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book excerpt – one (every)man’s dream to own a pro soccer team

A native of Buffalo, NY, born to German immigrants, Ronald P. Maierhofer, 74, has been involved with soccer in the United States for eight decades. In 1942 his father started the first youth soccer league in Buffalo.  Ron and his brother signed amateur contracts with Toronto’s Belfast United of the Canadian Professional League when they were 16 years old (part of the contract was two cases of Molson Ale after each game). Ron was an All American player at Cornell and inducted in the school’s athletic hall of fame on the same night as Bruce Arena. He played for the LA Maccabees (signed for 7 cases of booze, and a bottle of Chivas Regal for every goal scored). He played for the US soccer team in the 1959-60 Pan American Olympic games (they placed third). Walter Bahr, he of the famous assist to Joe Gaetjens in the 1950 World Cup, recruited and coached three of Ron’s sons at Penn State (one son, Jeff, later played in the NASL). In 1970’s Texas he coached several of the first women to go on to UNC and help begin that eventual dynasty. He started the Cherry Creek Strikers, now the Colorado Storm, the 2nd biggest soccer club in Colorado. Tim Schutz, president of the biggest CO club, Rush, was coached by Ron as a youth.

That’s the short list. And all while having a serious, non-soccer business career on the side, which speaks to the entrepreneurial spirit that led Maierhofer in 1980 to be founding owner of Major Indoor Soccer League’s Denver Avalanche. His new book, No Money Down! How to Buy a Sports Franchise details his experience of buying and running the short-lived indoor franchise. Detailing how he financed the deal, hired staff, built the team, and marketed the franchise, the book is a peak into the past and proves at least in American soccer, that you don’t have to be a tycoon to follow your dream. Three decades later, it’s still true. “For a minor league franchise, any guy can own one,” Ron says. “That American dream is what the book is about, and it tells you how to make it a reality.”

Chapter 2 - The Game Plan and the Dream Award

by Ron Maierhofer

The holidays soon ended and my improbable game plan began to take shape. In 1979, professional soccer in the United States had more than one league. The three major ones were the North American Soccer League (NASL), the American Soccer League (ASL) and the Major Indoor Soccer League (MISL).

The MISL concept developed out of an unsuccessful attempt to play indoor box lacrosse. Ed Tepper, a real estate developer in Philadelphia, started the league in 1978. He convinced several arena owners in major cities, including New York, Cleveland, Cincinnati, Philadelphia and Pittsburgh each to loan the league money to get started. These owners hoped to increase their winter revenue by hosting professional indoor soccer teams.

In 1978, Ed Tepper arranged for a Russian soccer team to visit the United States and play an outdoor game in Philadelphia. Terrific rains occurred during the week of the scheduled game and it had to be moved indoors. The game was a great success and Tepper modified the MISL rules to suit an indoor arena and television. Media reports speculated that the NASL was playing indoors to ward off competition from the new MISL.

By the fall of 1980, the MISL was prospering and growing. Its teams included:

• The New York Arrows, owned by John Luciani, a major real estate developer and plastics manufacturing company owner in New Jersey.

• The Philadelphia Fever, owned by Ben Alexander, a relative of Earl Foreman, the MISL Commissioner.

• The Baltimore Blast; owned by Bernie Roden and later owned by Reds Scherer. Reds had a winner in the Preakness Horse Race.

• The Detroit Lightning, which was moved to San Francisco and became the Fog.

• The Hartford Hellions

• The St. Louis Steamers, partly owned by Baseball Hall of Famer, Stan Musial.

• The Cleveland Force, owned by Bert Wolstein, a real estate mogul, and nationally known as a developer of major shopping centers.

• The Chicago Horizon, owned by commercial real estate developer, Lee Stern.

• The Buffalo Stallions owned by Mike Geraci, Armand Castellani and principals of a major food market chain.

• The Wichita Wings; owned by Pizza Hut founders, brothers Dan and Frank Carney. It was later owned by Bill Kentling.

• The Phoenix Inferno, owned by Rick Ragone, another sports entrepreneur. Rick had been in the offices of the Miami Dolphins of the NFL, and General Manager of an NASL Soccer Franchise. He owned five antique car dealerships in Miami. He teamed with Rich Their of the Pfeiffer Salad Dressing empire to acquire the Phoenix franchise;

• The San Francisco Fog, owned by real estate developer David Schoenstadt, who was also a former anesthesiologist.

