Beyond Bowling Spring 2012

INTRO

According To George t was always fun watching the old movies showing the launching of a newly built ship. The beautiful actress smashes the champagne bottle, the ship magically starts its smooth glide down the ramp, its sleek hull barely causing a wave as it enters the water.

We may not have beautiful actresses, and we don’t want to waste the champagne, but it’s still exciting to be part of the launch of Beyond Bowling. I’ve been an admirer of Scott Frager’s, and more recently Chris Holmes’, work at International Bowling Industry. I’ve had the pleasure of getting to know them and the IBI staff over the last few years, and learning a lot about the bowling industry in the process. Our friendship began as I contributed several articles to IBI in recent years, reporting on the growing development of what we now call the “BEC” the Bowling Entertainment Center. I’ve come at this as a family entertainment guy. I started in operations in the mall arcade business which, in the late 80s, evolved into bigger box, more diversified, FECs or family entertainment centers. We took a long look at bowling as an FEC attraction as early as 1991 but couldn’t quite pull the trigger. It was 1998 before I was personally involved in the management of a facility combining bowling and traditional FEC attractions. That was Sports Plus in Long Island, NY, which was an early pioneer but did not quite integrate all the great FEC attractions with the fun and magic of bowling.

That’s all changed now. The model has been refined and its economics proven. The BEC is here to stay. Having been a part of these developments over the last few years, Pinnacle and IBI believe there is a crying need to establish a vehicle within IBI that will showcase and bring focus to BEC issues, trends, and best practices. We will work together to earn your trust, your loyalty as readers, and your respect as proprietors as we work together to build Beyond Bowling into an industry force.

Hope you enjoy it,

I

George McAuliffe President, Pinnacle Entertainment Advisors

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Chris’ Corner hen I came to IBI all of 15 months ago, my perspective of the bowling world was that of most average Americans: “a bowling alley is any place that has bowling.”

Little did I know that the business had been evolving for a number of years to spawn a variety of facilities that have so much more to offer than just bowling that the term “alley” would not do them justice. From Bowling Entertainment Centers, to ultra-cool bowling lounges, to bowling bistros, there is so much more to the bowling business today than just rental shoes and pinsetters.

Traditional bowling houses are incorporating different kinds of amenities to get customers in the door and keep them there. Whether it is the latest in arcade gaming technology, the hottest new attraction, eye-popping theming ideas or delicious food and beverage options, there are more reasons than ever before to head to a bowling center.

Beyond Bowling was created to bring stories of the people and centers that are on the cutting edge of the bowling world’s evolution. I hope that the information will inspire you to think of the next step in your center’s development to make it more appealing to customers and thus more profitable. Partnering with George McAuliffe on this new endeavor, there is no doubt you will not have any difficulty finding that next gem of an idea.

This first installment of Beyond Bowling is just the beginning, and I encourage you to actively participate in growing this project. Join the Beyond Bowling group on www.bowlingindustry.com for the chance to feature your center in a future edition of Beyond Bowling.

To the future and beyond!

W

Chris Holmes Director of Advertising, International Bowling Industry

GOING BEYOND

By Jackie Wyckoff

Transforming a Business Proprietor Andy Bartholomy, Brunswick and Pinnacle Entertainment Advisors team up to transform a chain of bowling centers to BECs.

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ndy Bartholomy didn’t set out to become one of the kings of the modern Bowling Entertainment Center, or, BEC. It was a classic case of necessity being the mother of invention. In 2006-07, at the start of the economic downturn, Bartholomy Bowling’s Tulsa, OK, River Lanes was an 80-lane building with a 40-lane business. They needed to beef up the ancillary profits but were not sure how so they decided to check into the growing family entertainment business, or FEC. Before jumping in with both feet, Bartholomy and his partners certainly did their due diligence. They discussed the possibilities with their management team, spoke with other proprietors and then met with Kurt Harz, John Roush and their team at Brunswick. In the emerging BEC market, there was Andy B’s all lit up and ready for a busy night.

no set template to follow. They attended the IAAPA (International Association of Amusement Parks and Attractions) and other non-bowling FEC trade shows.

