Can We Keep the Good Times Rolling?
Keeping Up With the Fundamentals Can Serve the Industry & Your Locations Well
By George McAuliffe, President, Pinnacle Entertainment Group
Are you a positive thinker? Experts say that’s the nature of most entrepreneurs. That’s a great thing and they are certainly more fun to be around, but it can hurt them if their positivity makes them complacent or slow to react to changing circumstances.
Many of today’s FEC operators have expanded into this market only in the last ten years, which has been a period of steady growth. Veterans know from FEC history that it’s been a cyclical business, riding up on strong macroeconomics or waves of new technology, game themes, and attraction popularity, before hitting walls. Previous good times always ran their course into downturns.
I’d like to believe that this time is different. The FEC audience has never been larger, and that’s a huge difference. It’s not just for kids anymore –– I don’t mean that just for the Dave & Buster’s and the Main Events of our world. The 15-year-old boy, who was the arcade customer when I started in the ’80s, is now 53 with kids of his own (and grandkids around the corner). FECs have broadened their gender appeal to women, largely due to the growth of redemption games in arcades. Older folks, like my wife and I, regularly play in arcades with our grandkids. Millennials love our stuff! Now factor in the party and group sales piece of the profit puzzle. Maybe it really is different this time.
There are other factors that support that view. Debit card systems have arrived. We have great games with bells and whistles such as LED lighting. Average price per play has increased from 35 cents to over 90 cents. Social media and Internet marketing are huge drivers: We can now sell our experiences before the guest arrives on the premises. Social media marketing is cheaper and better at targeting customers than the old media. Increased food and beverage quality helps increase length of stay and drives guest decisions to visit in the first place.
A byproduct of this upward swing is that it increases competition. More facilities are opening including variations of FECs (see trampoline parks); bigger companies are expanding (see D&B, Main Event and Round One). At some point, the dreaded “saturation,” –– too many FECs in the marketplace –– could occur (see retail and regional shopping malls).
Also, what about the broader economy? We may be seeing a change in the favorable general economics we have been enjoying: interest rates are rising, gas prices are going up, Wall Street’s continued expansion may be “cooling.”
Frankly, I’m not sure which camp I’m in. I’m generally a positive thinker and it sure is fun when our clients are doing well. As the charts on this and the next page show, the graphs are all up. On the other hand, my experience tells me that “what goes up must come down.”
We all know how difficult it is to predict the future. Fortunately, we don’t have to. The fundamentals –– the principles of successful FEC operations –– serve operators well in good times and in bad. Here are my top five areas of focus:
1. Create a relationship with your customers: This doesn’t mean inviting everyone over to the house. It is letting them know that you understand why they come to you, that you appreciate it, and want them back. To do that, you must…
2. Understand your customers: Know who they are, what makes them different from your competitor’s customers –– especially if the competition is that giant corporate operation two miles away. Carving out a niche head to head with that guy may be tough. On the other hand, corporate chains can be like big ships: clumsy, slow and locked in to procedure. Local FECs should be nimbler, better able to maneuver, to execute, and to understand how to serve their niche. To do that requires that you…
3. Communicate with your Customers: Do this internally through staff, through access to management (aka “management by walking around.”), through VIP programs and, of course, social media, Internet, and general marketing. Representing at community institutions pays great long-term dividends.
4. Attention to the Basics: This means operating at the highest level. Doing everything better, continuously improving, and data-based decision making (the big guys live on the numbers, you need to know yours, too). Understanding the nuts and bolts of your operation and how you fit your niche: crafting the guest experience, filling day parts, price/value, staff excellence, right on down to keeping the bathroom clean.
5. Keeping it Fresh: We’ve written this many times: Introducing change over time, affordably, is the great challenge of FEC management. That change is why guests return to your facility. The financial plan should allow for reserves to add new games and attractions, as well as to make physical plant improvements. However, it’s not all expensive investments. Infusing change into your facility’s DNA through regular events, special promotions, decorations (every retailer in the world changes their interior look for seasons and holidays). This is as tough for the big guys to do as it is for the lighter-on-their-feet, community-focused FECs.
Great operators are beautiful. If the good times keep rolling, great operators are the best positioned to do well and thrive. If a downturn comes, great operators will also be the best positioned to do well and thrive. Historical downturns have included a “shakeout” of the weakest operators, but the strong survived…and prospered!
George McAuliffe has helped hundreds of business large and small develop and execute arcades and FECs. He has personally operated family entertainment centers from 2,000 to 150,000 square feet as a corporate executive, entrepreneur and consultant. With his partner and son Howard, he recently launched The Pinnacle Insider to help a wider audience execute FEC operations at a higher level. Readers can become an Insider at ThePinnaceInsider.com.
George lives on the Jersey Shore with his wife, Julie, and has a passion for passing along what he’s learned in the fun business to the new generation of operators and suppliers.