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Commissioner Earl Foreman, and Deputy Commissioner Ed Tepper, also had strong backgrounds in real estate and professional sports. Ed had been the President of the Philadelphia Atoms of the NASL. He made his money as a major real estate developer in the Philadelphia area. Earl, an attorney, was a former owner of the NFL’s Philadelphia Eagles, the Baltimore Bullets of the NBA and the Washington Diplomats of the NASL

The concept of the MISL was best captured in Venture, The ‘Magazine for Entrepreneurs’ in its April 1981 article about the league, “The idea was to invent a form of soccer that would sell in the United States and what Tepper and Foreman developed was a game combining elements of hockey and pinball as well as outdoor soccer. The game is played in four 15-minute quarters on a 200-ft long by 85-foot wide field covered with artificial turf. The bright red leather ball ricochets off walls and bodies pinball fashion, speeding up the action of the game. As in hockey, penalties allow short-handed goal attempts and substitution of players. With only five players plus the goalie on field for each team, the ball keeps moving.”

“We felt the game had to work on TV,” said Tepper in the same article, noting the league had a national game of the week on the USA cable network. “We decided to use a red ball because it bleeds on television. We went with two halves and four quarters with timeouts to make room for commercial breaks. We constructed a higher goal to bring the action of the head-shot and scissors-kick back into the game. One of the big problems with outdoor soccer is that you can sit there all afternoon and see a 0-0 tie. We wanted 12 goals a game and we have been right on target.”

“We’re more interested in providing entertainment than pure sport [. . .]” Tepper continued. “The MISL requires a team to have thirteen North Americans on a sixteen player roster. Americans want to see Americans.” Tepper elaborated, “Also, most U.S. players, anxious for the chance to play, come cheaper at $25,000 per year or less versus hundreds of thousands of dollars for established, world-class foreign stars.”

The NASL and the MISL soon competed against each other nationally. In some markets, they competed directly, although in 1983, they merged their indoor teams. I was aware of the competitive battles developing between these two leagues and that knowledge became part of my strategy as I developed my game plan. My first action would be to acquire rights to the arena. This would strengthen the application to either league and enhance my case to win a franchise award.

Indoor soccer is played within the confines of a hockey rink or basketball court. A green indoor artificial turf is placed either directly over the hockey-playing surface or over the basketball court floor. Denver had two professional sports teams that played games during the winter months. The Colorado Rockies were members of the National Hockey League (NHL). The league moved it to New Jersey in 1980 and it became the New Jersey Devils. The Denver Nuggets were members of the National Basketball League (NBA) and also played in the winter. Both teams played their home games in McNichols Arena, which has since been demolished and replaced by the Pepsi Center.

There were open playing dates in the schedules of both teams, which could provide scheduling opportunities for a professional indoor soccer team. How was I going to get the city officials to agree to make either arena available to a soccer team, especially when I had no money or other assets to guarantee any playing dates?

I evaluated both available arenas and decided that the major and larger McNichols Arena would offer the best opportunity to grow brand awareness and success. If my plan were to succeed at all, our team would have to play its games in a first class arena. Retrospectively, this was the first of a number of tough, questionable decisions, which were not so obvious to me at the time.

During this period, IHS was becoming more involved in international trade. Its President, E.M. (Ted) Lee had managed to attract the former Governor of Colorado, Steve McNichols, to the company as an international consultant. Steve was working with the U.S. Department of Commerce at the time and was focusing on developing foreign trade for Colorado companies. You guessed it! Steve was the brother of Bill McNichols, Denver’s Mayor.

I called Steve McNichols in early January of 1980 and discussed my dream with him. He thought another professional sports franchise, especially soccer, would be great for the City of Denver. Steve suggested that he should initiate a talk with Joe Nigro, a former state executive who worked for Steve while he was governor. Joe was the former Director of Public Utilities for the State of Colorado and was an attorney in Denver.

Wanting to remain in the background, Steve called me back a few days later and suggested I call Joe to arrange a face-to-face meeting with him to discuss a strategy to get the city officials on my side. Steve had previously indicated Joe was well connected with the City. I immediately called Joe, briefed him about my conversation with Steve, and arranged to meet the following evening for cocktails at the Denver Athletic Club.

Joe was a wonderful man and grandfather who had a low-key approach to life. We immediately clicked, and he too became excited about the prospects of another professional franchise in Denver. He was particularly excited because his grandchildren were playing soccer. Joe left the meeting that evening indicating he would make some inquiries as to the City’s posture about leasing the McNichols Arena for indoor soccer. I didn’t know at the time that those informal inquiries took place between Joe and Mayor Bill McNichols at the Mayor’s home. I now know all dreams have to be assisted by those who can help make them happen!

