museum stores An Exhortation to the Essential Steps from Business Plan are properly sized and well located. This Retailing is a fact of museum life: Few to Opening Day (Museum Store Associa- tion) is often a challenge; floor space within museums can afford to ignore the poten- a museum can be at a premium and tial income, and a creatively merchan- Theobald, Mary Miley. Museum Store Man- agement (AltaMira Press, 2000). Offers store achieving the right design can be diffi- dised store is an opportunity to further managers advice and tools to develop initial cult. The optimum size for a store is educate and serve the visitors. In this store conceptualization and to improve prof- dependent on the number of merchan- regard, all museum stores–in history, itability. dise items for sale, the number of visi- fine art, science and children’s museums, tors and the fluctuations in visitor traf- zoos, aquariums and parks–have an im- Food Services & Facility Rentals fic. A store that is too large can be just NEMA Policy Loan Service. This service portant institutional role to play. It is the gives Institutional Members access to more as disadvantaged as a store that is too role of the museum director and program than 16 categories of polices and reports, small. We have adjusted the size of staff to appreciate what the store can including Facility Rental Polices. A complete stores, up and down, to better serve the contribute, programmatically and finan- list is available on the NEMA website. customers and better present the mer- cially, to the museum; and it is the re- Function Managers of Historic Sites and chandise. Most recently, at the sponsibility of the museum store man- Museums. An informal group of Function Sugarlands Visitor Center in the Great ager and staff to strive for success. Managers from the region. For more information Smoky Mountains National Park, we Judy Flam and Arch Horst are principals of or if you have a question e-mail designed a new store that was four fmhsm@msn.com. MarketPlace Associates, a retail consulting times larger than the previous store. In and design firm in Cambridge, Massachusetts. Allen, Judy. The Business of Event Plan- this case, the goal was to better accom- Judy Flam is the former retail director of the ning: Behind-the-Scenes Secrets of Suc- modate the surges of visitors in the peak Museum Shop at the Boston Children’s cessful Special Events (John Wiley & Sons, Museum. Arch Horst is an architect specializing Inc., 2002) seasons and the pulses of visitors arriv- ing on tour buses. The store’s manage- in museum retail design. MarketPlace Manask, Arthur T. and Mitchell E. Schechter. Associates advises museums throughout the Complete Guide to Foodservice in Cul- ment had observed that sales dipped country on issues of retail feasibility, store tural Institutions: Keys to Success in Res- precipitously in those situations and performance, product development, store taurants, Catering, & Special Events (John reasoned that a larger store was the operations and store design. Wiley & Sons, Inc., 2001) NemaNews/Fall 2004 14
  • 13. GOVERNMENT AFFAIRS HIRING a director or curator? Senate Finance Committee Scrutinizes Nonprofit Community a development director? This summer, the Senate Finance Com- white paper, released in conjunction NEED HELP WITH mittee has been examining fraudulent with the hearing, was the subject of a Recruiting? and abusive practices within the non- July 22 roundtable hosted by the Fi- Reference checks? profit sector and the need for better nance staff. Nearly 20 individuals from enforcement and oversight of chari- the nonprofit, foundation, academic, M useum ties. Committee Chairman Charles and legal communities were formally S earch & R eference Grassley (R-Iowa) has indicated he is invited to participate and nearly 80 planning to introduce reform legisla- more in the audience had the opportu- Marilyn Hoffman tion this fall. The erosion of public nity to comment on the dialogue. Principal trust in the corporate sector and gov- ernment and recent high profile scan- Independent Sector has taken a lead Executive Search & dals involving charities and founda- role in representing the interests of Reference Checking tions has led many to call for greater the charitable community. They have “Full Search or public accountability and transpar- created 13 task forces—two led by Just the Help You Need” ency in the nonprofit community. AAM (valuation and accreditation)— to advise them on their response to Manchester, NH / Boston, MA While nonprofit museums should not the white paper and in the ongoing A “headhunter” you can afford anticipate any immediate changes to discussion with the Senate Finance CALL OR E-MAIL TODAY current law, the more than 30 recom- Committee. TO DISCUSS YOUR NEEDS. mendations being circulated in a Fi- No obligation - A la carte services nance Committee white paper could, if Independent Sector’s initial response 603-432-7929 approved, change nonprofit report- to the white paper is available at Hoffman M ar@aol.com ing requirements and governance www.independentsector.org. Most www.museumsearch notable is the strong recommendation andreference.com practices and how charitable dona- tions of tangible and intangible prop- against the federal government en- erty are valued. The American Asso- gaging directly or indirectly in ac- ciation of Museums (AAM), however, creditation of nonprofits. This view is encouraging museums to be familiar was echoed at the roundtable by those with the implications of the Sarbanes- well-known for their strong views in Oxley Act of 2002. While the new law favor of nonprofit regulation. is aimed primarily at reforming the Reform legislation may be introduced corporate sector, there are two provi- by Sen. Grassley as early as Septem- sions that apply to nonprofits. ber. Advocates anticipate that it will Designers and consultants for be the first among many measures the most sophisticated To help guide nonprofits, Board Source, a national nonprofit focused aimed at ending abusive practices in High-density storage systems. on strengthening nonprofit boards, nonprofits. For additional information, and Independent Sector, a national contact Eileen Goldspiel, AAM assis- A s ,d s r b t r o lo itiuos f coalition for nonprofit organizations, tant director of Government and Pub- lic Affairs, at 202-289-9125 or Montel Systems and have issued a paper, which is avail- S e lF x u e M g te itrs f. able at www.boardsource.org. Orga- egoldspiel@aam-us.org. To let your nizations representing the nonprofit elected officials know your views, join community, including AAM, are ac- AAM’s Museum Advocacy Team® by contacting mat@aam-us.org. www.bibliodesignltd.com tively talking with Senate Finance Committee staff about proposals for This report is compiled from a recent charitable reform. series of articles published in AAM’s 1240 Park Ave. Suite 1F Newsletter Aviso. Copyright American New York, NY 10128-1754 At a June 22 committee hearing, three Association of Museums. Reprinted Tel: 212-876-1114 panels presented testimony on en- with permission. Fax: 212-369-1872 forcement, fraudulent and abusive practices in nonprofits, and the need Ebrown1240@aol.com for better oversight of the nonprofit Peter Diemand, Pres. community. The Finance Committee Elaine Brown, VP 15 NemaNews/Fall 2004