After weighing all the options available, Bartholomy decided that an indoor electric go-kart facility would be the perfect anchor. The sports theme tied in nicely with the existing center, the capacity was just right, the team liked the excitement the new venue would generate and it would be a great opportunity to package a fun new product for birthdays and corporate parties. While Bartholomy and 42

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Andy Bartholomy receiving the Brunswick Center of Excellence award from John Roush, left, regional director for Brunswick, and Sharon Moony, right, the general manager of Andy B's Tulsa.

his team didn’t exactly reinvent the BEC wheel, they certainly set the standard and created a working model for how to do it right.

Once Bartholomy’s team was committed to the BEC concept, adding a redemption game room was the natural evolution. A well-planned, designed and operated redemption game room is a solid investment with very good returns and good risk management. When they researched family entertainment attractions, they discovered there are very few profit options which spans both the age and gender appeal that a redemption game room can provide. River Lanes developed its own in house game room team, initially

The ”command center” of Andy B’s is the best of form and function.

including general manager Sharon Mooney and game room and go-karts manager Saul Scribner.

Bartholomy has found that redemption revenue average per game was consistently higher than video games, and redemption sales held steady over longer periods of time.

With the new attractions, transformation of the existing building and reinvention of the business, River Lanes became “Andy B’s” in April of 2008.

But this was just the start of the Andy B’s story.

The results at Andy B’s, Tulsa, were an excellent return on investment. The redemption arcade concept integrated so well into the business that the team wanted to apply it to the other The indoor go-karts area has been a big draw to Andy B’s.

Barthlomy Bowling centers. They immediately formula, but the ticket payout percent began to modernize the existing game room and added a redemption arcade to and hit frequency of each redemption the 36-lane Broken Arrow center in Broken Arrow, OK. game in a location must be set in In 2010 Bartholomy addressed entertainment in his Starlite Lanes in Lebanon, relation to all the other redemption MO. Even though Starlite is a small center and had no room for a game room, he games. This will ‘balance out’ each modernized where he could with 12 brand new games. In December, 2011, he game so it has an equal opportunity modernized the game room in his home base location, Battlefield Lanes in of giving customers ‘fair value’ for Springfield, MO, adding approximately 28 games and a redemption center. A fifth their money and time. Of course, the center, Bartlett Lanes in Bartlett, TN, is currently undergoing a full renovation with better games will still earn more a state of the art redemption game room on the scale of Andy B's in Tulsa. because their higher entertainment Redemption games have a high entertainment value which is defined as the sum value exceeds a small reduction in of every sensory input that a game has, plus the time of play. It is a complicated their ticket payout percent. The right mix of games and attractions keeps visitors engaged and buying.

The floor plan, attraction selection, and theme development can have an enormous impact on the bottom line of a family entertainment center.

Bartholomy credits Pinnacle Entertainment Advisors for helping to enhance the center’s layout to maximize profitability and guest satisfaction. They worked directly with the architect/design firm Cornerstone Architechture to create a modern, vibrant floor plan that keeps guests interacting within the facility, increasing revenue and higher probability for repeat visits.

The Andy B’s team trains the center staff on Bartholomy Bowling’s game room standards and systems, with Pinnacle’s help on the operations side. Saul Scribner of Andy B’s, Tulsa, is the director of the in-house technical support department and trains the new centers’ staff on technical standards.

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The redemption counter looks chocked and full of prizes yet organized and is accessible from all areas of the center.

High design brings a sophisticated effect to the bowling lanes.

A clean and free-flowing redemption area is inviting to patrons.

technical support department and trains the new centers’ staff on technical standards.

The last of the major factors in how they execute their redemption game rooms is the Debit or “swipe” card system. They have used the Embed Card system in three of the five centers where they upgraded game operations. Bartholomy is a big believer in the power of debit card systems to transform the business, and not just in the game room. Andy B’s integrates every aspect of the business into the debit card system from game room, bowling and other attractions to food and beverage. It’s an important part of the Andy B’s experience.