A few days later, Joe called me and asked if I would like to join him for an exploratory meeting with Denver’s facility officials. I was elated at the possibility and could not wait for the meeting to take place. A week later, Joe and I had lunch and reviewed our game plan before meeting at City Hall with the facility officials. The city officials were genuinely excited about the prospect of another professional team, and especially about the possibility of having another “long term” tenant in McNichols Arena. At this meeting, another stroke of luck occurred. Fred Luetzen, the General Manager of McNichols Arena, also attended. He was a German immigrant who loved soccer, and his children were playing it too.

The facility officials listened to my short presentation and obviously were primed to react positively. Joe then went to the heart of the matter and asked the City to give me an exclusive option on the arena for a professional indoor soccer franchise. I had specifically suggested to Joe, in our preliminary meetings, that the option not specify which league. I felt having a league name in the option would restrict my negotiating ability with either the MISL or the NASL. This turned out be one of the defining moments in the “game plan,” and successfully positioned me to be granted a franchise from either league.

Several days later, Joe called me to give me the great news. He had been successful in getting the city officials to write a letter giving me the exclusive option to negotiate a lease. The lease would be for professional indoor soccer within the City of Denver. It specifically confirmed that the games would be played in McNichols Arena. The option was based on my being awarded a professional indoor soccer franchise for Denver. Wow, I now had letter from the City giving me exclusive rights to field a team for indoor soccer. The first play of my game plan was a home run!

I had negotiated the exclusive option less than a month after returning from our vacation. So far, my out-of-pocket costs were for cocktails, dinner and lunch. What was my next step? Money! I decided to contact my brother, Howard (Howie) Maierhofer, who was a stockbroker and investment banker in San Francisco to ask him if he wanted to be involved.

Howie had a great love for soccer, and since the early 1960s had made many friends within the San Francisco financial community. He enthusiastically said ‘yes’ and indicated he would also talk to a number of close friends about investing. I told him I would contact the MISL about a possible franchise for Denver.

I telephoned Ed Tepper, the Deputy Commissioner of the MISL in Philadelphia. I with him my business and soccer background over the phone, and told him I had a group that was interested in a MISL franchise for the City of Denver. I explained that Denver could be a great franchise city for the league.

Tepper told me that the total franchise fee was $500,000. A deposit of at least $100,000 was required to make an application. Should we be awarded the franchise, the $100,000 deposit would be the minimum down payment due upon being awarded the franchise. Another criterion was that the applicant group had to have a substantial net worth. He reiterated that Denver was a very desirable franchise city and that a number of similar “groups” from Denver had also contacted him and shown strong interest. I again gave him my background and asked for a meeting with him and Earl Foreman. Ed came across as somewhat hesitant – so I unloaded the bomb on him!

During that call, I told Tepper that I had an exclusive written option from the City of Denver to use its major arena, McNichols Arena, for hosting games for a professional soccer franchise. I told him that the NASL had also expressed strong interest in Denver. I implied that if the MISL were not interested in my application, we would apply to the NASL. Tepper quickly changed his attitude and suggested we make immediate application to the MISL and the board of directors would strongly consider Denver as an expansion franchise for the next season (1980-81). My strategy had worked!

Now I had a place to play professional indoor soccer, and the MISL was showing strong interest. Still, I had no significant liquid net worth, financial partners or money. And, I needed the $100,000 deposit immediately!

Later that night, I called Howie and updated him on my conversation with Tepper. Neither one of us had that kind of ready cash, but Howie offered a suggestion. He had a neighbor who was a very successful real estate developer with a substantial net worth. His name was Al Bressie and he thought Al might be interested in being involved as a third partner with us. According to Howie, Al could easily handle the $100,000 deposit in return for an equal share of the equity in the franchise. Howie said he would present the idea to Al that night to determine his interest.

The next day, Howie called me back and confirmed that Al was definitely interested. Al suggested I send my resume to him for review. He would be interested in being part of the group if he felt comfortable with me. The MISL had a franchise in San Francisco at the time. It was named the “Fog,” and played its games at the Cow Palace. Al believed there could be substantial financial interest from his friends in the bay area.

The following week, Howie called back and asked if he and Al could meet with me in Denver. We arranged to meet at the Regency Hotel in North Denver, near McNichols Arena. I had never been personally involved with an investment of this magnitude and could barely sleep waiting for the day of the meeting. When the day arrived, I could not focus at work and anxiously waited for lunchtime.

