If you’re thinking about developing a family entertainment center (FEC), the following advice is for you. It’s from my 20+ years of consulting experience with new leisure attractions, and watching many who have gone down the path you’re looking at right now. One of the real benefits of our industry is shared experience. We don’t have to reinvent the wheel when it comes to FECs. Sure, there are always improvements that can be made to the concept, but it’s a proven one with an established track record that now spans decades. With that in mind…
First, look within yourself and think about why you want to develop a FEC. If the main reason is to get rich, think again. Although there’s always the feeling that a clever new idea can lead to great fortune, few in our business actually do get rich developing leisure attractions and those that do probably didn’t think they would when they started. If your main reason is to take on the challenge of developing a thriving fun business that could entertain thousands every year, then welcome, we need more like you. Many FEC developers are actually buying themselves a job, and an enjoyable one at that. There’s nothing wrong with that. It’s the motivation driving most of the small businesses today in our country. The goal of being your boss, doing something you enjoy, and hopefully building something of value that you can pass on someday to others.
Second, you’re going to need money. Not all of it, that’s what lending institutions like banks, help with. But you’re going to need what we call “seed money”. If you’re the creative type that simply wants to conceptualize and not deal with money, this is the time to begin finding a business partner. The leisure attractions industry has benefited time and time again from pairing creative and business types. I’m sure you’ve heard of Walt and Roy Disney.
How much seed money you’re going to need is hard to say. I’ve been asked if there is some way that a consultant can provide a “preliminary” feasibility analysis that would help get this seed money. Sadly, the answer is no. Any worthwhile feasibility report is going to take considerable time and effort.
Think carefully about the general risk involved in developing a new business. There are no guarantees and you will need to be comfortable with these risks before you can seriously move forward.
Third, you should have a good idea of what type of family entertainment center you want to develop. One type is not inherently better than another; such as indoor versus outdoor or teen-oriented versus children-oriented. This is the time to educate yourself as much as you can about FECs. In particular, you should visit as many family entertainment centers as you can, and see first-hand what you like and don’t like. Soon, you should have a good idea of what you want to develop.
Fourth, you should also have a good idea where you want to develop your family entertainment center. Ideally, you should have a specific site in mind.
Fifth, you’re very likely going to need a feasibility study unless you have the financial resources to develop the project on your own. That’s because our industry, like most, has its own version of the golden rule and it says “the one with the gold makes the rules”. Lenders and other investors want to see an objective, analytical report prepared by an expert that evaluates the potential of your proposed type of FEC at your prospective location. This effort might be divided into separate market and financial feasibility studies, but typically it is done in a single report.
Although you’ve paid for it, the feasibility study is not written directly for you. It’s written for prospective lenders and investors, and assumes they have little if any knowledge of family entertainment center. That’s why it will often begin by describing the FEC concept, a topic you probably already know much about.
The study will then likely identify the potential markets for your proposed FEC, through distance rings, travel corridors, or other means. It may or may not include tourists, depending on the location. It should present the size of each market segment and its demographic characteristics. It should project potential attendance by applying market penetration rates to these market segments, influenced by the quality of these markets, competition, and the experience of comparable FECs elsewhere.
The feasibility study should provide general physical recommendations to ensure that the proposed FEC will physically be able to effectively service its expected attendance. This study, however, does not design the FEC and should give the designers flexibility.
The study should also project potential financial performance and provide guidance on the total development costs needed to achieve a worthwhile return-on-investment to investors. This amount needs to be high enough to provide the “critical mass” of experiences needed to achieve its market potential, yet avoid overbuilding. An FEC can often be expanded later if needed, but downsizing is generally very difficult. With the feasibility study in hand, you’re ready to continue moving forward.
Sixth, you should prepare a detailed business plan for your proposed family entertainment center. Its purpose differs from the feasibility study. The feasibility study is prepared by an outside expert and hopefully demonstrates the potential of your proposed FEC. If not, you will need to make changes to the concept and/or location. Even a positive feasibility study does not predict or guarantee success. Instead, it shows the potential performance if the FEC is developed and managed effectively.
The business plan shows how you plan to effectively develop and manage the FEC so that it will achieve the potential identified in the feasibility study. Although the business plan may partially or completely be prepared by outsiders, it is ultimately your document. It will need to persuade skeptical readers that you can actually make this happen. They will look hard at the top people involved in the project that are described in the business plan, and will want comfort that these individuals are qualified.
Seventh, you may need initial design and concept development work as part of the complete package to present to prospective investors and lenders. I’m not a designer, so I won’t speak for that profession concerning this particular step. There are many fine design firms in our industry that will be happy to discuss this with you and you should begin talking with them early in the planning process. There may also be other consultants needed to effectively move the planning process forward.
Eighth, you may need to bring in other equity investors. Banks and other lending institutions will rarely provide all of the funds needed to develop the FEC, so the remaining amount has to be provided by equity investors. Since the lenders will likely have liens on the assets of the FEC, the equity investors have higher risks, but also have the potential to reap the higher rewards from a successful operation.
Ninth, you have funding in place and are ready to begin construction. If you’ve made it this far, you’ve accomplished quite a bit and should take a moment to celebrate. More challenges lie ahead, but you’re well on your way.