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HIGH CASHFLOW ENTERTAINMENT BUSINESS
BE QUICK - MOTIVATED VENDOR WANTS SOLD ASAP!!!
:: SERIOUSLY COOL FUN!!!!!!!!!
:: EASY TO RUN
:: PROMINENT SHOPPING CENTRE LOCATION
The Executive Summary
There can’t be a teenager in Australia who hasn’t heard of this business, and very few who haven’t been into a store at one time or another; and of course a core who spend many hours playing the numerous games on offer.
Electronic gaming is a large and growing leisure time activity and the sheer size, scale and diversity of games means that even though young people may own a home gaming console they’ll still be drawn to a centre such as this to play games unobtainable elsewhere. They can also win prizes and meet friends – something that can’t be done at home.
The business uses a debit card system – players pay cash to charge the card with a similar amount in playing credits. They carry the card with them, which acts as a reminder and encouragement to return to the store and is a powerful branding device. Licenses for these sorts of systems are expensive, but through the franchisor this business gets the system free.
This particular business has taken things a significant step further, however, and makes use of a sophisticated intranet and analysis package to track the business’s performance against a number of KPIs. This gives it a significant analytical edge over its competition.
With just eight staff (two full time, one part time and five casual) required to keep the centre running and an operation that basically “runs itself”. This is a business which is ideally positioned for a new owner to boost its sales simply by promoting it. The present owners have made one step in this direction – the appointment of a Business Development Manager – but with an entrepreneurial owner at the helm there’s almost no limit to potential growth.
The business is ideally situated north of the river in a fast-growing area where over a quarter of the population is in its target age range, in a shopping centre which draws thousands of people each day.
Because the business brand is strong and well-established, barriers to entry are significant. Through the franchise the business benefits from a great deal of advertising (radio, newspapers), the costs of which would be significant for any other competitor.
An ideal mixture of stability – with the fundamentals perfect and strong franchisor support – and potential, this business represents an opportunity to acquire an easy-to-operate business which requires relatively little owner input in order to maintain or even grow its sales base.
This is a newly established business, founded in 2007. Initially the business was modelled on other franchised stores, but the owners have since streamlined the business – maintaining same opening hours but decreasing costs and this includes an additional $800 per fortnight for a business development manager.
They’ve also invested in IT infrastructure, with an intranet and analysis service to keep track of the KPIs of the business. A website which will permit online party bookings is almost complete and search engine optimisation services have been contracted
Business Description & Operations
The business is a family entertainment centre that caters to all age groups. It provides video games, redemption games (where tickets won can be redeemed for prizes), prize vending games and photo machines. The facility also has a party room so that people can hold a special event at the premises.
Machines are played via rechargeable “Powercards” which customers carry with them, encouraging return visits to the centre and contributing to branding.
The business employs eight staff in this “farming” type business which really sells itself. With a good centre manager and business development person in place, the business runs itself.
The business pays the franchisor a royalty of 10 percent and a marketing fee of one percent. The franchise agreement commenced in May 2007 and runs for 10 years. No franchise license payment is made upon expiry of the agreement and there are no exit or assignment fees.
Approval of the prospective franchisee by the Franchisor is required. Initial training, carried out in Perth, lasts for two weeks and is free to the purchaser.
The franchisor has a strategic plan detailing where the business is heading and invites franchisee input into the way the network is run through ad hoc discussions with the Regional Manager, who keeps every store in the loop regarding promotions etc, and is supportive of initiatives by franchisees.
The vendors feel the franchisor has provided excellent marketing and support. They say they honestly feel that the franchisor is looking out for their business instead of simply trying to make money from franchises.
Powercards, must be purchased through the franchisor whilst all other suppliers are at the franchisee’s discretion.
Products and Services
The business sells entertainment in the form of Powercards. Each Powercard is loaded with cash, and customers use that cash to play games. There are various tiers and packages that are determined by the franchisor and, to an extent, the franchisee.
It also offers birthday packages, timed packages and fixed number of game packages and provides a dedicated party-room so that people can have a party at the business. Some games offer redemption, so people can claim prizes for playing the associated machines in the store.
Positioning
The business has the largest collection of amusement machines in the area, backed by a very easy-to-use debit card system. The centre also caters for parties and offers value packs that target specific customer preferences.
The business offers its customers entertainment at value-for-money prices – and is able to do so because the cost of running the machines is minimal.
