Five Questions: Joe De Francis
by Evan Hammonds
Date Posted: 2/1/2010 3:47:45 PM
Last Updated: 2/2/2010 10:55:14 AM
Joe De Francis
Joe De Francis began his career in racetrack management in 1984 and later took over the presidency of Pimlico and Laurel Park in Sept. 1989 following the death of his father, Frank J. De Francis. He remained CEO of the Maryland Jockey Club until Magna Entertainment Corp. purchased 100% of the company in Sept. 2007 (MEC acquired 51% of the MJC in July 2002).
For MEC he has also served as director and executive vice president. As a member of the executive management committee, De Francis was Frank Stronach’s principal advisor on technology and distribution initiatives including overseeing XpressBet and HRTV.
A graduate of Stanford University (1977), De Francis also holds a J.D. degree from the UCLA School of Law and a MBA degree in business economics from the UCLA School of Management. De Francis, along with his sister, Karin, has formed a group that has submitted a bid to acquire the MJC that is currently owned by the bankrupt MEC.
(The last two editions of “Five Questions” have been with David Cordish of the Cordish Co. and Jeff Seder of Blow Horn Equity, other bidders on the MJC properties)
We caught up with Joe over the weekend and asked him five questions:
Your group is one of several bidders trying to acquire the Maryland Jockey Club. What makes your proposal more appealing to Marylanders and the Thoroughbred industry?
“My sister, Karin, and I are life-long Marylanders and racing fans who between us have almost a half-century of experience in the business of managing racetracks. We also have extensive experience in the other major businesses that comprise the Thoroughbred racing industry—breeding and owning horses. This sets us apart from the other bidders in two important ways.
“First, we are thoroughly familiar with the competitive challenges and problems the Maryland racing industry has faced over the years, and continues to face today. We obtained this knowledge from literally decades of being ‘in the trenches and on the firing line’ operating Pimlico and Laurel, and breeding and racing horses in Maryland. It is absolutely invaluable in enabling us to craft the best possible business plan to make Maryland racing flourish again, and to restore Maryland to its rightful place of leadership, both in the mid-Atlantic region and nationally.
“Second—while this will be a business investment and our actions and decisions will be shaped and driven by sound business principles—Pimlico, Laurel, and Maryland racing will always be more than ‘just a business’ to Karin and me. Our father, Frank, put his whole heart and soul in to it, and led it to unprecedented heights in the 1980s. That legacy, and our emotional tie to it, create a fire and a passion that allow us to promise unequivocally that no other bidder will try harder or care more about making Maryland racing successful than we will.”
Magna purchased the MJC from your family in 2002 in a $117.5 million deal and you were active with Magna for several years. What has been your involvement in racing recently?
“I left MEC in October 2007, so I have been out of management for almost 1 1/2 years. That time away has been very helpful, because it has given me the opportunity to take a step back and look at things from a fresh and broader perspective. Often, when someone is immersed in dealing with day-to-day issues, they get so close to the trees that they can’t see the forest.
“With my friend and partner, Corey Johnsen, and some other close friends, I’m an investor in a syndicate that owns about 20 horses in Argentina. We haven’t had a stakes winner yet, but we sold one for $350,000 and we have some promising young horses, so hope springs eternal.”
Tell us something about the team you have assembled for your bidding group?
“We have a strong group, that has both the managerial expertise and the financial resources necessary to implement our business plan. Our plan will restore the financial health of both the Maryland Jockey Club and the broader Maryland Thoroughbred racing industry.
