How to Design, Build, Open and Operate a Family Fun Center

Transcription

1 How to Design, Build, Open and Operate a Family Fun Center A How-to OR Should-I guide from the FEC Network

2 Table of Contents 1. Chapter One - Industry Overview! a. So you want to open a Family Fun Center?! b. Exactly what is an FEC / CEC?! c. How Profitable is this industry?! d. Chapter Resources 2. Chapter Two - Market Opportunity! a. What are my demographics and how do I use them? " b. Jim & Mary a Case Study " c. Why FEC s fail! d. Chapter Resources 3. Chapter Three - Planning the Business! a. Industry secrets - selling to your hot buttons! b. What will it cost to open a facility?! c. What are my equipment costs?! d. Thinking about location! e. Should I build or lease space?! f. Equipment lease options! g. What kind of return on investment can I expect?! h. How long before I make money?! i. 4 things your banker WANTS to hear! j. Chapter Resources 4. Chapter Four - Finding Funding! a. What are my funding options?! b. Are there Federal Grants and other resources available?! c. How to use the embedded Revenue Calculator! d. Chapter Resources 5. What to do next? More resources online at

3 Chapter Three - Planning the Business Industry secrets - selling to your hot buttons Unless you live in Orlando or Southern California where you may be able to pull from a large tourist market, your daily existence will be based on your local community opportunity and it s demographics. How many people are within a maximum drive time (say 20 to 30 minutes) that you can pull from that will come to your facility, how often and spend how much? This is the underlying formula for community based FEC success. Many amusement equipment sales consultants are paid on commission. They themselves have mouths to feed, and most of them will end up being miles away from your location, meaning you have to trust what it is they are selling you. Many are very efficient at showing you graphs of how their latest and greatest Weekend traffic accounts attraction will drip cash and drive a return for 60%-70% of your on investment within a few months - IF - overall facility visits. you run at 100% capacity. This is nonsense. There is no way any attraction will run at 100% for more than an opening weekend. Not to beat up on all sales consultants - but in our experience very few have your business interest at heart when providing consultation regarding their product/services. For example, is the equipment the right mix for your facility goals? Does the equipment represent the right $/square foot ratio that maximizes your traffic and meets your revenue projections? Is the equipment age-appropriate? What kind of play-value does the equipment represent? What are safety concerns, warranties, and maintenance issues? More resources online at

4 These questions all relate to the above market formula and should be supported or verified by the equipment vendor. But many rely on your hot buttons and present their marketing message based on what you think is cool, not what matters most to your guests and your facility goals. In an effort to make a sale, some may discount your market opportunity (or lack thereof). Perhaps you are in a smaller community where the simple math of the above (number of people x visits) will not 24% of FEC s have between 50,000 and 100,000 paying guests annually. support a $30,000 very cool new virtual-reality arcade game. But the marketing materials and sales pitch will lead you to believe that everyone from 150 miles away will be beating a path to your new facility to play this hottest of hot new games over and over again. Not so. For that initial month or so perhaps the local buzz will bring some folks in, but the thing that works against you on this type of activity is it is a ride-once-been-there-done-that $6 hit that most will not ride a second or third time. In the business they call this the playability factor (what is the cost vs. fun, or; how big is the repeat play desire). As stated above in the business of commissioned sales they sometimes neglect this very critical success factor (playability), preferring to use the fancy new color brochure and promises of huge returns if you buy now. 20% of facilities earn It is imperative for whatever piece of $10,000 - $49,999 annual equipment you buy that your preferred revenue from food and vendor takes a serious consultative beverage sales. approach to your business goals. Who is your market? How large is that market? What can you expect from them regarding $/square foot returns? How many visits can we expect before we need to maintain the activity? On and on... More resources online at

5 A Word About Playability When planning your facility you will hear a lot about playability. Playability is the primary driver for FEC success. It is a formula that entices your guests to play long and to come back and play again and again. Playability is a measurement of your overall facility value how much fun are your guests and the kids and their bankers (parents) having, versus the dollars they are spending? This success factor is determined by your activity mix, the kind and amount of amusements and activities you offer. The more and the diverse activities with varying degree of play-value the higher the perceived value from your guests. One newer aspect to this formula in current years has been the addition of edutainment. Outside of the hard equipment purchases, is the operator added value of content and programming. Whether by offering Mommy & Me classes, Gymboree, gymnastics or other community-focused programs, if your target demographic includes ages 10 and under, you would do well to plan on multipurposing your space to accommodate this potentially important component of FEC success. Your true battle in building a winning foundation for facility success is maximizing your overall budget with playability while still providing a safe, welcoming environment. What Will It Cost to Open a Facility? Your facility budget will be based on your business goals and local market opportunity. However, in general terms you should expect More resources online at

6 a gross build-out cost of anywhere from $40 - $120 per square foot depending on local real-estate market, contractor costs, themeing, etc. This figure is for the build-out only (The costs of finding and completing leasehold improvements of an appropriate space). Add to this figure the cost of your equipment; Activity Mix (games, rides, attractions, etc) Kitchen Equipment Furniture and Office Equipment Inventory (concessions, redemption, etc) Computers and Software Sales and Marketing Costs Annual Operating Expenses What Are My Equipment Costs? Good question. As you have or will come to find out, this entire process is a custom one based on all of the above and including your location; What is the market opportunity? How do you want to exploit that opportunity with size and scope of your project? How much space / ceiling height do you have? And what are the realities of your ability to raise the necessary capital to fund that opportunity? Not what you wanted to hear? Probably not so let us give you a range of what a base set of activity / equipment costs could be. 10% of startups over the last 3 years spent $250,000 - $400,000 to get started. The average full-attraction FEC startup cost is closer to $1.6 million. More resources online at

