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Feasibility studies – a combination of art and science

The feasibility study is one of the most misunderstood aspects of developing a location-based entertainment facility. Yet, it is the most important step as it lays the foundation for everything that follows. Mistakes at this earliest stage of development will permanently handicap a project’s performance, perhaps fatally.

A good feasibility study is more than just a set of financial projections. As much as answering the question, Is a project feasible?, a good feasibility study addresses the question of what is most feasible. This includes what niche market of customers should be targeted; what should the mix of attractions, food and beverage and other elements be; what size should the project be and what should all the project’s attributes be to attract the targeted market and assure maximum success. Done properly, the feasibility study becomes the market-driven strategic plan for the project’s entire development and operation.

Preparing a feasibility study entails both art and science. Its takes someone very experienced in the location-based entertainment center industry to analyze all the information and data (the science) and make the necessary interpretations and judgment calls of what it all means (the art).

Feasibility starts with market analysis and market feasibility. The market area needs to be defined. There is no such thing as standard criteria for defining a market area. Market areas are not circles defined by some fixed distance. Market areas vary greatly in both distance and drivetime from the site based upon multiple factors unique to each site. A market area might reach 20 minutes and 15 miles in one direction, but only 10 minutes and 5 miles in another direction. Define the market area wrong and all the demographic and socioeconomic data used will be wrong.

Once the market areas are defined, the demographic and socioeconomic data and any identified competition must be evaluated and interpreted to determine market feasibility. This includes which niche market of customers should be targeted, including definition by age, social groupings and socioeconomic-lifestyles; the type of center that is most feasible and its mix.

The feasibility study then projects attendance based on the market area data and competition and right-sizes the center, including all its components. This is then translated into a preliminary site and floor plan to assure that the center will fit on the site or in the leased space and for purposes of accurately estimating project development costs

The financial pro forma projections follow. First revenues are determined by calculations of attendance multiplied by assumptions for projected per capita expenditures for each category of revenue and type of guest. Operating expenses are then projected to arrive at EBITDA and cash flows. Again, the financial projections are part art based on developing assumptions based on interpretation of all the available information.

Despite what some websites, such as www.familyentertainmentcenter.com, and vendors peddling low cost business software claim, there are no boilerplate spreadsheets where you can just plug in some data and get reliable market feasibility, cost estimates and financial projections. Such fixed formula type solutions ignore the art of feasibility, as no two sites, market areas or projects are the same. Inexperienced entrepreneurs who think such websites or software are a quick and inexpensive route to feasibility are only asking for failure. A reliable feasibility study can only be prepared by an experienced professional, by someone who, based on years of experience, understands how to correctly interpret all the information and data that combine science with the art that goes into preparing feasibility studies.

About Randy White

Randy White is CEO and co-founder of the White Hutchinson Leisure & Learning Group. The 26-year-old company, with offices in Kansas City, Missouri and Doha, Qatar in the Middle East, has worked for over 500 clients in 33 countries in North and Latin America, Africa, Asia, Europe and the Middle East. Projects the company has produced have won sixteen 1st place awards. Randy is considered to be one of the world’s foremost authorities on feasibility, brand development, design and production of entertainment, eatertainment, edutainment, play and leisure facilities. Randy was featured on the Food Network’s Unwrapped television show as an eatertainment expert, quoted as an entertainment/edutainment center expert in the Wall Street Journal, USA Today, New York Times and Time magazine and received recognition for family-friendly designs by Pizza Today magazine. One of the company’s projects was featured as an example of an edutainment project in the book The Experience Economy. Numerous national newspapers have interviewed him as an expert on shopping center and mall entertainment and retail-tainment. Randy is a graduate of New York University. Prior to repositioning the company in 1989 to work exclusively in the leisure and learning industry, White Hutchinson was active in the retail/commercial real estate industry as a real estate consultancy specializing in workouts/turnarounds of commercial projects. In the late 1960s to early 1980s, Randy managed a diversified real estate development company that developed, owned and managed over 2.0 million square feet of shopping centers and mixed-use projects and 2,000 acres of residential subdivisions. Randy holds the designations of CSM (Certified Shopping Center Manager) and Certified Retail Property Executive (CRX) from the International Council of Shopping Centers (ICSC). Randy is also a partner in Eatertainment Venues 4.0, a company that is developing eatertainment venues, and a co-Regent and presenter at the 14-year-old Foundations Entertainment University, a 3-day long training seminar for the family entertainment center industry. He has authored over 100 articles that have been published in leading entertainment/leisure and early childhood education industry magazines and journals and has been a featured speaker at conventions of over 20 different leisure trade groups. Randy is the editor of his company's Leisure eNewsletter, has a blog and tweets.
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