Ads at interstate exits mean revenue for state and businesses that participate

Advertising program for Interstate exits means revenue for the state and the businesses that participate

ssloan@herald-leader.comSeptember 5, 2011 

  • Payments to the state on an increase

    Here are the quarterly payments from Kentucky Logos to the state. The state receives 35 percent of all sales of logos to businesses, and 6 percent for the far fewer tourist-oriented directional signing (text-only signs on state routes instead of interstates).

  • Dollar signs

    Below are the quarterly payments from Kentucky Logos to the state. The state receives 35 percent of all sales of logos to businesses, as well as 6 percent for the far fewer Tourist Oriented Directional Signing (text-only signs located on state routes instead of interstates).

    2nd quarter 2011: $157,723.11

    1st quarter 2011: $157,105.97

    4th quarter 2010: $156,607.97

    3rd quarter 2010: $155,501.28

    2nd quarter 2010: $150,642.91

    1st quarter 2010: $156,152.75

    4th quarter 2009: $155,019.80

    3rd quarter 2009: $153,833.54

    2nd quarter 2009: $151,697.88

    1st quarter 2009: $155,060.96

    4th quarter 2008: $154,295.49

They're staples of each trek down every open highway in the country: the interstate exit business signs. The ones that point you to the nearest gas station or restaurant. But how do they work? Which businesses are chosen? How much do they cost? And how often do they change?

In Kentucky, the state has handed off the operation of the sign program to a private company, Kentucky Logos, and receives a portion of the sales. The company, which has handled the program since 1997, is a subsidiary of Interstate Logos, which handles similar programs in 22 of the 28 states that have privatized the service.

Just who can be on each exit sign is governed by rules set by the federal government and perhaps modified to some extent by each state.

"It's all based on distance from the exit," said JR Jarvis, general manager of Kentucky Logos.

Most businesses that show up on an exit sign are within the first 3 miles of the exit, but "we can go up to 15 miles if no businesses are present," Jarvis said.

For some exits, there aren't many businesses, so there's room for everyone, but distance comes into play at other exits, such as at Hamburg in Lexington.

"That exit is huge, and everything is proximity-based," he said. "It's the closest six gas stations, closest six restaurants and closest six hotels.

"If they're not interested in signing up, we would go on to the next."

But there is an exception for restaurants, he noted. Priority is given to those that are open by 7 a.m., and operate at least 16 hours a day and six days a week.

That means a place like Outback Steakhouse that on the weekdays is open only in the evening could be passed over for a McDonald's "that might be further away but serves motorists on the interstate more of the time," Jarvis said.

The company markets the service to all of the businesses that are eligible.

"We take great pride in the fact that we visit each business along each exit, letting them know the costs involved if they're eligible, and if they're not eligible, what it would take to become eligible," he said.

Signs cost $600 annually for one direction at an exit or $1,200 annually for both directions. That includes the signs before the exit, and those on the off-ramp with the directional arrows.

"It's really, really cost- effective when you compare it to other products that people have access to, like billboards or radio," Jarvis said, noting the state has kept the prices the same since Kentucky Logos took over in 1997.

There is an additional cost to fabricate the signs. A set of four that utilizes two colors costs $1,253. Customers are responsible for paying to replace a sign if a vehicular accident damages it beyond repair.

According to the state contract with Kentucky Logos, the state receives 35 percent of all logo sales and 6 percent of sales of what's called tourist-oriented directional signing, or TODS. Those are the text-only signs that are on state routes, not on interstates. For instance, around Lexington, Talon Winery has some TODS.

In 2010, Kentucky Logos paid the state $618,904.91 as part of the program, according to checks provided to the Herald-Leader by the state Transportation Cabinet. That was up 0.5 percent from 2009's payment of $615,612.18.

So how effective are the signs, which number 1,568 in Kentucky, including exit ramps? Jarvis said turnover is just 1 percent and 2 percent.

"The renewal rates are incredibly high because the product works," he said.

Oklahoma City University accounting professor Jacci Rodgers studied the interstate signage programs with graduate student Tara Blackburn in 2005 and came to different conclusions based on the types of customer.

For national chains, Rodgers said, the program definitely works because of brand recognition. She said companies were eager to see all states adopt the signage, which became nationwide by the late 1990s.

As she was conducting her research, a state office shared that "an unnamed national chain had offered to underwrite all the costs of getting the highway logo signs on the exits so that the program could develop faster," said Rodgers, who is chair of the university's accounting department. "The chain estimated that the increased business they would see from those signs in just one year would more than pay for the costs. The state declined that offer."

But it can be a different story for locally owned businesses, her research found.

"There isn't one answer," she said. "It really depends on the business itself."

Local businesses, she said, should consider the cost of the sign versus other forms of advertising, and also examine whether they truly need the added business that could come.

"The easy one to look at is if you're a local motel. If you're running at 75 percent to 80 percent occupancy, how much increased business can you take?" Rodgers said. "You only have so many rooms."

In Lexington, Horseshoes' Kentucky Grill and Saloon — next to Days Inn along North Broadway at Interstate 75 — purchased signs about six months ago.

"It's really helped us, especially for the amount it cost," said property manager Nathan Dodge.

Dodge said he's counting on travelers who are like him and explore locally owned places while vacationing.

"I'm always looking for someplace I haven't eaten before," he said. "And it's convenient to the interstate."

As to whether others should do it, he endorsed the program heartily.

"I think any interstate property needs an interstate sign," he said. "It's a necessity."

Reach Scott Sloan at (859) 231-1447 or 1-800-950-6397, Ext. 1447.

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