7 There are many, many variations and factors to consider in the purchase and the pricing of activities and amusement equipment. Without getting into pages of detail for each variety of amusement product, below is a basic guide to pricing activities. The Usual Suspects: Arcade Games Many operators (24%) profit share on Video Arcade games. Game prices vary greatly and are based on several variables, size and play-value being two. Prices range from $2,500 to $25,000 and higher for multiplayer and new Virtual Reality games. 76% of fun centers offer arcade and/or redemption games. Redemption Games 36% of operators profit share on Redemption games (redeem tickets for merchandise). Same variables apply as Video games. Prices range from $1,800 to $12,000 and up. Laser Tag For most amusement equipment it is all about through-put. How many people / players can be run through the activity over the span of an operating day. Laser tag is one of the better examples. Prices for laser tag equipment have dropped in recent years as competitors have battled over market share. From $6,800 per laser vest/pack in the early days down to $1,800 per vest/pack today. This price does not include leasehold and maze construction. Soft Contained Play Truly a creation of custom design, contained play is the epitome of 61% of fun centers own their own arcade games vs. revenue share with an outside vendor. playability. The more activities and diversity of activities within the playground, the higher the playability factor and (hopefully) the greater the repeat play desire. Pricing runs from $700 - $1,200 per child capacity. Need a playground for 50 kids at a time? Allocate $35,000 to $60,000 for a contained playground. More resources online at

8 Miniature Golf The epitome of custom design, great miniature golf design is an art form. From basic indoor putting surfaces to sophisticated, fully themed outdoor works of art, miniature golf runs the gamut of pricing. Build your own indoor 9-hole course for a few grand, or spend several hundred thousand for the professionals to design and build a master-piece. In the past five years or so, a newer form of indoor blacklight miniature golf has arrived with much success. Again, the 45% of facilities offer one or more types of miniature golf. sky is the limit; you can throw some blacklight painted 4x4 lumber on the floor with green carpet and call it DIY blacklight mini-golf for $10,000 - or you can spend well into $200,000 for an 18 hole highly themed, interactive (lights, sounds, bells and whistles) 3D blacklight mini-golf attraction. Climbing Walls Huge advances in technology have made this growing sport an included activity in many larger FEC s and smaller CEC s with open wall space. As with the above, prices vary widely, from a custom built design that fits the corner of your facility, to the 24 footer on wheels and the automated continual-feed 8 footer, expect to pay in the $8,000 to $60,000 and up range. However, some companies offer Rock Course Climbing walls for under $500 per 8 foot panel. In addition to the old real-estate motto location, location, location, when looking for a facility, there are a couple of quick rules-of-thumb to keep in mind. 25% of facilities offer some form of climbing wall(s). Go-Karts Karting is an exciting activity for family fun centers, and it can be an expensive one. There are many karts and track types, from twoseaters to slick tracks and all the way up to sprint racing. For fun centers, in recent years the advent of electric karts has meant easier operations and the ability to bring the entire experience More resources online at

9 indoors year round. Expect to pay around $4,000 - $6,000 per kart plus track development which can easily add up to $150,000 plus for an 18 kart track. If you are looking to build outdoors, site preparation will dramatically add to that cost. If you intend to use traditional gas-powered karts, you will most likely need city approval and in some cases you will need comprehensive EPA documentation regarding site preparation. Thinking About Location Mortgage/lease cost should run no higher than 18% - 24% of gross sales. The higher the ceiling height the better as various activities and attractions can maximize your space by going up high, using the volume of your space vs. precious floor area. Negotiate hard. In return for a 5+ year lease, some landlords may be willing to complete a wide variety of expensive lease hold improvements for you; bathrooms, offices, party areas, plumbing and electrical. FEC s are seen primarily as a destination attraction. Meaning your target audience does not typically drive by and say hey a family fun center, lets go in! Due to this destination effect you are offered a little latitude with regards to your ideal location. This means that for many facilities setting up in a light industrial area offers reduced (in most cases) lease rates for increased space with higher ceiling heights as an added bonus. If your business goals are smaller and you are thinking about a drop-n-shop service or something along those lines, then it may make sense to find your ideal location beside something like a More resources online at

10 Wal-Mart superstore or other prosperous retail area. However in most cases the monthly lease costs for that kind of location are prohibitive. Should I Build or Lease Space? Many people want to know about finding the right space and whether to buy land or building and build to suit, vs. leasing the perfect space. In most cases, leasing space makes more sense then buying. It s difficult enough to find the funding you will need to start the business, let alone find the funding to buy your own building. The argument to purchase your space may be that with the equity you have in the land and building you may have some leverage if your property value appreciates. However, in a poor market owning and managing a building can turn into a separate career of it s own and most lenders recognize this. If funding is not a problem, or the sheer scope of your project demands property ownership, then a build-to-suit project makes sense and there are certainly some advantages to owning your own building. Taking the time to investigate those benefits further with a local commercial lease agent makes sense. Amusement Equipment Leasing The good news is that there are a number of lease options for capital expenditures; equipment, activities, etc. There are companies that do specialize in providing lease options to the amusement industry. The bad news is, when it comes to business start-ups many are like traditional funders and require the More resources online at