Bartholomy cautions proprietors that a redemption arcade requires the same commitment of management time and resources as any other aspect of a business. It is important to recognize that this isn’t just “open up your game room and come 46

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in once a week to collect the money.” Do your homework; understand how the game room and family entertainment attractions in general can be integrated in a way to transform your business. Get some professional assistance in areas you don’t know and understand all the alternatives. Bartholomy Bowling has had excellent results in the four centers where they added redemption game rooms and, thanks to meticulous planning and execution, expect the same in their Bartlett, TN, Andy B’s

Andy B’s Tulsa BEC earned the 2009 Brunswick Center of Excellence Award. Bartholomy Bowling centers include Andy B’s and Broken Arrow Lanes, Tulsa and Heritage Lanes in Oklahoma City, OK; Battlefield Lanes in Springfield, MO, Buckhorn Lanes in Waynesville, MO, and Starlight Lanes in Lebanon MO; locations in Tennessee are Winchester Bowl in Memphis and Bartlett Lanes in Bartlett – which is currently in the process of modernizing and transforming into an Andy B’s. ❖ Photos courtesy of Cornerstone Architecture.

Jackie Wyckoff, who started bowling in 1968, is a San Francisco (CA) Bay Area native, avid Giants fan and gourmet chef. She was President of the Bowling Writers Association of America, 2009-2011. Wyckoff has worked and volunteered in the bowling industry since 1972 with jobs including Center Manager, USBC (WIBC) Association President and Writer and Promoter for all things Bowling. She was a PWBA Regional Player with several state and local titles to her credit.

BEC/FEC BASICS

By George McAuliffe

The Bowling FEC 101: How to Begin

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owling-anchored FECs are the hottest trend in the family entertainment center industry. Bowling is the leading asset to the mix; it is the prime draw and anchor. Bowling appeals to a wide age group as shown in bowling leagues from toddlers to seniors. The appeal extends to both genders and every segment in terms of age diversity.

With the addition of redemption arcades, laser tag, miniature golf and even theater screens, that appeal is widened and helps diversify the audience. Bowling FEC attractions provide entertainment capacity for parties and groups, including a serious corporate component.

With many bowling centers in their fourth and fifth year of redemption operation, we have a track record to examine.

There are two models to draw comparisons: (1) new construction, ground-up bowling FECs and (2) traditional bowling centers that convert existing space into family entertainment. Because the market is mostly from the second category, let’s focus on the traditional center that adds/converts space to family entertainment.

The Game Mix Each center is personalized for its market, but today’s numbers often reflect a game mix of roughly 80% redemption (including cranes and merchandisers), 10% video and 10% miscellaneous novelty pieces like photobooths, air hockey and others. Within that mix, we create sub-sections of game categories to serve different age groups. Our objective is to draw the whole family, both together as a unit and separately as individual members. A good attraction mix will expand appeal which helps to eliminate “veto votes” and gets the whole family in the car for a visit to the local FEC.

Investment Levels Both new and traditional centers have similar economic considerations. The process starts with space allocation and “right sizing” the gameroom. Many bowling proprietors make a common error in building the wrong size game room, often too large. Sales volume does not necessarily equate to number of games. For example, a center might reach $800,000 in annual sales in a 1,200 square foot game room with only 25 games. “Right sizing,” which takes into account the center’s overall traffic, maximizes the return on investment.

The game mix dictates the game investment, and this is 48

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where a professional would be helpful. By knowing the games that will perform best at the lowest cost will give the greatest value to proprietors. With this game performance knowledge, the proprietor can choose the most cost efficient game, ie. Game A which may cost $5,000 and should average $300 per week, vs. Game B with the same sales production at a cost of $10,000. Including good used games from trusted sources to average down the overall game cost is a smart move for proprietors. With the mix of new and refurbished games, the cost generally averages about $6,500 per game. With a gaming professional, the proprietor can maximize the “player-station-to-game-cabinet” ratio, maximizing player capacity with the selected games.

Operating Economics Illustrated in the example below is the arcade size in comparison to bowling lanes. Excess lanes can be converted to arcade space, and this chart help create some perspective.

