Frank Talk – November 2018

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What’s Hot…And What’s Not –– Part Six

Frank’s 16-Point Checklist for Evaluating the Top FEC Attractions

Frank Seninsky

Frank Seninsky

by Frank Seninsky, President/CEO Amusement Entertainment Management (AEM) & Alpha-Omega Amusements & Sales

When trying to decide what attraction to add to your FEC or what attractions to start with in your new fun center, there are a number of things to consider from the overall cost and ROI to player appeal and if there’s “cannibalization” of revenue from your other attractions. Let’s walk through the basics one by one and learn how to make the best choice(s). After the first few, the rest are not in any particular order, but the entire list is important.

1) Revenue/Cost Ratio

The first thing to look at is whether –– in one year –– an attraction will generate gross revenue equal to or exceeding your total cost in purchase, shipping and installation. That ratio is a key benchmark and a one-to-one (1:1) ratio is the lowest to start the weeding out process.

Of course, before you can do any number crunching, each attraction’s revenues need to be broken down into a percentage of your average per capita spending amount. For example, take a laser tag that grosses $300,000 (its original cost is $150,000) of a $1,200,000 gross revenue facility where the average per capita spend is $12. The laser tag grosses 25 percent of total revenue, has a $3 per capita and has a 2:1 revenue vs. cost ratio.

I really search the world trying to find attractions that can do even better –– two-to-one (2:1) or three-to-one (3:1) –– and they’re out there. Of course, this all relates to square footage and that’s the trouble. Calculate what percentage of your facility this attraction is going to take up.

Note that a top attraction that does take up a large percentage of the facility’s square footage may cost a lot, but may be worth it since that attraction is a major reason why a guest chooses to come to your facility. These are known as anchor attractions and may have a less than a 1:1 ratio. Examples of these are bowling or a top go-kart track and the real profits come from food and beverage and other attractions.

Laser Tag Adobe Stock image - Frank Talk 1118

Laser tag remains one of the top-earning attractions for FECs.

2) Throughput

How many people can you get through the attraction per hour directly relates to revenue. You also need to determine the capacity of each attraction (in some cases it is the local fire marshal, and sometimes in combination with your insurance carrier, who determines this number). This is also part of the throughput calculation.

For example, for safety reasons a 1,000-sq.-ft. ninja warrior course is designed to only have two players on the course at one time. The physical challenges are designed so that 80 people per hour can get through the course so, on a packed Saturday, the revenue projection for a peak hour theoretically maxes out at $400 at $5 per play. There are many reasons why you will most likely never reach the max revenue per hour … ever (a few pokey players hold up the line or the staff person needs a break).
The gross revenue per year is $200,000 and the cost is $100,000. The revenue vs. cost ratio is 2:1. If the throughput was initially designed for 40 people/hour, it should be obvious that the maximum revenue could be cut in half, though maybe not, as it could be operated more efficiently and the lines of people waiting to play could be longer (more demand).

3) Big Audience

Does the attraction have a wide demographic appeal? Is it one that everyone who visits your facility can play? Will parents play it with their children? Will grandparents play with their grandchildren? Or, is it locked into one, focused player group?

There can be exceptions, but for the most part, a successful attraction will mix and match the players, it’s not just set up for one demographic. In some instances, different age groups can utilize an attraction at different times and even play under different circumstances, but the attraction is exciting to each group.

4) The Impact On Other Attractions

You want to choose your attraction so it does not significantly cannibalize one or more of your other attractions. Cannibalization is a shifting of spending throughout your facility attractions when you add a new attraction to the mix (also when considering a removed attraction, if there is one). You have to analyze what happens to the individual revenue of each when another is added. How much of the current attraction’s revenue shifts over to the new one? I have named this percentage the “cannibalization rate.”

When AEM does a feasibility study, we re-calculate each attraction’s projected revenue each time an attraction possibility is substituted into the mix and one is deleted. Then we see if the total attraction revenue is increased or decreased and by how much based on the cost differential of the added/deleted attractions.

