2007 ended and 2008 began with the worldwide media reporting on the projected 100 percent increase of sub-prime mortgage defaults that are causing stock market plunges and a doom and gloom outlook for the United States economy. What they never seem to report is the fact that the sub-prime mortgage default rate was three tenths of a percent (0.3 percent or 0.003) of all of the U.S. total mortgages and it could have doubled to six tenths of a percent (0.6 percent or 0.006) by the end of 2009. This is still a lot of money but only a small percentage of the total picture and the Fed just cut the federal discount interest rate by three-fourths percent (the interest rate that the federal government charges its member banks to borrow money). And now we find out that the stock market sell off was really caused by a French bank that lost $7 billion trying to cover its positions in a stock future’s scam perpetrated by one of its employees. Therefore, the market will correct itself and the media will need to come up with a new doom and gloom theory to forward its biased agenda.

But let’s get back to our industry and how it needs to cope and succeed in the 2008 economy where people are still concerned about rising gas prices, rising prices in general, health care, and the future of their jobs. We all know that the first cut in the family budget is “entertainment spending” that is currently $2,207 per family out of a median household income of $42,350 or approximately 5 percent. If we are to succeed in attracting people to our facilities, it makes sense that we first have to be able to measure our business against our competition and then we have to find the best and most efficient way to market what we have to offer.

The FEC and coin-op industry have surveys (IALEI and others) but what it is lacking is “real” financial information that is compiled from a large set of FEC operators. Your first reaction to this is most likely, “Impossible to get!” Well, let me tell you what the bowling industry has accomplished to achieve the impossible. Years ago a group of multi-center owners created an organization called MUBIG (Multi-Unit Bowling Information Group). To be eligible for membership in this prestigious co-operative group, you had to own 100 or more lanes and be willing to share your financial data with an independent and confidential entity that would compile all of the member’s data and present it in a format that would be not only available to MUBIG members, but to the entire bowling industry and industry media as well. MUBIG members currently own more than 25,000 lanes across the U.S. so their data is up to date and accurate. The following data may be useful to the FEC and leisure entertainment industry to help forecast where we are headed:

What can the FEC industry learn from this data?

Much of the MUBIG financial information also pertains to FECs. The MUBIG owners are among the most aggressive in the bowling industry, and if they own multiple centers, one can assume that they are in general able to borrow modernization and expansion money much easier than single facility owners are. Bowling has learned that its food service was a weak revenue category and many of the progressive owners have taken steps to increase their food and soda beverage revenues and with great success in just one year. Bowling centers are also starting to focus on their game revenues (changing over to redemption), birthday party and group business, and adding FEC type attractions (all non-bowling revenue) so that bowling will be a less and less percentage of their total revenue. From the ILTA openings and closings, we can see that single attraction facilities are the most vulnerable to outside competition and FECs with a few or more solid attractions stand a better chance of attracting customers and getting them to be repeat customers.

2008 is going to be a difficult year for us to adapt to. The media has everyone expecting a recession and even if there is not a recession, we should prepare our businesses as if there is a recession and try to attract more people with incentive packages and give them more reasons to keep coming back. For those at the other end of the spectrum who are confident that their facilities have a high-perceived value, then raising prices is a possibility. The fact is that the cost of doing business is increasing and so is the average per capita spending in just about every area of the country. Have you been to a movie lately? I have and was hit with a ticket price of $9.50! Bowling has certainly raised their lineage (game of bowling) prices and that is one of the ways many proprietors have been able to remain profitable.

Think of some of the less costly attractions with a small footprint and see if you can find the space to incorporate them. Examples that come to mind are the Lightspace Dance Floor, Extreme Engineering’s flat climbing walls, Frog Hopper, My Very Own Adventure, Water Wars and Funovation’s electronic maze race. Some of the higher cost new attractions include Magi-Quest, CyberSports, and glow in the dark products. One of the areas that just about every FEC should consider improving is their game zone so that their per game weekly average revenue exceeds at least a minimum of $150/week and attains more than a $200/week/game average. If you are not attaining these averages, than one thing you know is that you have additional space available for additional attractions that will help you expand your target market.

Modernization is another way to invest in your business and make it more appealing to customers. Special effects, light shows, lighting, new carpeting, new paint and air brushing should all be considered. To improve food revenues, think about what attracts you to certain food places, such as a fresh baked bread and pizza smell, cookies or the smell of the grill.

Gift Cards. Many businesses are quickly learning that gift cards are another source of revenue (many are not ever redeemed) as well as a great marketing tool. You can sell discounted gift cards to your own facility and have other businesses and non-profit groups sell your gift cards and let them keep a portion of the proceeds (fundraising). Have local companies purchase them and give them out to their employees for a special occasion or as a rewards program. Some FECs will find a way to give out their gift cards free and reap the rewards as new customers pour through their doors.

Holidays and special days can be a bonanza. If you are not concentrating on the many holidays such as Valentine’s Day, President’s weekend, Halloween, Graduations and Proms, you are missing some great opportunities to reach out to a large segment of your market. It takes time to theme your facility for these holidays, but your customers and the community will look forward to it each year.

Group day (on a slow afternoon/early evening) is a no-brainer. Offer a church group a free invitation to your facility, no money required. Rules are you need a minimum number of kids, one adult for every 10 kids for example, and no food is permitted to be brought in. Everything is free except the food and the games. My results show that each person will spend a reasonable amount of money on food and games anyway, and you will be quite surprised at how much money is in the till at the end of the night.

Corporate Meeting, Awards, Team Building. Even small 10,000 square foot children’s centers have been able to attract a corporate group of 100 and get $15,000 for feeding them and having them use the children’s attractions for team-building events. Have the men try to rock climb barefooted, blindfolded, and with one hand tied behind their backs! Have the women make up their male counterparts at the make-up mirror attraction. Drive the bumper cars blindfolded and see which team can end up on the left or the right side after driving around for a few minutes. Use your imagination to find a way to have adults “play” like children. You will be rewarded with many happy adults.

Debit Card Systems with POS food integration. I would never consider setting up a game zone without installing a debit card system. The system pays for itself in less than two years just from the 6 percent – 8 percent “float” (money on the cards that is never spent) and the marketing programs are infinite. The debit systems can easily be financed as part of a game package and the costs are still coming down. In fact, you can purchase the game readers and optional kiosk(s) and rent/lease the rest of the debit card system for under $5,000 per year.

Yes, 2008 is going to be an exciting year. While your competitors in the out-of-home leisure entertainment industry are floundering, you can be entertaining many of the lost customers. We hope that the information provided helps motivate you to action. -

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