If you want to ‘look under the hood a bit’ and see the economics of running a racing stable, read on!

We recently received a copy of an email from Fantasy Lane Stable, a fairly well known, medium sized thoroughbred racing syndicate. We don’t know these people personally; they seem to have a decent enough reputation and have been around awhile. The purpose of their email is to inform their partners of a series of new fees and rate increases (that’s a hell of a way to say happy new year if you ask us!) justified by a rather lengthy explanation of the ever increasing costs of running a thoroughbred racing stable.

While it IS possible to make money (a LOT of money sometimes!) in the thoroughbred business, there are without question a lot of easier, less stressful, less risky ways to try to earn a profit than owning thoroughbred horses. Indeed, as much as we run Kenwood as a business, with the goal of profit firmly in mind, we are all in it, at least to some extent, for the love of the horses and the sport. That said, we thought you’d find it informative to see what Fantasy Lane, a fairly ‘typical’ (although they might not agree!) racing syndicate, says about the costs of running their business and what they charge their partners. Since we’re copying their email here (they probably wouldn’t like it but it was sent out to the public via email and is not copyrighted material) a few words of explanation are in order.... We didn’t change or alter any of their words, but we did cut out some very lengthy rather self-serving paragraphs about how they try to save on vet bills and how little they pay themselves. You’ll see ...  where we did, and we have the entire unedited email we received available for anyone to review upon request. We have highlighted some of the main points we found most interesting in red and placed some of our comments after them in (blue). Take a look....

Fantasy Lane Thoroughbred Racing Stable LLC
Mailing Address: 166 Weed Avenue
Staten Island, New York 10306

Dear Partners:

Here we are on New Year's Eve as another year has come and gone.  Hard to believe that FLS is starting our 16th year.  Since 1999 we have never increased our prices or made any cost of living adjustment to what we pass along to our partners.

When we first started back in 1999 the "day money" that trainers charged was $55.  Today we pay $85. (Kenwood pays $48-$75, depending on location). The big name PR trainers charge their clients well over $125 per day; plus 14% of the purse earning, not the 10% our trainers charge.

Vet bills have gone thru the roof.  Back then in 1999 it was only about $150 per horse per month.  Today it's about $750 per horse per month; and if they are sick, sometime higher. ....  (Kenwood pays about $550 per horse per month, also higher if they are sick).

Transporting a horse in a box stall back in 1999 cost about $400.  Today, that same trip can cost anywhere from $1,500 to $2,500 depending on how many horses are on the van. (Vanning HAS gone WAY up recently. Depends on the trip, but to ship a horse from New Jersey or Pennsylvania to Florida, about the longest ship most people do, costs us between $800 - $1,000).

And just about every other cost has skyrocketed during the past 15 years.   During this time we have kept semi-annual training expenses at $600 a full share; $300 per half share and $150 per quarter share as it has never changed.

When FLS first started, the annual cost of training a horse was about $36,000.  Today as we head into 2014 some 16 years later, the cost is about $60,000 per horse. (Kenwood’s cost today is $28,000 - $42,000 per horse depending on location, about what they claim to have paid 16 years ago).

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The accounting expense to procure the K-1's and file the tax returns for each partnership, sent to you on or about March 31st each year, costs $2,100 per partnership. (Our structure is different, there are no K-1’s with co-ownership. The work our CPA does is included in the one time $750.00 payment we charge for overhead with each co-owner group).

Toward that end we're trying to get the cost down.  We plan to end our long time association with our current CPA.

If any of you would like to throw your hat in the ring to acquire the business, I suggest you call me.

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When FLS first started it was my now departed best friend, trainer Alan Seewald, who said how much work could FLS be?  He said, "About a dozen partners with a couple of horses. So Bob it will only take you a few hours a week."  Yeah right!  LOL

Well from the dozen partners we originally had back in 1999 FLS has grown 16 years later to over 500 partners.  We now have about 20 separate partnerships with nearly 30 horses and about another ten on the way.  The 25% increase is will come from the breeding operation that didn't exist when we first started back in 1999.

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I still recall the President of a competing major partnership asking me, how in the world could FLS survive by only making a 10% commission on horses that had an average cost of about $65,000?   (In fairness, a 10% commission doesn’t sound so unreasonable. Kenwood charges 0% commission. No markups, plain and simple).

He had heard from some of his cross over partners that I correspond with all of you on an almost daily basis, which he knew took me over four hours per day just to write my emails.  Some of his partners wanted him to do the same.  He replied he would do so, but only if they wanted to pay another $50,000 for him to hire someone.

