The Falcons took stadium food back from the concessionaire, cut prices, and sold 53% more

NFL fan surveys showed the Atlanta Falcons failing on food and parking. Rich McKay, who heads the organization, found the food was outsourced to a concessionaire that set prices under a clause allowing 'market prices', defined as those of similar venues, which the Falcons thought a terrible definition. A box of 20 stir straws for a suite cost $36, the final straw for them.

A new stadium meant a new bid. Concessionaires all pitched the standard deal: a big upfront payment (one offered $20 million for equipment) plus around 60 percent of gross revenue. COO Greg Beadles argued that this put the concessionaire in a multimillion-dollar hole, so it could recoup only by buying cheap food, charging more and using fewer staff.

The Falcons instead took control and paid a concessionaire a management fee. They called it street pricing: $2 popcorn, $3 fries, $2 sodas with free refills, pitched as roughly a 50 percent price cut. Beadles' model expected at most 25 percent more sales and a $4 million shortfall, which owner Arthur Blank accepted. Most concessionaires balked at the idea, and the team went with one it already knew.

Results beat the forecast. Fans arrived earlier, and sales before kickoff matched the old stadium's whole-game total. The Falcons sold 53 percent more product, so the loss was well under $4 million, though soda refills averaged 3.7 per cup. NPR reported that the Ravens, Lions and Mississippi State were also cutting prices.

Stadium prices are high because the concessionaire's upfront check forces it to squeeze fans. Replace the check with a management fee and the team can set prices.

The concessionaire's upfront payment created a debt that could only be repaid by high prices, cheap food and thin staffing.

The team had no control over pricing under the old contract, so fan complaints went nowhere.

Fixed management-fee pay let the team treat concessions as a way to lift fan experience, with its owner willing to absorb a possible loss.

Elasticity worked in the team's favour: with a captive crowd and lower prices, people bought far more, at 53 percent, than the 25 percent modelled.

High prices are often a symptom of how a contract is financed. Fix who holds the price lever and the debt that drives it, and volume can repay the discount.

Other NFL owners were upset at the first league meeting, because concessions are a big revenue stream for them. The Falcons said their only regret was free soda refills. They also raised ticket prices to pay for the new stadium and stopped selling single-game seats, aiming at repeat buyers.