“The centerpiece of our plan is to do everything humanly possible to get Laurel Park back into the competition for the Anne Arundel VLT (video lottery terminal) license and to win that license. I am absolutely astounded at the way the entire saga of VLT gaming in Maryland has unfolded. The Maryland racing industry worked tirelessly for over 15 years to get the VLT legislation passed, and then to pass the statewide referendum in November 2008. The industry’s argument was simple, straightforward, and persuasive: Maryland racing, one of the largest employers and most economically significant industries in the state, and an important part of Maryland’s cultural heritage, had enjoyed great success until our neighboring states began arming their racetracks with VLTs in the late 1990s. With the Maryland tracks surrounded by competitors in Delaware, West Virginia, and Pennsylvania, who were using VLT revenues not only to boost purses and breeders’ awards, but also to finance substantial physical improvements and huge increases in marketing and advertising, Maryland was suffering and the playing field needed to be leveled.
“The former governor, the current governor and the Maryland Senate all publicly and strongly supported placing VLTs at Maryland’s racetracks by right in order to remedy this situation. The Maryland House of Delegates wanted competition for the VLT licenses, however. Thus, the legislation that was ultimately enacted did not award any license by right, and required Laurel to compete.
“Because MEC’s application was disqualified, we are now facing the worst possible outcome—no competition whatsoever and the possibility the license might end up at a local shopping mall. I could not disagree more strongly with the business plan of the Cordish Companies, or the assertions of its chairman on bloodhorse.com two weeks ago about the impact of their plan on Maryland racing. I believe that if the VLT facility—which will have more gaming devices than the Taj Mahal in Atlantic City or the MGM Grand in Las Vegas—ends up at the mall, Laurel Park will close as a racetrack. The Maryland racing industry—if it survives at all—will shrink to a fraction of its former size, with maybe a short spring meet at Pimlico as the last remnant of what was once a large, proud, and vibrant industry.”
I believe everyone in the industry could agree that the entertainment value of racing in Maryland is not what it could be. Can you share some specifics as to what your group would do to upgrade the experience?
“People with no background whatsoever at running a racetrack love to zero in on ‘entertainment,’ and talk expansively about all the money they are going to invest and all the wonderful things they’re going to do to enhance the ‘entertainment experience’ at the track. They miss the simple reality, however, that the basic product we sell to our customers is wagering on horse racing, just like the basic product that McDonalds sells is hamburgers. You can talk all you want about fish sandwiches, salads, Ronald McDonald, and “family fun centers,” but if McDonalds has bad hamburgers, then it’s going to fail even if all those other things are right.
“Don’t get me wrong—having modern and attractive facilities, good food, etc., are all very important, and new ideas and innovative approaches to enhancing the entertainment experience of racing fans are always welcome. A top priority, however, must and will be restoring the quality and attractiveness of the live racing, because that is the core product.
“A foundational cornerstone of our business plan—and we feel strongly the only viable way to achieve the modern facilities, new restaurants, and expanded entertainment options that everyone longs for—is to create one integrated facility, modeled after a first-class Las Vegas casino, where racing and VLT gaming are side-by-side. Racing patrons and gaming patrons will share common infrastructure—structured parking, road systems, the building itself—and common amenities—restaurants, bars, entertainment venues, etc. The cost of creating this facility will be financed by revenues from the VLTs as well as the Racetrack Facility Renewal Account, both of which are necessary in order to make such a development financially viable and thus a reality.
“There will also be tremendous marketing synergies between the VLT and racing operations, allowing racing to benefit from all the marketing dollars generated by the VLT operation. All advertising dollars will be directed towards getting people to come to one venue—Laurel—where they could experience and enjoy VLT gaming and racing, as well as the common amenities that will be available to all customers. The ‘Players’ Rewards’ program will reward customers for dollars spent on both VLT gaming and pari-mutuel wagering. Thus the ability to grow the racing business will expand geometrically.”
You’ve been around Maryland racing all of our life. What is one, singular moment that captured your imagination?
“Without a doubt, the 1989 Preakness (gr. I) between the great Easy Goer and the incomparable Sunday Silence. I’ll never forget watching them battle eyeball-to-eyeball from halfway around the far turn all the way through the entire length of the Pimlico stretch. It was my Dad’s last Preakness, and he began the trophy presentation with the words, ‘You’ve seen the best that our sport has to offer.’ Of course, he was absolutely right.”
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