The Many Considerations of Converting to an FEC
The ‘secret’ of success for those who have made the move involved developing a detailed plan and executing it well.
By Ken Paton
With the decrease in the number of sanctioned league bowlers, as well as the sometimes-inconsistent recovery from the recession, converting from a traditional bowling center into a family entertainment center has been a hot topic. Although many centers have successfully transitioned to an FEC, there has not been a consistent path through the maze of issues. In the ﬁrst four parts of this series, we have outlined the good and bad experiences of several proprietors who have made the change. In this installment, we will summarize our ﬁndings.
Developing a Plan
Nearly all of the proprietors that were interviewed agree that a detailed plan either made their lives easier during the conversion or would have. Several pointed out that they didn’t know what they didn’t know and needed outside advice to make good decisions. Most of these proprietors asked an out-side advisor to prepare a detailed feasibility study.
Starting with such a study was a consistent recommendation. Since most bowling proprietors grew up bowling in leagues, understanding the traditional bowling market is relatively easy for them. With an FEC, much of the revenue will come from people who do not bowl regularly, and many may not have ever bowled before.
A signiﬁcant portion of the center’s revenue may come from games and attractions, with which a traditional proprietor will not have had any experience. Also, some FECs generate as much as half of their revenue from food-and-beverage operations, which adds another complicating factor to planning.
Identifying the demographic market segments to target, understanding the potential income from these new customers, and developing a marketing program to reach them is a critical ﬁrst step to planning a conversion.
A feasibility study will estimate the demand for each type of attraction and the potential revenue that each might generate. This information will help with space planning, capital equipment purchases, marketing, and stafﬁng. It also will help with the decision to remove lanes, convert underutilized space, or add on to the building.
Posted with permission from Bowling Center Management.
Several proprietors pointed out that revenue per square foot was their measure, rather than revenue per lane. For example, if eight lanes were rarely used, but a new laser tag arena could add signiﬁ cant revenue, they made the decision to convert the space to laser tag.
However, revenue is only one consideration. The amount and type of capital investment is a major concern. Many of the attractions will involve equipment that is very different than what a traditional proprietor has experienced. Some attractions require an attendant to ensure a safe experience for the customer, which could require additional hiring and training. Maintaining electronic equipment such as arcade games and laser tag vests requires training that many bowling mechanics don’t have, plus components within an arcade game often cannot be repaired and must be replaced.
A major capital investment may require new ﬁnancing, and the availability of the ﬁnancing also is a factor to consider. A feasibility study will help to evaluate these costs.
Another factor to consider is the operating margin per square foot. Bowling equipment can have a useful life of 50 years or more, while many arcade games can see revenue fall off within ﬁve years when they will need to be replaced. Thus, capital reinvestment needs to be part of the plan.
Liability insurance premiums for some attractions are higher than for others. So, despite some attractions generating high revenue per square foot, the contribution margins may be less than first expected.
The old snack bar of the traditional center is giving way to an upscale menu with separate dining areas, requiring a different skill set for cooks and more servers, increasing overhead.
Executing the Plan
Even a minor remodeling of a building can be costly and time-consuming. A question that frequently comes up is whether the business should close during remodeling or remain open. Several proprietors who remained open argued that they should have closed since it would have reduced the construction cost as well as the time to complete the construction.
Since the primary reason to remodel is to generate revenue from the new attractions, getting those attractions open sooner often makes the most economic sense. Others argue that remaining open allows the business to continue to generate revenue during the construction, and the inconvenience of the construction process actually generates more buzz in the community, which is a form of free advertising.
While there is no one-size-ﬁts-all answer to this question, the centers that remained open during remodeling seem to have been those that generated the strongest revenue before the conversion, or had excess space available and required minimal construction to install the new attractions.
New arcade games and attractions are introduced on a regular basis, often at the International Association of Amusement Parks and Attractions Expos. Attending the IAAPA show and BPAA’s International Bowl Expo before making ﬁnal decisions can help you translate a plan into a successful operation via attending the seminars and viewing and playing the games and attractions.
FECs generally require more labor than traditional bowling centers. The BPAA Benchmark Study reports that the average bowling center spends 28% of its revenue on payroll, while many bowling-based FECs spend more than 32%. The time and cost to recruit new employees need to be factored into the plan.
Food is becoming a signiﬁ cant part of many FEC operations. The old snack bar of the traditional center is giving way to an upscale menu with separate dining facilities that require a different skillset for cooks as well as more servers, which increases overhead. Finding and testing new recipes to upgrade the menu also adds time and cost to the plan.
Many traditional league bowlers may not be comfortable with the changes that are being proposed. Some may move to a competing center that has retained its traditional league orientation. Discussing the proposed changes with some of the league leaders may give insight into how the bowlers will react to the changes. With this information, the plan can take into consideration the potential loss of leagues or the concessions that may be needed to retain them.
Marketing in a consumer environment requires paying attention to every aspect of the business to present a consistent image to the market.
The key is to ensure that the right story is told. A beautiful building with the latest equipment can be offset by a dirty restroom or staff members who are too busy texting their friends to pay attention to customers. High bowling scores will not overcome the lack of a great experience.
Marketing is successfully telling your story to the right customers using every aspect of the business. A high-ﬁdelity experience, to use an expression developed by industry consultant Randy White, should be the goal of FECs. White coined this phrase to describe a high-quality or luxury experience rather than a convenient one that is cheap and readily available from a number of sources.
Branding is an issue at this stage. “Location Bowl” may no longer identify the center with its new at-tractions. Most traditional centers are taking new names as part of the conversion to an FEC. While some of the history of the center may be lost, the future may be stronger because of it. Some try to compromise and use “Location Entertainment,” but most proprietors recommend a different name unless the portion of the name that is retained has a signiﬁcant tie to the center’s physical location.
Although free advertising is a wonderful goal, most proprietors invested in traditional paid advertising as well as social media to announce the changes.
Identifying the target market for each attraction will help to determine the best advertising channels. For example, Facebook appears to be
a good channel for parents looking for things for their kids, but not as effective for teens and pre-teens who might spend more time on Instagram.
Converting a traditional bowling center into an FEC is a complicated, time-consuming, and expensive proposition, but one that can be a good ﬁnancial investment.
The BPAA Benchmark Study shows the average bowling center generates $47,641 gross revenue per lane, with a median revenue per lane of $36,367. The average bowling-based FEC appears to generate more than $125,000 per lane.
In a non-scientiﬁ c survey, the only FECs that have defaulted on their loans did so during construction, and not after operations began. This implies challenges with the planning and execution of the plan, rather than problems with operations or marketing.
So, despite the work and the risk, converting to an FEC has been worth it for many proprietors.