This fun business is generally perceived by its client base as a safe, fun environment in which to have fun. Its target market is children, teenagers and young adults; as well as parents who want to organise parties for their children.
Market Size
Economist Linda Nazareth in her book The Leisure Economy (2007) (John Wiley and Sons) - states that we are entering a time where there is increasing spend by all generations on leisure items. Gen-X and Gen-Y will spend on games, while their parents will spend to have birthday parties organized for them.
Additionally, we have increasing immigration into WA for the next few years - and the increasing population in the outer suburbs will have a beneficial effect on business. The housing affordability crisis also means more people will be moving to the outer-suburbs. Also, the shopping centre is the most successful shopping centre (in terms of turnover) in the area.
The market consists of the casual shopper who wants to come in and spend $10+ dollars for a short period of enjoyment. Then there are the hard-core gamers (who play specific games - such as racing or dancing games). They also have the kids market that they aim their parties to - and finally we have the corporate market.
Untapped Client Base
The business has undertaken very little marketing aimed at businesses, youth groups or government. For example, there are more than 100 shops in the shopping centre, yet the business doesn’t provide specific discounts for them. Outside the centre itself there are more than 50 businesses, ranging from Bunnings to a blood donor centre, yet the business does not advertise on their premises or offer them any special deals.
Whilst the business does have the occasional government booking (for youth groups) it needs to follow up on these and build a relationship with them. And despite being located in an area full of sporting clubs, the business doesn’t undertake any marketing or awareness campaigns aimed at them.
There is also a real option of generating more business from the Party Room which can hold parties for a number of people at one time.
Key features over other businesses
"The above purchase price represents excellent value….
…. when comparing the features of this business with other businesses"
• UNPARALLELED BRANDING, STRONG FRANCHISOR SUPPORT
No other family entertainment brand is as well recognised across Australia as that of this business. The franchisor is active in promoting the brand and building the business of its franchisees.
• IDEAL LOCATION
Not only is shopping centre ideal from the perspective of its centrality to a relatively young population, but it is in an excellent location for passing traffic. The shopping centre has the highest turnover in the area and is also located close to a large number of schools and sporting clubs.
• LEADING EDGE SYSTEMS
This is the only entertainment business with an IT-based plan for improving business processes and driving sales. The business utilises an excellent software development house for all its IT infrastructure needs.
• ONLY APPROXIMATELY $10,000 STOCK
This amount of stock is con¬sidered minimal. Most other busi¬nesses will carry much higher values than this, which will demand higher working capital requirements and un¬necessary money tied up during the term of ownership.
• PROFIT BASED ON ONE OWNER / OPERATOR
Be¬cause of the ease of operation, the business could easily be placed under total management to reduce the owners hours further if required.
• EXCELLENT CASHFLOW
All sales are for cash while 95 percent of accounts payable are on 30 day terms. This provides the business with an excellent cash flow, which minimises working capital.
• NO SELLING REQUIRED
The vast majority of sales are simply self pro¬pelled.
• PROFITS CAN BE PROVEN 100%
• ESTABLISHED REPEAT CLIENT BASE
Not reliant on agencies or large clients, reflects a lower than normal risk factor.
• HUGE POTENTIAL
With focused marketing the potential for increased sales is significant, with the looming school holidays a real opportunity
Growth Potential
The vendor has identified the following strategies which, if implemented by the new owner, offer the potential to increase the turnover and / or profit of the business:
Advertising and promotion.
The present owners have been working towards the launch of a website that takes online party bookings, which would then be marketed via Google Adwords, and WA based websites.
Further client expansion.
The business has not yet focused its advertising on local businesses or sporting clubs, but has made an initial start on church groups in the area. Boosting group bookings offers a cost-effective way of increasing sales.
Extended product range.
There are always new games being released which the developers promote via various channels, from gaming magazines to specialised TV shows.
Barriers to Market Entry
A newcomer to the market hoping to compete with this business would need:
• To be able to meet the initial up-front cost for the machines, which is significant, as are fit out costs for a centre such as this.
• An equivalent brand, as an unknown stand-alone centre would be unlikely to create the same “buzz” amongst the target market.
• A means of creating a niche in a market which is already comprehensively served by this business, and is further supplemented by some machines at the local cinema.
• A loyalty system to equal the Powercard debit system.
• To locate a suitable location – and the vendors advise that there are none available in the area.
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