The only way to really understand cannibalization rates is by looking at real revenue data from multitudes of FECs that have the same or almost identical attractions in them. Study what the per capita is for each, and then adjust to the different demographic markets. You’ll want the attractions, per capita and demographics you’re comparing to be as close as possible. Once that’s done, then we can look at all those numbers, viewing them as different ratios, when we’re looking at those same attractions in a different setting.

5) Play Variation

Another consideration is whether or not players get a different experience each time they play. Obviously, you want them to come back so an attraction that doesn’t offer a variation in play experience won’t have the long-term player pull you’re looking for. If it doesn’t, it’ll be one and done. Obviously, attractions like laser tag, bowling, and racing fit this criterion well.

Amusement Products' Go Karts6) Can You Upgrade It?

How do you easily upgrade and change the attraction –– multiple times –– before you need to remove it? Clearly, this is something that both increases player satisfaction and reduces your capital expenses. If marketed correctly, an upgrade can be perceived by your customers as a “new” attraction!

7) Competition

If you’re in a target market where there is one or more of the same attractions, you must take this into consideration.

As a quick example, a client will say, “I’d like to put in a laser tag.” My first question would be, “Are you going to do multi-level or just one level?” Let’s say they tell me that theirs is going to be all on one level. I’d go into their market to see what their competition is. If there are other locations in their area with a multi-level laser tag, I tell them that I very much doubt that players are going to come to their one-level arena, no matter how good it is. Going forward with your single-level would not be a very wise move. If you put a one-level in and somebody puts a multi-level in within five or 10 miles of you, they’re going to suck a lot of your customers no matter how good yours is.

8) Labor

A key queston is how many staff members does it take to properly staff (and market) an attraction? Does a staff operator have to be solely dedicated to that attraction or can they do other tasks at the same time? How easy is it to train the staff? Are there regulation requirements, such as age, training, that your local/state and/or insurance company mandates? Labor costs money. Revenue had better offset that.

9) Long-term Viability

You need to look at how long you expect the attraction to remain popular and in good service before you need to replace it. Before making a purchase, it is recommended to fully research what the attraction would sell for after one year, two years, three years, etc.

10) Spectator Value

A great attraction will draw players, as well as spectators. The longer someone is in your center, the more they’re likely to spend whether they’re actively involved in that attraction play or not. Here is where, for example, a ninja warrior course can have dozens of spectators while only two players are using the attraction.

11) Insurance Considerations

Some of your attractions will bring the need for additional liability protection from your insurer. Are there safety concerns with the attraction you’re considering? How does that fit within the other entertainment options you’re offering and your customer mix? Insurance is a necessary cost of doing –– and protecting –– your business.

12) Height, Weight & Age Restrictions

Here is an attraction consideration that has a lot to do with insurance, as well as profitability. Usually, a manufacturer might tell you what the recommended height restrictions are on a ride and then you present that information to your insurance company. (Of course, the lower the height requirement, the more people can ride it. It’s directly related to revenue.) The insurer usually goes along with that, but sometimes you have to “fight” to get it right. We’ve done plenty with insurance companies for clients, making special cases where they could lower the height requirement, even by a few inches, and still meet all the safety conditions. None of this stuff is etched in stone. There are just things that smart FEC operators know.

Weight restrictions are also a consideration. For example, a multi-rider tube on a water slide attraction at a water park might have a total weight restriction of 550 pounds and hold up to four riders. What do you do if four linesmen from a local college football team all want to ride together and you have a 16-year old kid telling them they absolutely cannot? Obviously, you need to find a way to enforce this safety policy. Age restrictions are also a criterion for some attractions. This is where waivers come in and play an important part in our industry.

13) Is the Attraction “Boxed Off” or Enclosed?

Examples of “boxed off” attractions are laser tag and escape rooms. There’s nothing wrong with those. The concern is when you have too many of them in an FEC, there’s little open space for customers to stand or sit (determined by the fire marshal), plus it destroys the spectator factor.

Laser tag is usually boxed off and so is indoor glow golf … and they need to be. But, you can’t have too many of them in the FEC. Recommenda­tion: Do not over-crowd your facility with boxed or roped-off attractions.