Here’s a snapshot estimate P&L for a 2,400 square foot redemption game room: Investment –– 2,400 sq. ft. # Lanes Displaced (690 SF per Lane).............................................................4 # Games .............................................................................40 GameCost ($6500)..................................................$260,000 Other .........................................................................$50,000 Total Investment ................................................$310,000 Sales at $150 Game per Week ...........................$312,000 Merchandise Cost of Sales (15%).............................$46,800 Other Cost of Sales (3%)..............................................$9,360 Direct Labor (15%).....................................................$46,800 Parts & Service ($100 per Game/Year) ......................$4,000 Total Expenses ........................................................$106,960 Gross Profit .............................................................$205,040 Less Reinvestment in New Games (5% Year) ...................................................................$30,000 Net Income From Games...................................$175,040 Cash On Cash Return ................................................56%

Economic Analysis: A bowling lane consumes 690 square feet; four lanes equals space for 40 games. A state-of-the art selection of 40 games plus other items such as a debit card system, merchandise inventory and other consumables should be just north of $310,000. Sales per game per week could be as high as $200 or more, but this illustration uses a realistic number of $150. That yields a little over $300,000

does not have the capital or is not willing to invest in learning game operations up front and commit to managing the game room, then an outside operator can be the best choice.

There are pros and cons to all three approaches, and a good professional on the proprietor’s team can help the proprietor decide what will work best for each project.

Conclusion Certain businesses, those that are capital intensive with mostly fixed costs, qualify for the term “top line businesses.” With the up front investment in games, The redemption area at the new Lucky Jack's in Traverse City, MI. a predictable labor cost to staff the room, constant rent or occupancy costs, and a formula reserve for new games, most redemption game rooms are top line in sales. Using operational economics, businesses. Once breakeven is achieved, a huge percentage of each additional sales the games should be able to deliver dollar flows to net profit. $175K in net income (gross profit less The percentage cost of merchandise sold is what determines the value equation the cost of new games), a healthy for the customers, or better known as players. Once merchandise is “right sized” return on investment. for the game mix and the operation, it should be treated as a fixed expense and Reinvestment in new games is often left alone. Once the cost of sales is zeroed in, a great redemption operator’s focus overlooked but is a key to maintaining shifts to driving the top-line sales. revenues at a high level over time.

We commonly plan for the player’s redemption games to pay out tickets with The recommended budgeting is 5% of a merchandise value equal to about 18% to 20% of their sales. Since there is a natural annual sales (net of trade in). A float in tickets paid out but not redeemed (tickets are taken home and saved, lost, diversified bowling center delivers etc.), the value of tickets actually redeemed to equal about 15% to 18% of the additional revenues and benefits. redemption sales.

Multiple attractions draw more people This means that once the breakeven is attained, for every $1 in sales the player to the site where they bowl, eat, drink spends, they receive back 15 cents in wholesale merchandise cost. IF the job is done and play games. The center tends to right, the player will be happy with their winnings, and the proprietor will be happy do business in more day parts. Price with the profits. packaging allows for delivering more Doing the job right involves having a good system to pull together the many moving value and fun. When that happens, parts required to create a high-perceived value experience in the arcade. ❖ people stay longer and come back

By George McAuliffe, President of Pinnacle Entertainment Advisors more often. Parties and groups are attracted to the wide appeal.

Financing the Investment There are three basic ways to finance the state-of-the-art redemption game room: 1. Center owns: cash or classic loan through bank or game-asset-based lenders. If the center is willing to learn this new business segment and provide quality management time and attention, this is the most profitable approach.

2. Center owns/leases: essentially same as the first option except the financing is structured as a lease (much like a car lease).

3. Contract with a third-party game operator: A game operator provides games and service. If a center owner IBI

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ENGAGING INTERVIEW

One on One with Bill Diamond of Grand Prix New York George McAuliffe spent a few minutes with Bill to ask some basic questions about his FEC business.

1.

So, tell me about Grand Pix New York GPNY is a 120,000 square foot family and corporate entertainment complex in Mount Kisco, New York, that has indoor go-kart racing, bowling, arcade and carnival area, a full restaurant & bar, and finally, a large event space for 200+ people.

2.

How did you get into the business?

We decided to build a premier indoor go-kart facility with a focus on corporate events. We are located in Westchester County, New York, and Fairfield County, Connecticut is right next door. Both are affluent counties with strong corporate presences, plus we are located within 30 miles of New York City, and we felt that there was an opportunity to cater to the regional demand for entertainment based event space.

3.

You have a beautiful bowling boutique. How did that come about?

Racing was successful, but we quickly saw that social events were a much bigger part of our business than we originally expected. We felt that we could increase revenues further by broadening the product mix and becoming a more family focused facility. We added bowling, and now the arcade and carnival areas. We use Brunswick for the bowling alley and they have proven to be a truly fantastic partner.

