What's the Arrangement between a Local Bar and Its Slot Route Operator?

I hang out at a local bar in Vegas. The bartops are managed by Jett Gaming. This small three-pub chain is family owned. When we gamble enough, the bar comps our food. Who owns the machines and how does the arrangement work? Do they split food, drinks, and gaming?

We put your questions to Jett Gaming, but no one there was inclined to answer.

However, the Jett website hawks a variety of products and services, not least of which are International Game Technology G20 bartop video poker machines.

We know of no slot route operators, -- like Jett Gaming, and Golden Entertainment, largest in Nevada, and Century Gaming, second largest, which was just acquired by Accel Entertainment, largest slot route operator in Illinois -- that doesn't own and operate its own machines. In turn, the operator leases the machines to bars, convenience stores, supermarkets, any venue that has up to 15 machines, at least in Nevada.

We also know of no slot route operator that participates in the food and beverage revenue stream. In Jett's case, comps are awarded at the host bars discretion with the aid of a proprietary player-tracking system. To make its dough, Jett relies on a revenue-sharing model that works on an undescribed sliding scale: “Locations generate income based on high revenue instead of volatile net win figures.” It stands to reason that the more lucrative your route, the bigger the share Jett takes.

As for taxes, Nevada collects quarterly and annual fees per machine from slot route operators For the first five games, the quarterly fee paid to the state is $81 per machine. The locations pay $141 per quarter for each of the next 10 machines. Under the formula, the total annual tax, including annual fees, for a location with 15 slot machines is $11,010.

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jay May-31-2022

Turning a buck - many assumptions

Assuming $1/spin - on a 92% payback thats a house hold of 8c.

Assuming the machine is busy 6 hours per day, at 400 spins per hour over 30 days that $72K in, at the above (8c) hold  that $5760 Gross hold. 

Multiply by 3 months the machine is earning $17280 amd subtract the quarterly tax of $81 = $17199. The route operator is still going to need to pay his shop rent, business taxes, and other overhead so nominally take 30%  off the top. This leaves roughly $12k (quarterly) to be used in a revenue split or $4k/mth.

Per the QOD reply if they are sharing based on gross coin in which is just math done a different way.... If they were to give the bar 2.5% of gross in - that would equate to just around $2k or about 50% of profit. 

So if the bar is making $2k/mth on the machine does it make sense to comp food or drink ??  

Using the same math 400spins /hr x 3hrs of you eating and drinking in front of the machine = $1200(coin in) x .025 = $30 which is break even.

ahawley Jun-01-2022

Missing assumptions

I appreciate jay's back of the envelope math that suggests a machine might only make on average $30/person in a small establishment. However, the distribution and variance of bankroll wins and losses after 1000 hands/spins in a slot or video poker machine means a large majority of customers are still losers of some amount. The outlier in payouts with a few large jackpots or Royal Flushes to a tiny number of winners, is a factor in that distribution.

Also, the prices of food and drink aren't the actual dollar cost to a business. Although, comps as a loss leader could be considered lost earnings in food and drink revenue.

Question of the Day - 31 May 2022

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