Strengths
Family entertainment centers are able to generate substantial contribution margins among multiple revenue centers. Additionally, these businesses are able to remain profitable and cash flow positive in nearly any economic climate given that they provide a reasonably low-cost form of entertainment in the communities that they serve.
As it relates to financing, family friendly entertainment centers are able to easily secure funding from either investors or financial institutions (or both) given that a substantial portion of the capital is typically used for the acquisition of land, facility build out, as well as furniture, fixtures, and equipment. Once established, these businesses are able to effectively draw an ongoing customer base given that parents are always looking for ways for their children enjoy a low-cost form of entertainment that is physically engaging. These businesses also benefit from having on site event hosting capabilities for birthdays as well as other types of personal events.
Weaknesses
For weaknesses, family entertainment centers typically have very high startup costs. For an average-sized facility these fees can range for anywhere from $500,000 to $1.5 million. For large-scale family entertainment centers, the start of a cost can easily reach $2,000,000 to $5,000,000 depending on the size of the facility and where it’s located. It should be noted that even though some of these facilities do have very substantial startup costs, the returns on investment are substantial. For larger facilities that often cost upwards of $5,000,000 to develop, these entities often feature large scale entertainment installations such as miniature golf and go kart tracks that are able to draw patrons from an expansive market radius.
Opportunities
As it relates to opportunities, over the past 10 years – one of the common trends within this industry has been to integrate membership driven operations in order to produce recurring streams of revenue. These membership programs, for a flat monthly fee, often provide substantial discounts on food and beverage purchases as well as usage of specialized equipment that would otherwise incur a fee such as arcade games, miniature golf course usage, or go kart usage.
An additional opportunity is the continued expansion of event hosting operations. Birthday parties are especially important for the operations of family friendly entertainment centers given that they not only produce a substantial amount of revenue, but they also greatly increase the visibility of the business on a regional basis. One of the ways that many family entertainment centers can further expand their visibility is by providing discounted rates for large scale events when hosted by civics organizations as well as other not-for-profit entities.
An additional opportunity of growth typically comes from continued expansion of marketing operations. This includes expanded social media marketing in regards to distributing specialized promotions and discounts. One of the unique ways that many family entertainment centers have used to promote their locations is to work with social media influencers that will come to the facilities and upload a video of themselves and their families enjoying time at the location. For regional businesses, this can be a very low cost yet very high impact way further increasing brand name visibility.
Threats
As it relates to threats, these are usually a pretty minimal issue for most family entertainment centers. The primary threat faced by these businesses is typically other entities that operate in a similar capacity within the target market. As such, owners of these facilities must find ways to properly differentiate themselves whether it’s through specialized installations (such as virtual reality equipment) or through promotional discounts that make the experience more affordable to the local market. As it relates to the economy, major economic recessions can cause downward pressure on the revenues of family entertainment centers. However, given that these are regional businesses they can often serve as an alternative to vacations or other forms of expensive entertainment for families within any given regional market.