Determining when to switch out or upgrade games and/or family entertainment center attractions, and then actually following through, can have a great positive effect on the both the short term and long term profitability of your bowling anchored facility. Ignoring these factors and permitting your games and attractions to become old and tired can result in the loss of hundreds of thousands of dollars of revenue over just a few years. Also, note that if you fall behind in keeping the game mix current and populated with the hottest games, it becomes financially impossible to catch up. There are several reasons why continuously tracking and investing in these revenue-generating categories of your business is important:
Staying Ahead of the Competitive Marketplace
Repeat customers are always looking forward to seeing something new or different. If they don’t see new ‘bells and whistles’ or a new addition on a frequent basis, they will not look forward to visiting your facility and will search out other alternatives. Marketing a new or upgraded attraction will also bring in new curious customers, as well as providing an opportunity for current customers to visit more frequently. A realistic rule to follow is to budget 10% of net profits (before taxes) each year for re-investment in your games and attractions. This does not mean that you must spend this full amount each year, as a new or upgraded attraction would only be necessary when the current attraction no longer annually generates revenues close to its original purchase price. This is a good benchmark to keep in mind.
Increasing Facility Throughput
Choose attractions that have a high throughput (number of customers per hour) in relation to their footprint. High throughput translates to greater revenues on peak attendance days (Saturdays, Sundays and holidays) without requiring a larger facility or more games. The same logic applies to higher game revenues when several high throughput games (known as quick coin games) are included in the game mix. Also, higher game revenues can be attained with a lower number of games, if the games are positioned so customers have enough space to walk easily from game to game through the game zone, even when each game’s player station is being utilized. Using a floor space design criteria of 50 sq. ft. per game (including the redemption prize center) is a workable guideline. Approximately 10% of the games should be comprised of quick coin games, a category that has been conveniently deleted by our industry manufacturers and distributors for their own business profitability reasons.
Avoiding the Costs of Refurbishment
(both mechanical and visual)
It costs an average of $500 per year (parts and labor) to recondition a game after that game becomes two years old with normal wear and tear. Remember this is just an average. Some game’s refurbishing costs are much higher. Tracking the weekly revenues of each game makes it easy to see which are the lowest earners and which have frequent malfunctions. It is not always the games with the lowest revenues that should be the first to be replaced. The costs of reconditioning and the costs of weekly maintenance are also factors that must be considered. The cost of refurbishing an attraction on an annual basis can be prohibitive. Most attractions can be cleaned and sometimes painted or touched up.
Improving Operating Efficiency
Saving money operating an attraction can be provided with an upgrade or even an expansion of the attraction. A good example is converting a single level laser tag into a two-level laser tag. The cost is very reasonable if the original laser tag was designed (high ceilings and large enough footprint) with this future option in mind.
In some cases adding a new technology to an existing attraction can increase that attraction’s revenue. The customer perceives the enhanced technology as if a replacement attraction were present. An example is adding a new software or scoring system to an existing bowling component. There are many instances where a new game offers more features, enhanced graphics, monitors, and LED lighting than a previous similar model. ‘Smoken Token Extreme’ vs. ‘Smoken Token’ is one example. Adding a debit card system is another example of a new technology that enhances the guest experience, but also allows for improved revenue and payout tracking plus hundreds of marketing opportunities.
Investing in a new attraction and in new games still qualifies in 2013 for an accelerated depreciation schedule up to certain limits of bonus depreciation and Section 179 depreciation. The tax savings this year could be one of the criteria for making this type of purchase now rather than next year. Check with your accountant to estimate what your tax savings this year could be if the maximum purchases were made.
Consider The Following Steps:
- On a bi-weekly or monthly basis, start with small easy low-cost changes that include adding new trendy prizes to the redemption prize center and hot new prizes to the cranes and high-end merchandiser games. Make sure that the redemption prize center is brightly lighted and attractive. Set a goal of switching out 10% of the games annually but doing it on a quarterly (every 3 months) basis. Follow the considerations highlighted above. This game switching out process is easier to accomplish if games are traded-in or sold when they still have a reasonable value, but their revenues have decreased substantially since they were purchased. Add an upgrade to an existing attraction every year starting in your 3rd year in business. Switch out an attraction when that attraction no longer earns in a year close to what its original cost was and its revenues are trending downward.
- Before a decision is made to trade-in or sell a once high earning redemption game, first increase the ticket payout percent by 5% and see if the weekly revenues increase substantially. If they do, chances are good that the revenues will remain high for up to 6 months. If the revenues do not increase, try moving the game to another location within the game zone. Sometimes this alone gives the customers the perception of change and they will play this game because they haven’t noticed it before. Those customers who enjoy this game will seek out its new location.
- When the time is right to trade-in or sell a game, there may not be a specific new game on the market that fits your purchasing criteria. In those cases doubling up on one of your top earning games may be the best choice. If the combined revenue of the two games turns out to be 1.6 times or greater than the initial single game’s revenue, you have made a good decision. When the combined revenue of the two games starts to decline below the 1.6 times amount, the first game will still have a good trade-in or resale value.
- For video games, when a game’s revenue falls below 50% of its initial yearly average, the price per play can be reduced by 25 cents at a time to offer the customers a better play value. This may help increase revenues for a short time, but realize that video games have a much shorter life than any of the other game categories. Also, check to see if there is an upgrade kit available for that video game. New game kits can also be installed into existing video game cabinets, often with substantial savings versus purchasing the dedicated version.
- Taking into account the above guidelines, benchmarks, and steps will help determine when it is time to switch out games and attractions. Budgeting for these time periods will make it easier to follow through on your decision when the time comes. Over the long haul, your business will be kept current and more profitable and your customers will keep coming back and recommending your facility to others. What could be better!
Bowling Center Management – Entertainment Center News – Spring 2013