I met Howie and Al, and we chatted about the opportunity. Finally, Al agreed he would front the $100,000 down payment required with the submission of the application to the MISL. He suggested the three of us form a General Partnership. He was familiar with this entity management form because of his real estate deals. After our application was awarded, we would then raise operational funds from other investors. Once we were granted the franchise, Al felt we should try to raise approximately $2.0 million to fund our first few years. He was familiar with an investment vehicle known as a Limited Partnership. He was involved in a number of these offerings with personal friends of his. Those investors could be limited partners, and the three of us would be the general partners.

After receiving our funding, we agreed that the Limited Partnership would pay Al back his $100,000 for the franchise application down payment. Al, in return for fronting the down payment and submitting his financial statement, would receive one third of the General Partnership. The General Partnership would retain 50% of the Limited Partnership after raising $2.0 million from private investors, who would become limited partners.

This was my first real exposure to the concept of OPM (Other People’s Money), and I was excited. However, I did not fully understand the Golden Rule: those with the gold, rule! Al sketched a general partnership agreement, literally on a paper napkin, and the three of us signed it, becoming the General Partners. This allowed us to make application to the MISL.

Howie and Al felt I should be the Managing General Partner and spearhead the application process. Al would have a check made out to the MISL for $100,000 when the application was ready to be submitted to them. Since I lived in Denver, I volunteered to do the initial work. However, we would have to decide on my role should we be awarded the franchise. We decided that I would resign from IHS and run the franchise on a day-to-day basis. We agreed to determine the details later.

The next step in my game plan was to create the illusion that our group had substance and desirability. I made calls to friends and acquaintances whose business credentials I felt would impress the MISL board of directors. They were chosen for a variety of team building reasons: soccer background, business acumen, television or cable background, marketing background, and their financial balance sheet. I then created a Board of Advisors for the sole purpose of making the application to the MISL. I contacted several of them, and all agreed we could use their names and resumes on the application.

Several days later, I completed the application form, and with the deposit check for $100,000, submitted our application to the MISL league office. Ed Tepper called me shortly after receiving the application and told me that the league was having its annual board of directors meeting in St. Louis on February 27, 1980. He asked if our group would be interested in being guests at the MISL’s first All-Star Game, its showcase event. I said that we would be thrilled. And, hopefully we could get a positive answer on our application.

Tepper indicated that the league board of directors would be voting on the Denver applications at the All-Star Game and that representatives from several other cities in which the league was interested would also attend. I mentally noted he implied several groups were making applications.” At any rate, I said we would be delighted to attend the game and were expecting to be awarded a franchise. Wow – were we getting any closer?

We flew into St. Louis the morning of February 27, 1980. When we arrived at the hotel, we were told that the league’s board of directors was meeting. I did not know it at the time, but Stan Musial, a member of the Baseball Hall of Fame, was on the league board. He and his group were the owners of the league’s most successful franchise, the St. Louis Steamers. The Steamers were averaging 12,000 fans per game. We also discovered that Cincinnati’s franchise had been owned by the infamous Pete Rose, another baseball legend, and the franchise later closed after its first season. I was impressed and hoped we could become part of this league.

Besides my brother and our wives, our traveling group included Al, Bob Brown, who was then a Vice President with Bill Daniels and Associates, one of the cable industry giants, and Barry Nelsen, a friend and business colleague from IHS. Both had agreed to be on our Board of Advisors. We sat for several hours in the lobby of the hotel awaiting the application decision. The time had come to determine the status of my dream!

Shortly after lunch, we were called into the meeting. At the time, we did not know that the owners and team officials of the Denver Zephyrs, a minor league baseball franchise, were also there waiting for a decision on their application.

We joined the board meeting and Earl Foreman introduced us. Earl nonchalantly said “Welcome to the league.” We had arrived! We had been awarded the franchise and the first phase of the dream was now real. Amazingly, it took only about two months to accomplish.

We saw our first professional indoor soccer game that night. What a night to celebrate! The Steamers had a full house for the MISL’s first All Star Game – 16,892 raucous fans. We were hooked! We left St. Louis the next morning, high in hopes and wondering how we were going to raise $2.0 million in operating capital we estimated we needed to sustain the franchise for the next several years.

I would soon be enmeshed in that wonderful entrepreneurial world, the world of taxation and venture capitalism. The dream had become reality. We had a long way to go to get operational, but we certainly had made great progress towards its fruition.

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This excerpt from No Money Down! How to Buy a Sports Franchise is republished courtesy of the Author.