Question

Suppose you were granted the next MLS expansion franchise and the right to locate the team anywhere in North America. Explain the factors you should consider in choosing a profit-maximizing location. What would be the costs and benefits of choosing a city that already has a team?

Answer 1

There are different factors to be considered. The first factor is the presence of infrastructure, facilities and specialized vendors that can help establish the MLS franchise  quickly at that location. It will help franchise to start the operations without any hiccups. The second factor is the presence of target audience to whom the games are to be offered. It makes people to access the matches and franchise also earns revenue. The third factor is the friendly policy of the local government towards the franchise so that franchise gets different types of benefits at lower expenses. It happens, as franchise also facilitates the growth of local economy. So, these are some of the factors to be considered by the franchise.

The benefits are the presence of already developed infrastructure of different nature, presence of vendors, ready made  target audience and utilities in the city. But, there are some costs as well. These costs are, expenses incurred due to competition, increased bargaining power towards the vendors and losses due to audiences being shared between the team. Besides, competitive pricing of tickets, also decreases the profit or increases the losses.