4. So you are actively evolving your business. What drives your thought process in considering adding complimentary attractions?

We’re looking at how the potential product mix will drive revenues across our different customer bases. Two thirds of our business is made up of either corporate or social events, and the balance is walk in business. So we are constantly trying to refine the mix in order to drive revenues across each of those segments.

5. You opened a redemption game room in April of this year; tell us a little more about the thought process specific to the game room.

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We already had a few games sprinkled around the facility, which were always busy, and we realized that the arcade area could become Bill Diamond in his Mount a much larger attraction for the Kisco, NY, office. facility. Racing is labor intensive, and there is often a wait to race, and so two things that we’re compelling about increasing our arcade focus was that this area has a much lower labor cost, and also gives our customers something additional to do while they wait to race. Also, by using an Embed card solution, rather than tokens, we will be able to tie the cards into the entire facility, enabling our marketing team to come up with a wide range of packages and offerings.

6. Is food and beverage a significant part of the mix, or just an amenity to existing traffic?

Food and beverage has always been very significant in the context of our event business. Restaurant sales were not as significant when we were a racing-only facility, but since we added bowling the restaurant volume has tripled. Having a top quality restaurant means that our customers can linger longer in the facility.

7.

Where do you see GPNY in five years?

We believe that the recent addition of bowling and the expanded arcade will help position GPNY as a true destination for family and corporate entertainment for years to come.

8. Any other wisdom you care to share for our readers adding other attractions to their business?

We were surprised by the amount of revenue we could generate with the arcade and redemption games. We feel that adding this sort of a product mix for a bowling alley is almost a ‘no brainer’. And we try to focus a great deal on evaluating our product mix and customer base, to make sure that at the end of the day our ‘product’ fits the market. Also, utilizing a card system for payment instead of tokens allows for expanded flexibility with promotions and offerings. ❖

EDUMARKETING

By Rick Leffke

“OPPORTUNITYISNOWHERE”

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ometimes, the opportunity is right in front of us and we can’t see it. All the signs are there, and yet all of our experience and our beliefs blind us from seeing the real opportunities that are before us. How many of you read the title of this article and saw the words “Opportunity is nowhere?” If that is what you are convinced that you read, you are correct. The interesting thing about the title is that if you take another look at it and with a little guidance you will see that the title of this article is “Opportunity is now here.” I would like to think the latter statement is true for the bowling industry. It is up to each of us in this industry to seize the opportunity and redefine the direction by truly understanding what our customers really value and take a close look at our options to provide that opportunity to them.

Apply new and innovative technology to attract new customers.

incorporated into a bowling center, but have you ever considered that a vending machine could offer a fun experience for a customer? An example of such a machine is the Cotton Candy Factory by Vendever. With cotton candy being an item that cannot be picked up at the store, people get excited seeing the novelty treat created right in front of them.

Create value for both your customer and YOU. The sweet spot for you as a proprietor is offering your customers something that they perceive as having a value but also something that has a high margin and ROI. The sweetest part for operators of the Cotton Candy Factory is a product cost of 10 cents and a selling price of $3.00. Quick math will show a 96% gross profit margin. WOW!

The “Opportunity is Now Here” and it is up to you to redefine your future.

Most centers already have the latest and greatest in bowling technology to make the experience user-friendly, but now it is time to look elsewhere in your center to create tailored experiences that customers will pay incremental money for. Believe it or not, vending is on the cutting edge of modern technology by creating specialty, state-of-the art and user-friendly machines.

Offer a wide variety of options.

We all know of the variety of attractions that can be

The fully automated "COTTON CANDY FACTORY" produces the finest cotton candy. The candy is served perfectly shaped, dry, fluffy and nonsticky in less than a minute. Using ordinary table sugar, it is easy to clean and maintain with no cheap plastics to break, discolor or need to be replaced over time. With gross profit margins at 96%, operators not only pay off the machine faster than other vending machines, they create the ongoing customer impulse buy and also add incremental cash sales. ❖ Rick Leffke is CEO of VendEver, LLC.

WWW.VENDEVER.COM (888) 586-5368 • sales@vendever.com – FINANCING AVAILABLE –

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