Capitalize on the benefits and avoid the pitfalls of multi-year contracts.
By Holly O’Dell
Because event companies cater to a fluid and unpredictable industry, they value services and practices that can bring stability to their business. One such element that provides security and peace of mind is the multi-year contract. While they certainly aren’t foolproof, multi-year contracts offer plenty of advantages.
One significant benefit of the multi-year contract—which typically spans three years—is its ability to help tent rental companies establish a sales forecast. “When you’re making a five-year plan, planning for future years is easier,” says Marlene Livaudais, vice president of business development for Colonnade Events LLC in Houston, Texas.
Multi-year contracts also allow tent rental companies to better gauge their product needs. “It’s easier to invest in inventory when you have a guaranteed rental,” says Alexandre Renaud, international sales manager with Fiesta Tents Ltd. in Lachine, Quebec, Canada, whose multi-year contracts include the Montreal International Jazz Festival, the Tennis Masters Series, and the Grand Prix de Trois Rivi‘res. “If you’ve been servicing an event for 10 years but have no multi-year contract, and this client decides to create something with skyboxes, for example, it’s hard to invest in something like that without knowing you won’t get more than one year out of it,” Renaud says
Multi-year contracts can also save on administrative time because there’s no need to send quotes back and forth, nor do rental companies need to renegotiate contracts each year. Perhaps more importantly, though, such contracts give tent rental companies some leverage if the customer hires new staff.
“When a client changes purchasing people, they have something that says we are the official supplier for an event,” Renaud says. “They can’t play the game where at the end of the year they say something like, ‘Your takedown wasn’t as fast as expected.’ At least for that period [of the contract], you’re covered. Of course, if you don’t deliver the event properly, they can null the contract.”
Multi-year contracts can offer many advantages to clients as well. “What’s in it for them is someone who knows how to do the event and doesn’t have to re-create the entire picture from step one,” says Mark Clawson, CEO of Diamond Rental, based in Salt Lake City, Utah.
In fact, multi-year contracts are so favorable to customers that some tent rental companies would argue that the clients are the big winners. “In this industry, generally there are contractual outs one way or another,” Clawson says. “There are enough clauses that serve as escape hatches, allowing customers to pull the ripcord and jet out. [Customers] have all the leverage because we’re trying to get the business.”
For its multi-year contracts, Fiesta may build in a gradual price hike over the term of the agreement in an attempt to protect its interests. Still, Renaud admits, such a practice does not ensure a happy ending. “The danger with multi-year contracts is that they become null if the event doesn’t happen. There’s no guarantee that your customer will be there,” he says. “There’s not much you can do to protect yourself. That’s why we try not to push price hikes as far down the line as possible.”
Furthermore, Renaud adds, rental companies find themselves in situations where they are scrambling at the eleventh hour to meet a customer’s needs. “Sometimes you get requests at the last minute, and you have no choice but to honor them [because of the contract]. It forces you to jump through hoops to get the job finished.”
Clawson recounts a multi-year contract for a golf event that fell apart. “The sponsorship for this particular event dried up, the promoters backed out, and the last year we did it we were stiffed with $30,000 in bad debt. You want to be protected in a long-term contract, but sometimes your desire to keep getting that job makes you put blinders up.”
Rental companies can shield themselves from potential downfalls by carefully analyzing verbiage, particularly when the client makes its own changes to the contract or even supplies its own version. “It’s important to review loopholes in those clauses to make sure there’s nothing on which you can’t deliver,” Renaud says.
On the flip side, rental companies can welcome these pro-client contracts as a way to offer better services, says Grahame Muir, managing director for Arena Structures in St. Ives, Cambridgeshire, England. “We always give our client the opportunity to exit any contract if we under-deliver,” he says. “Thankfully, this has never happened, [but] this avoids Arena becoming complacent and taking our client’s work for granted. We are very aware that they always have a choice.”
Delivering the goods
Because multi-year contracts are more advantageous to a client, customer service becomes that much more important. Muir has found that delivering on client needs results in a stronger relationship—and a stronger event. “The end user may have exacting demands in terms of what they do with our product,” he says. “This can range from placing a car on the roof, creating a mezzanine floor and generally delivering the appropriate image and/or ambiance that the sponsor wishes to portray to their customers.”
They key to customer happiness is to provide plenty of ideas up front, Muir adds. With multi-year contracts such as Wimbledon, horse racing events, and PGA and IMG golf events, Arena meets customer requirements through “many meetings, discussions, preparing budgets and producing mood boards and computer visualizations of what we can construct,” Muir says. “Much of this preparation happens a year or so beforehand.”
Multi-year contracts are also an ideal way to forge long-term relationships, says Colonnade’s Livaudais. “We look at our multi-year contracts as partnerships,” she notes. “We try to understand their business and work with them to enhance their branding or their client’s experience, and to give them more than just a basic structure.”
To that end, Colonnade attempts to offer its multi-year clients fresh ideas while bringing uniformity to events. “We can bring them a consistent look, but I think we’re constantly offering new ideas to our clients,” Livaudais says. “Once you do something three years in a row, the look gets a little stagnant, so we try to upgrade or change.”
To make the vendor–client relationship the best it can be, rental companies need to be flexible, which results in stronger partnerships and, ideally, future contracts. “Every one of us operates in a relatively small community,” Clawson says. “The focus should be on the relationship between client and vendor and making sure the contract works for everyone. I think the benefit of being reasonable brings a lot of business back to you.”