University of Northern Iowa eyes private bookstore operator

Five years after buying its community’s 80-year-old student bookstore for $2.4 million, the University of Northern Iowa wants to partner with a private chain to operate it — following in the footsteps of the University of Iowa.

The Board of Regents next week will consider approving a proposed deal between UNI and Follett Higher Education Group, Inc. to operate the UNI Bookstore — which had been privately owned since the 1930s before the university in 2018 bought it and all its equipment and inventory.

Follett is the same private group UI partnered with in 2021 to operate its Hawk Shop and University Bookstore — although terms of the two agreements differ.

The proposed UNI arrangement would consolidate retail operations onto the first floor and cut about 14,500 square feet from the property at 1009 W. 23rd St. When it sold five years ago, the store included 42,491 square feet on 1.2 acres.

The initial term — aimed to start Nov. 1, according to UNI’s request for proposals for private bookstore operators — would span six years and eight months and come with one five-year renewal option. Follett would pay UNI a percentage of all “commissionable sales calculated on an annual basis and payable in monthly installments” — although UNI didn’t disclose the specific percentage when asked by The Gazette.

“It would be premature for UNI to comment at this juncture since conversations are still ongoing, and there are a number of details yet to be finalized,” UNI spokesman Pete Moris said.

The university did share with regents that Follett will provide an annual $10,000 credit for “textbook scholarships” and $900,000 for upgrades to the facility.

UI-Follett deal

Follett’s arrangement with UI required it pay the university 16 percent of gross sales up to $10 million; 17 percent of any gross sales between $10 million and $12 million; and 18 percent of any sales over $12 million. The operator also agreed to pay UI 8 percent of gross sales on digital course material and to cover the balance if royalty payments fell below $1.125 million in the first year.

The UI contract required Follett to pay $250,000 for every five-year operating term; $100,000 annually for utilities; $50,000 a year for student life programming; and $10,000 for UI library programs.

Follett also had to spend $1 million to improve the UI bookstore and invest $110,000 on point-of-sale management systems.

Before UI partnered with Follett, it wasn’t charging sales tax — citing an “educational exemption” for state institutions. The Follett deal changed that.

UNI, operating its bookstore as a nonprofit, has been passing on a 7 percent sales tax savings to students buying educational supplies and books. Officials on Thursday didn’t say whether the new arrangement would affect what it charges in sales tax.

But, in summarizing its desire to move forward with a partnership, UNI officials in board documents told regents the partnership would “improve equitable access, affordability, and quality.”

“Utilizing one of the top national providers of college and university bookstore services allows the university to leverage an external supplier’s expertise in the industry, provide economies of scale in operations, and enhance the services for the campus community,” according to UNI’s request for board approval, which notes Follett’s “willingness to hire all current university bookstore employees who choose to become employees of Follett.”

Internal audits

Follett manages about 1,200 campus stores coast to coast, from Florida State and New York universities in the east to Texas Christian and Baylor universities in the south to California State and Arizona State universities in the west.

In answering questions from prospective partners interested in the collaboration, UNI reported it has no local textbook store competitor and that 70 percent of its annual sales — or $1.4 million — is charged to student u-bills.

Although UNI officials said a private operator wouldn’t have to retain current full-time employees, the university would be “happy to provide introductions” — sharing current salaries, ranging from $43,388 for a storekeeper to $68,711 for its business manager.

To one question about enrollment and growth projections, UNI reported enrollment is expected to hover between 9,000 and 10,000 over the next five years — representing a slight uptick over last fall’s 8,949.

“For Fall 2023, new freshmen enrollment is currently trending up over 5 percent,” officials reported.

The last time UNI’s bookstore underwent an internal audit in 2021, the operation had 10 full-time employees, seven working part time, and 20 to 55 student workers.

That audit found the UNI Bookstore needed better oversight of managers who have “elevated privileges,” upping the risk of inappropriate activity; to audit its own returned merchandise; to document account reconciliations; and to improve book commission records so it doesn’t miss out on income.

Internal auditors in 2022 reviewed UI’s new arrangement with Follett and determined the university needed better checks and balances to ensure it was getting what was owed.

“Responsibility for oversight of the operating agreement is unclear, increasing the risk of non-compliance and potential loss of revenue,” according to the UI audit, which also noted, “Royalty payments are not being reconciled against detailed transaction data, increasing the risk of incorrect payments.

Vanessa Miller covers higher education for The Gazette.

Comments: (319) 339-3158; vanessa.miller@thegazette.com