Every year after the November IAAPA Show in Orlando, FL, we get inquiries about what we saw there that was new and could be the next BIG Thing. We're continually perplexed about family entertainment center operators' fascination with the search for the next BIG Thing. What it says to us is that the things they have don't work and they're looking for something that does.
This ongoing pursuit for the next BIG Thing is the pattern of thinking so many FECs fall into during their initial development. They don't develop their centers with a mix of attractions that has legs, that has a long life. Instead, there is this hope for the next BIG Thing. In fact, some even build future money in their budgets to buy the unknown next BIG Thing.
FECs cost a lot of money. Let's say for sake of example that a particular FEC that cost $2.0M generates a 20% cash-on-cash return on cost of $400,000 per year during its early years. The center would need to sustain that return for five years to just get the investment back (5 x $400,000 = $2.0M). At that point in time it will only have broken even (setting aside inflation). There hasn't yet been any true return on the $2.0M investment. To get a return, the center would need to be successful for many more years. In fact, if you assume it was able to maintain that $400,000 rate for 10 years, its true annual return at ten years in very simplistic terms is only 10%, or $200,000 per year (5 x $400,000 starting in the 6th year divided by 10 years).
A large majority of FECs are not developed with a mix that can sustain sales for ten years. The attractions, the mix they select gets old and loses its appeal after just a few years. So what they have to do is find new attractions, what they refer to as the next BIG Thing. Of course that can require a major investment. So the original returns forecast at the beginning of the FEC's development are never achieved due to the ongoing need to make major capital investments.
There are actually only a few anchor attractions that have stood the test of time. And the only next BIG Thing anchor attraction that has come along in the past decades has been laser tag, but it took more than twenty years to really take off.
Now there is actually one next BIG Thing out there that most FECs are not seeing. That next BIG Thing has actually been out there for a very long time. It's not something you'll find at the IAAPA Show. To find it you have to go to an even larger show in Chicago that takes place each May. That next BIG Thing is really an old BIG Thing, destination food and beverage. Yes, that's right, destination F&B is an anchor attraction that has legs. And the show we are referring to is the National Restaurant Association Show.
We know destination F&B works and lasts, as we have a number of solid examples of evergreen concepts that have been around over 30 years that use it as an anchor attraction - Dave & Busters, now with 73 locations, and Chuck E. Cheese's with over 540 U.S. locations, both with roughly 50% F&B revenues (actually CEC lost its way with its F&B a few years ago, but has recently revamped its menu to become a F&B destination for not only children, but their parents as well).
If you look at some of the strong new concepts out there, they also rely very heavily on their food and drink offerings to drive attendance. Examples include Pinstripes with bowling and bocce. For some, such as Punch Bowl Social and the newly opened Level 257, the majority of their revenue comes from F&B and entertainment revenue is in the minority.
The other thing that F&B does in a big way is increases the social experience that takes place. People naturally socialize around F&B. We have since the beginning of mankind when our ancestors gathered around the campfire to eat. In fact, we still do that a sense when we have a candle on the dining table. Even if we are playing something like bowling, the presence of F&B on the lanes further facilitates socialization. For the majority of FEC guests, socialization is the primary reason for their visit.
The bottom line is even for FECs that use time-proven anchors such as bowling and laser tag, if they want to survive and prosper long-term, they need to stop chasing after the next new BIG Thing. Instead they need to seriously incorporate the next old BIG Thing in a major way - great contemporary destination food and beverage. It's the anchor attraction that will never get old.