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The big business of school fundraising
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Club's Choice currently works with schools and other groups in 19 states. The company's goal is to expand to all 50 states, and double its workforce to 1,000. (Image courtesy of Club's Choice)
School fundraising sales are big business in the United States. Revenue from all of the pizza, candy, wrapping paper and everything else students sell, runs into the billions of dollars every year. And it's not just school groups that are cashing in. The hundreds of businesses that help organize and supply school fund drives are making a lot of money as well. It's an industry that's as competitive as it is profitable. One of the largest education fundraising enterprises, Club's Choice Fundraising, is headquartered in Eau Claire, Wisconsin.

Eau Claire, Wis. — Inside an industrial park complex of office, warehouse and manufacturing space in this community of 60,000 in west central Wisconsin, a dozen workers staff a production line, churning out thousands of pizza-like snacks called Italian Cheese Dippers.

On one end of a conveyer belt, a hair-netted worker is placing pre-made pizza crusts under a machine that precisely squirts out a mixture of seasoned butter.

Down the line, grated cheese drops onto the crust. Another worker plops on a packet of marinara sauce for dipping. Seconds later, Italian Cheese Dippers by the thousands are shrink-wrapped, labeled and packed for distribution.

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Image Richard McHugh

"We will make about 12,000 dippers in an eight-hour shift here," says Richard McHugh, the president and owner of Club's Choice Fundraising.

"My family owns it. We started this company approximately 22 years ago, and we came up with a simple concept of a practical approach to fundraising -- which is food," McHugh says.

The Italian dipper production line is just one prong of a school fundraising empire McHugh has built over the past two decades. There's also a cookie dough plant in Kansas City. There are plans to begin making breadsticks and doughnuts. And what McHugh doesn't manufacture himself, he buys from other companies.

In addition to food -- from beef sticks to French silk pie -- Club's Choice supplies fundraising groups with gift items that run the gamut from scented candles to stationery and figurines.

"We're a very important part of the fundraising dollars that are generated and that are needed for those school budgets -- that tax dollars do not necessarily want to be put in these causes," McHugh says.

Club's Choice currently sells in 19 states. The company's goal is to do roughly $27 million in business this year. About $11 million of that -- less than half -- would go to the schools and other groups that sell Club's Choice merchandise.

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Image The Italian dipper line

The Eau Claire headquarters' office, production and warehouse space is a spotless and impressive testament to McHugh's business success.

"We have 7,000 square feet of office, 40,000 square feet of warehouse and manufacturing, freezers. We have near 100 cars and trucks and semis, and everything to deliver the products across the country," he says.

The key to Club's Choice success, McHugh says, is well-executed logistics.

Orders from students are electronically scanned into a database -- just one cog in a sophisticated production and delivery system which McHugh says allows his company to efficiently and accurately process orders.

"If they've got an apple pie instead of a cheesecake, they're very unhappy. And we do not want unhappy customers or groups -- so everything is to get the business back," he says.

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Image Prizes for selling

McHugh also has a large sales force. Sometimes they're working phones, other times they work school and parents groups in person for contracts throughout the upper Midwest.

"Our regional sales managers are based out of Eau Claire, and we have a corporate plane that takes them out on Monday morning and brings them back on Thursday night or Friday, so they're home with their family and very productive for the entire year," says McHugh.

Club's Choice is one of the nation's largest school fundraising companies. The Association of Fund-Raising Distributors and Suppliers estimates there are about 1,000 fundraiser companies in the United States.

"It's extremely competitive," says Russ Lemieux, the association's executive director. "I would say on average, any given school is going to have at least a half dozen or more options available to them in terms of the companies they work with and the type of programs they want to run."

"They try to sell themselves. They're good sales people," says Gary Bowen, the athletics director at Hermantown High School. Bowen coordinates all of that northern Minnesota school system's fundraising programs, and deals regularly with a host of fundraising companies.

They're making a lot more money than we are. ... it would be a whole lot easier for me to say, 'Give me $5 as a parent, and you don't have to buy anything.'
- Gary Bowen, fundraising coordinator for Hermantown schools

Bowen doesn't recall whether he's done business with Club's Choice. He says, in general, the companies are skilled marketers.

"They always try to make sure that you understand that you can make money on this, but in reality they're making a lot more money than we are," Bowen says. "We may get $2 for something that we sell for $8, and $6 of that is going back to that company. so it would be a whole lot easier for me to say, 'Give me $5 as a parent, and you don't have to buy anything.'"

The industry association says the average fundraiser nets the school about 47 cents for every dollar of merchandise sold. The association says school fundraisers grossed well over $3 billion in 2000, the last year the industry group attempted to estimate the figure.

Club's Choice President McHugh says his customers make about 40 cents for every dollar's worth of pizza or cookie dough they sell.

Although the 40 percent profit margin McHugh offers his fundraising clients is lower than the national average, he says more than 80 percent of his first-time customers end up coming back.

"I think when you pay 40 percent to a group -- which I feel is a very reasonable amount of money for food -- the company itself doesn't have that much profit," McHugh says. "We have trucks, we have overhead, we have office staff just like everything else. Do we make a profit? Yes, we make a profit. It's just like a regular business."

Just like a regular business -- except for the fact that kids are selling the merchandise.

"I just feel like if they actually had to pay sales people to do their job, they might not come into the schools," says Mary Warner, the mother of three school kids in Little Falls. She and her husband maintain many school fundraisers exploit kids and waste class time.

"We don't want our children sort of the free workforce for these companies that come from out of town, and they take away most of the money," says Warner. "The other thing is that our kids are coerced into doing them."

McHugh defends his industry and the practice of supplementing school budgets with fundraising. Since getting into business in the early 1980s, McHugh says his company has helped non-profits earn more than $100 million.

"There's a lot of good that will raise with these monies. As I say our goal is to raise $11 million for these groups -- that's tax money that would have to be paid by you and I and someone else."

McHugh is convinced companies like his are in a growth industry. He says he sees parallels between what was going on in the nation in the early 1980s when he started his company, and what's going on now.

"It was the an exact same situation in today's economy. There was a recession going on, and there were many cutbacks" to state, local and school budgets, McHugh says. "I think the future of fundraising is going to be very strong for the upcoming years because of the budget cuts."

McHugh has ambitious plans to meet what he expects will be growing demand for school fundraisers. He hopes to more than double his workforce, so he'll have nearly 1,000 employees working the school fundraiser market in all 50 states.

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