Incentive Program

FY 2015 RETAILER INCENTIVE PROGRAM - "THE MORE YOU SELL, THE MORE YOU'LL EARN"!

GOALS AND OBJECTIVES                                                           

  • To develop a program to exceed the State Sales Quota of $883 million for traditional product lines for FY‘15.
  • To provide financial incentives beyond standard fees for Retailers achieving outstanding sales performance.
  • To provide a compensation program that is fair and equitable for all KLC Retailers.
  • To provide an incentive for KLC Retailers to offer additional product lines.
  • To provide an incentive system that will motivate Retailers to promote and sell lottery games throughout the fiscal year.

SALES GOAL FOR FY ‘15

  • $883 Million is annual goal for traditional products
  • FY ’15 time period = 52 Weeks: June 29, 2014 June 27, 2015
     

INCENTIVE TIME PERIODS         

  • Quarter 1: June 29 – September 27, 2014
  • Quarter 2: September 28 – December 27, 2014
  • Quarter 3: December 28, 2014 March 28, 2015
  • Quarter 4: March 29, 2015 – June 27, 2015   

INCENTIVE RATES

Eligible retailers may receive additional incentive fees as shown on the following table for instant ticket sales only.  Currently, KLC's instant sales are only scratch-off games.  These rates do not apply to or include draw game sales.

 

TOTAL AVERAGE
WEEKLY SALES

INCENTIVE % RATE TRADITIONAL/PULL-TABS

<$1,000

0 (see Improvement Portion)

$1,001 - $1,500

Flat $30

$1,501 - $2,400

0.25
$2,401 - $3,300
0.45

$3,301 - $4,000

0.60

$4,001 - $5,600

0.75
$5,601 - $7,700
1.00
$7,701 or more
1.25
 

Total average weekly sales refer to total instant ticket sales during the quarter divided by the number of weeks in that quarter (13). Total average weekly instant sales will be used to determine which quarterly incentive percentage (%) rate that a retailer qualifies. The maximum aggregate rate payable for ticket sales will be 6.25%. During the normal course of business retailers receive a 5% commission rate for our instant games. The above incentive rates will be applied to calculate the total earnings of each retailer.

If an incentive is earned, the retailer will receive it via an account credit with written notification by the Lottery. The credit will be given as soon as administratively possible after all necessary checks and balances are performed. At KLC’s discretion checks may be written and delivered to retailers earning incentives above a certain amount (i.e., $300 or $500). Each incentive period stands alone and represents a sales quarter as defined above.          

IMPROVEMENT PORTION

This incentive program portion only applies to Retailers who have average weekly instant sales of $1,000 or less during the respective quarter being measured. Those retailers can earn incentive monies if they have demonstrated improved average weekly sales during the quarter being measured compared to the immediate previous quarter. The incentive rates shown below will apply to all instant sales during the measured period, and will be applied to calculate the total earnings of each retailer.
 

Total Average
Weekly Sales
Improvement %

INCENTIVE % RATE

<5%
0
5% - 10%
0.25%
11% - 20%
0.50%
21% - 30%
0.75%

31% or more

1.00%
 

The same eligibility rules stated above also apply to this portion of the program as they do for the initial program portion. Note, however, that in order to qualify for this portion of the program a Retailer would have to have been eligible to sell instant products for the total 2-quarter time period being reviewed (i.e., measured period and previous quarter). If the retailer does not meet that criterion, they are not eligible until they do so.


FY'15 ELIGIBILITY

Retailers must have an active license status on the records of KLC at the beginning and end of the quarter they qualify for an incentive. To qualify for a specific quarter’s incentive program, the retailer must have the capability to sell instant products all assigned weeks of that specific quarter. If not, they are ineligible for the incentive for that quarter.

Retailers who have an “Inactive” license status (often due to A/R balance issues) according to the records of the KLC on either of these two dates (first/last day of quarter) are still eligible as long as they fully pay their account balances and are eligible to sell lottery products all assigned weeks of that specific quarter.

Only retailers able to sell all assigned weeks of an incentive period will be eligible for additional incentive rates per this plan. Retailers who start selling KLC products after the beginning of a specific incentive period are not eligible for that specific incentive period, but may be eligible for the following incentive periods if all other requirements are met. (i.e. Retailers beginning to sell KLC products after the start of a specific incentive period are not eligible for that specific period)

Only retailers who have less than 2 NSFs instances during the incentive period during which they are qualified for an incentive fee will be eligible to receive that incentive fee. Those retailers with 2 or more NSF instances during a specific incentive period are not eligible for incentive fees for that period.

In the sole discretion of the KLC, a retail location having joint ownership may retain its eligibility if one of the original owners sells their share of the business to the remaining partner(s) (which necessitates a Retailer Number change). These will be handled on a case-by-case basis. Sales from both retailer numbers will be combined for comparison to the weekly incentive rates if eligible.

Retailers not meeting the above criteria may still be eligible, at the sole discretion of the KLC, with written authorization of the President of the KLC. 
  

ADDITIONAL INCENTIVE FOR TRADITIONAL DRAW GAME SALES

Retailers qualify for a year-end incentive fee related to traditional draw game sales.  Keno sales are excluded for this incentive.

There are two (2) sections to this fee.

A product specific quota is created for each retailer during the development phases of the FY'15 quota.  All quotas are based on actual market share sales of the previous year. For each retailer we determine actual FY’14 draw game sales as well as create a FY’15 quota for each draw game based on market share.  The KLC total online quota for FY’15 is $341 million.

1) Eligible retailers who exceed their FY ’14 online games total sales will receive a 1% incentive fee on their incremental draw game sales between what they sold in FY’14 and their FY’15 quota. Each retailer who qualifies will receive this incentive fee of 1% only on their sales which exceed what they sold during FY ’14.

2) Eligible retailers who exceed their FY’15 draw game quota will receive an additional 2% on draw game incremental sales that exceed their FY’15 quota.

Eligibility for this portion of the program will incorporate all the criteria found above in “FY’15 Eligibility” as well as the following. Retailers must be active at the beginning and end of the FY. Since quotas are based on FY’14 activity, all activity will be annualized to insure that the FY’14 quota is reflective of a 52-week sales period.  For retailers having 10 weeks or less of online sales activity in FY'14, KLC will make every effort to annualize their sales based upon the previous owner (if it is a change over site) or the averages of similar stores in that area.
 

PROGRAM POINTS

1.     The cashing bonus for “authorized cashing agents” will remain at 2% for cashing winning tickets between $601 - $5,000.
2.    
Incentives will only be awarded to those retailers meeting all eligibility requirements and who qualify by their sales.
3.    
Each retailer will be considered as standing alone for purposes of this plan. (i.e., Each store in a chain account will be judged on the merit of its own sales, rather than the total of the chain account.) KLC will provide any incentive due to the retailers based on their current banking arrangements with KLC.
4.    
Traditional Draw game sales will only be considered for that specific portion of this program as designated, but Keno sales will be excluded from both quota and sales of traditional draw games.

It is anticipated that unusual situations may arise during FY ‘15 that might not have been considered by this plan. Such situations will be brought to the attention of the Senior Vice President of Marketing & Sales, who will determine how such situations shall be treated in conformance with the intent of this Incentive Plan.