Money-losing Minneapolis Club gains traction with two-year turnaround effort
Executives, professionals and community leaders once filled the 125-year-old Minneapolis Club to network, drink and dine.
But times changed, and like other storied exclusive clubs, the club in 2019 was facing a drain of members, revenue and profit that had spread over several years.
Corporate members who drove revenue for 40 years were dying or moving on. Some companies balked at thousands of dollars annually for executive memberships. Some younger members quit for suburban golf clubs closer to home.
Being asset-rich and profit-poor was threatening the club’s future, board chairman Joe Puishys remembers telling fellow board members in 2019 when he was treasurer.
“We couldn’t survive on aging executives forever,” said Puishys, 64, a veteran Twin Cities executive. “We needed to invest in diversity, younger women and men. And we needed to invest in the building.”
There were rumors a few years ago of a fate akin to that of the former downtown Minneapolis Athletic Club. That private club was sold in 2011 to a developer for $5 million and converted into a boutique hotel.
The Minneapolis Club, although shrinking for years, has maintained a positive cash flow and is buttressed by a building that is valued around $35 million on the club’s books.
But club membership peaked in 2014 at 918 “resident” or household memberships. It fell to 714 by 2019 and declined further in 2020.
The nonprofit club lost $651,638 on revenue of $4.5 million, according to its 2019 tax return filed last June. Puishys said the loss grew to $870,000 in pandemic-affected 2020.
Staff, largely because of COVID-19, was cut from 135 to 57 in 2020. The board also accepted a Small Business Administration payroll protection loan.
Meanwhile, the club got to work. New top management came on in 2020 and launched a turnaround plan.
“We went from losing $870,000 to half that in 2021 and we doubled EBITDA [operating earnings] in spite of fewer members,” Puishys said. “The turnaround has begun, including a steady increase in membership over the last six months. Our goal is to get back to 900.”
CEO Jeff Arundel, a veteran Twin Cities restaurateur, was hired in 2020. He has overseen a nearly $1 million investment from refinancing debt and cash on hand in a first-phase remodel. That includes a redesigned marquee restaurant and turning two huge second floor rooms into a brighter space, moves that are already attracting weekend wedding receptions and more business gatherings.
The oak-laden club is busier. Puishys said revenue this year should top $6 million, compared to a $4 million low in 2021.
Management has automated the parking ramp to a 24-hour electronic service. The club expects to bring in an additional $300,000 annually in public-parking revenue.
Some member criticism has been muted by the financial improvement.
“If you don’t have 20% of the members complaining … something’s wrong,” Puishys said. “No change was not a good strategy.”
Arundel is assisted by Heather Hannig, a veteran hospitality executive who focuses on member experience and engagement. They have an eye for hospitality and a nose for what sells, Puishys said.
Minneapolis Club has temporarily cut the membership initiation fee from $5,000 to $1,000 to attract members. It will rise at some point to an unspecified amount.
The club provides no-initiation-fee memberships to select younger “influencers” who are expected to recruit new members.
Monthly dues were reduced about 25% to $335.
The typical member also spends about $500 monthly on food and other items there, according to the club.
“We’ve made it more affordable overall, but the martinis are still $19,” Puishys quipped.
The dated former restaurant was serving only 50 dining parties a week in temporary quarters on the third floor. So vacated first-floor space recently became Charlie’s, a nod to Charlie’s Café Exceptionale, a former downtown favorite for decades.
The club has opened Charlie’s to the public through July. Puishys said members get at least two-thirds of the evening reservations. The restaurant is serving 200 tables weekly so far.
The brighter, open entrance to the club now looks more like 2020 than 1920. The club also plans to renovate the locker rooms, the 15 overnight rooms and reopen a second-floor pub.
“We can’t declare victory yet,” said Russ Nelson, a long-time member and former board president. “But Jeff and Heather brought a new energy and put things in place.”