He asked how I survived with my overhead of rent, utilities, employees, etc.  He said he marked up his horses over 100% to account for all of that.  He said FLS didn't buy more than 3 to 5 horses per year totaling at most about $300,000; whereas he was buying two dozen horses costing about $2 million and marking it up over $4 million. (Many large syndicates DO charge 100% markups. It’s why virtually all of their partners lose most, usually all of the money they invest. 100% commissions (and frequently hidden fees and markups) are obscene, and one reason our industry has a less than sterling reputation). He asked how could I survive making about $65,000 gross {with 10% of the purses}?  He was correct as I did not have an answer.

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The truth be told, I put in about 60 hours per week and Janet at least 30 hours.  For those of you who deal with Janet, you know how hard she works performing all her administrative duties, which include running to the bank, making changes to your status, issuing your refund checks for overpayments, as well as recording your buying and selling shares.  FLS does not participate in private sales one red cent as we help you as a courtesy.  Janet also makes all the necessary address changes, not to mention, the accounting.

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Thus effective January 1st, 2014, tomorrow, FLS must charge $300 per month for administrative fees. You will not have to pay anything out of pocket as it will be reflected in the year end statement sent to every partner.  ($3,600 a year in new fees, happy new year!)

It's embarrassing in that Janet only earned $12,000 in 2013 for all her hard work.  A full time bookkeeper would cost, at the very least $50,000 annually, and would never have the dedication or do what she does for our partners.  She is my right arm.

So starting on January 1st, each partner with a full share will pay $10 per month; those with a 1/2 share $5 per month and those with a 1/4 share $2.50 per month.

In addition, so we get back in touch with reality the new billing to all partners for semi-annual expenses, approximately every six months, shall be...

full shares $800; 1/2 shares $400; and 1/4 share partners $200.

I trust everyone recognizes this is called the Sport of Kings for a reason.  At FLS our communication skills are second to none.  On that I hope we all agree.

There's no other business that has not increased its prices one red cent in over 15 years, except for FLS.  In order to continue to provide first class service we really have no other choice.  May I take this opportunity to wish all of you and your families a healthy & Happy New Year.

Happy Holidays,
Bob
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Bob concludes with a list of their trainers. They seem like decent people with decent records. That said, compared to the people who trained for Kenwood Racing in 2013 (Steve DiMauro, Mark Salvaggio, Peter Walder, Ben Perkins and Ron Dandy), it’s hard to see why their partners are paying the premium pricing and added fees described in his email. One has to wonder about some of the costs Bob quotes. There are many successful stables that don’t spend $60,000 a year to care for each horse. Perhaps those numbers are accurate in New York (where the purses are much higher), and southern California (land of movie stars who will pay ‘name’ trainers almost any price despite purses too low for anyone to rationally race there economically), but at most tracks from Monmouth to Laurel to Philadelphia to Gulfstream to Churchill and beyond, these seem awfully inflated. One might almost wonder if there were some markups or profit centers for Fantasy Lane built in to that $60,000 figure, but we don’t know their structure so we can only speculate.

Bob is correct, this is a tough, tough business to make money in, for all of us. You need to pay attention to the bottom line, keep your overhead costs down, work hard, while still making sure the welfare of the horses come first!  If you want to give your partners a fighting chance to at least pay the bills, maybe make some money when they come up with a good horse, you need to offer a really good deal and accept a lot less money going into your pocket. That’s what sets our ‘Taste of thoroughbred ownership’ program apart from the syndicates. An owner friendly structure that delivers top quality results without the added layer of fees and markups.

Our purpose here is NOT to denigrate Fantasy Lane, or any other stable, but to point out that in a game with what everyone playing it agrees are some tough economics, we as industry professionals need to put the people who are paying for the horses, the owners, first! That's true for racing syndicates, trainers, vets, vanning companies, farms, etc. Yes, it's a tough business, a labor of love in many cases for a lot of hard working horse people operating on thin margins. But if we keep putting the costs on the backs of the people who make the game go, the owners (and the betters, by continually raising takeouts!), our industry will continue to shrink. Kenwood Racing created the taste of thoroughbred ownership program as a model, to show our industry the way to build our collective business and revive our sport by giving owners a fair shake. Maybe if more people operated this way, our industry would have a better reputation, and more new owners would be coming out to their local track to cheer their horses on.