I’ve walked into FECs that look expansive, say 20,000 square feet, but it seems like you can only put 30 people in it. They just have so many rooms –– party rooms, laser tag, escape rooms, offices, staff rooms, janitorial closets, storage rooms, bathrooms, etc. –– and by the time you put all this together and look at it, you tell them that their capacity by fire law is going to be so small that they’re not viable anymore. They can’t make a living on the mix they have or want.

There are a lot of great, boxed-off attractions that fall within the top 20, but you need to remember you can’t have them all. It doesn’t work that way. You’ve got to have some wide-open attractions and make room for people to stand and be spectators, mingle and so on in order to make them feel comfortable and stay long enough, but also to provide them with a great experience.

Walltopia ninja course web page capture

A Walltopia ninja course. The spectator value on these is high.

14) Location of Each Attraction

A key consideration is where you’re going to put each attraction in your center. It’s a critical piece of the puzzle. When we look at laser tag example, yes, it’s a boxed off attraction, but it can go in the back because it’s not as visual as other attractions (except with gameplay monitors, a grand entrance and such on the outside). You put it in a back corner and then drive traffic to it.

I’ve written about layout before, but a good rule is to keep the people up front if you can because that’s really where they want to be. There’s a lot to facility layout … it’s really a science.

Consider how people get into the attraction. How do they load in and unload out? How do people queue up? (This should be counterclockwise around the FEC, dumping everyone out in the middle of the facility, if possible.) Customer lines of sight are important. You want customers to be able to see all the attractions in the facility without other objects or attractions blocking the lines of sight.

15) Quality and Financial Stability of the Manufacturer

The residual value of any attraction you buy is directly related to the quality and financial stability of the manufacturer. How long have they been in business and how much longer do you expect them to be? How long will they support this attraction with service and spare parts? Will they offer upgrades and enhancements over time to help you keep it fresh? Will they help you to offer a potential buyer of the attraction a warranty, and if so, at what cost?

16) Residual Value

I always like to add in a projection of what will each of the attractions selected be worth down the road at one, two, three, four and five years. Do they depreciate in value according to straight line depreciation? Or do they hold their value better than that? Naturally, you always want the attractions that hold their value. One tip: Attractions that adults can participate with children hold their value much better than just those that appeal to children. This is clearly evident in the ride category.

Virtual Reality (VR) is a good example of an attraction that can be resold within a tiered market. Early adopters with bigger pockets can afford to enter early and then sell the attraction at a reduced price to another FEC that might be in a different or smaller market.

And finally, remember that you will also need to develop a plan for what attraction (size matters here) you’re going to replace any attraction with. It should be easy in, easy out…at least, as much as possible.

List of Top Attractions

So now that we have a checklist of what criteria should be used to decide which attractions are best for your center, the next step is to list those that rank in the top 20 or top 30. I’ll give you a bit of a tease and say that axe throwing is in that list, but at the top remain laser tag and bowling. I’ll give you the rest of the list and reasons why next month.

See you then! As always…keep cranking!


Frank Seninsky is president of the Alpha-Omega Group of companies, which includes a consulting agency (Amusement Entertainment Manage­ment), two nationwide revenue-sharing equipment suppliers (Alpha-Omega Amuse­ments and Alpha-BET Entertainment), and Alpha-Omega Sales, a full-line game and related equipment distributor. During his 47 years in the leisure entertainment industry, Seninsky has presented nearly 400 seminars and continues to regularly write columns in numerous trade publications. He served as president of the AMOA (and was on the board for 22 years), and was president of IALEI (founding member and on the board for 11 years). Frank is the sole owner of Foundations Enter­tain­ment University, now in its 16th year. He is also considered a leading industry expert in the design, layout, and operations of coin-/debit card-operated arcades and FEC attractions, and is often called upon as an expert witness in cases involving the amusement industry. Frank edits The Redemp­tion & FEC Report e-newsletter (35,000+ readers worldwide) and also writes a blog at www. frank-thecrank.com. Frank can be reached by phone at 732- 616-5345 or by email at fseninskyAEM@gmail.com (website: www.AEMLLC.com).

 

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