Schuylkill County Business Owner Says Skill Games Ban Will Cost More Than $1 Million a Year, Force Job Cuts

Sam’s Place owner Michael Somers says the end of skill games will cost his 20-store tobacco chain more than $1 million a year, and his employees will feel it first.

The people who will really lose, he said, are the cashiers behind his counters.

Somers, president of Sam’s Place Lottery & Tobacco Inc., told Coal Region Canary the machines are the reason Sam’s Place grew from five stores to 20. With the games set to become illegal in Pennsylvania this week, he is preparing to cut staff, end the company’s 401(k) match, and find hundreds of thousands of dollars to keep every store open.

The Pennsylvania Supreme Court ruled June 15 that skill games are slot machines under the state Gaming Act. The court put its decision on hold to give lawmakers in Harrisburg time to pass a law regulating and taxing the machines. That window closes Tuesday.

Pennsylvania State Police say businesses that still have the machines face prosecution and seizure starting Wednesday, and that unplugging them isn’t enough.

On Friday, the court turned down requests from state lawmakers and 20 charitable organizations to push back the deadline. Bills to legalize the games have passed both the state House and Senate, but neither chamber has agreed to the other’s version.

Somers spoke with Coal Region Canary on Oct. 5 at the chain’s Cressona Mall store, days before the court’s decision went into effect.

The machines in the store were already unplugged that day, each with a sign saying its software had been deactivated. They have since been removed from his stores, and from many other Schuylkill County businesses that had them.

His message to lawmakers was simple.

“Vote for the six-month extension,” he said. “If you decide we can’t make a deal, pull out in six months. Does that really affect anybody?”

Somers, who lives in Orwigsburg, started his business at a farmers market. In 2014, he bought out his largest competitor, Sam’s Place. The chain now has 20 stores, all in Pennsylvania and all within about two hours of Schuylkill County, reaching south to Leesport and north toward Williamsport and Muncy.

He didn’t put skill games in his stores until 2017. When the machines first appeared, he said, he had the same questions as everyone else, including whether having them could land him in jail. He waited until the courts had weighed in before bringing them in.

Once they were in, the money changed the business. A new tobacco store takes about three years to turn a profit, he said, and skill game revenue carried the chain through those years as it expanded.

“Sam’s Place was a chain of five stores when we put skill in, and Sam’s Place grew to a chain of 20 stores,” he said.

That growth also paid for a corporate staff he says is unheard of for a tobacco chain his size: a vice president, an operations manager, four territory managers and a cigar category manager.

Each store generally has six machines, a cap set by the vendor. Somers said he never bought his own machines. The distributor placed them at no cost to him, and he said he didn’t want to get into that “gray area.”

Sam’s Place keeps 40% of the profit from the machines in its stores. Depending on the size of the store, he estimates each location clears $2,000 to $4,000 a month from the games. Across the chain, he said, that adds up to more than $1 million a year.

The first cuts will come on the store floor. Stores that now run two employees during the day will likely drop to one.

“Every store is going to lose essentially a day shift person,” he said.

He estimated the chain could lose about 15 jobs, including two or three at the corporate level.

The company also plans to end its 4% 401(k) match, which costs about $8,000 a month. The Sam’s Place plan covers employees of Magnolia Health Group LLC, a home care business he also owns, so ending the match hits workers at both companies. He said about 100 people stand to lose it.

At the time of the interview, a 30-day notice ending the match was sitting in his inbox. He said he hadn’t signed it yet because he was waiting to see whether lawmakers would act on an extension by the end of the week.

He has already stopped taking a paycheck.

“I told my accountant, ‘Don’t send me a paycheck. Don’t pay me again until we figure this out,'” he said.

His vice president is considering a pay cut, and staff have been pulling old stock out of back rooms and putting it on sale to bring in cash. To keep all 20 stores open, he said, the company needs to find $300,000 to $400,000.

Closing the weaker stores isn’t an easy way out, he said. A store like the one at Cressona Mall costs about $300,000 to build and stock, the company borrowed to grow, and every location is under a lease.

“You can’t call up the bank and say, ‘Any chance you can forget about the other two years of payments?'” he said. “Unfortunately, 120 days is just not enough time for a chain my size.”

He knows some readers won’t have much sympathy for a chain owner, and he doesn’t ask for it. To those who say he knew the risks when he put the machines in, he doesn’t argue.

“If they become illegal, then they’re illegal. They have to get rid of them,” he said. “But every action has a reaction. We’ve spent the money, and we have overhead.”

That kind of uncertainty comes with his line of work, he said.

“Every year, I think for myself, ‘Oh man, I’m going out of business.’ That’s the business we’re in,” he said. “When something comes out that we can make money off of, it’s great. Hopefully it lasts for a while.”

He also defended the business itself.

“We’re not telling people they have to smoke. We’re not telling people they have to gamble,” he said. “But if you’re going to do it, you should be able to do it in a friendly atmosphere.”

What frustrates him is the timing. He said lawmakers left the issue until the last minute.

“They got the budget passed, and then they went on their summer breaks, while the rest of us couldn’t go on vacation because we’re nervous about losing our business,” he said.

He said he respects lawmakers and will pull the machines if that’s what the law requires. He just wants more time.

“They’ve been around for a decade,” he said. “What’s another six months?”

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