Should you consider buying an indoor park franchise or face entrepreneurship alone?
An indoor park franchise can be anything from soft play equipment made up of tubes and slides (also known as soft-contained equipment), go kart tracks, giant inflatables, arcade and coin operated games, laser tag, paintball, batting cages, bumper cars, miniature golf and skate or BMX parks.
The International Franchise Association says, "Industry analysts estimate that franchising employs more than 8 million people, a new franchise outlet opens somewhere in the U.S. every 8 minutes, and approximately one out of every 12 retail business establishments is a franchised business."
With the recent economy and more business professionals facing layoffs, there is a growing trend toward business ownership. Whether this trend is as a business entrepreneur or franchise operator, the days of being hired as an employee are shifting. Today more and more business professionals are seeking new ways to achieve employment security by going into business for themselves. Recent layoffs have encouraged smart, self-starting professionals with severance packages, retirement funds, and home equity lines to look beyond the traditional employment mill toward one that offers them better control.
There are pros and cons to becoming a franchisee. I have spoken with franchise owner/operators and there are some very good arguments for both sides of business ownership. Only you can determine whether individual business ownership or independent owner/operator operations are right for you.
Your goal when evaluating potential indoor park and family entertainment center franchises is to determine whether your efforts are worth the actual profits you will retain. When investigating a particular franchise, it’s a good idea to ask questions of four or five new and four or five established owner/operators within the company you are interested in. Their responses may differ but it’s those responses, which will offer the most telling signs of a stable and well supported franchise.
During your due diligence, be sure your investigation includes inquiries from independent owners in a similar territory (i.e., population size, geographic location, and demographic makeup including household incomes). If you compare an East or West Coast indoor park franchise to a potential location in the Midwest, you may get drastically different results. The same growth or profit may not be seen in a Midwest region where the cost of living, median household income and buying patterns widely differ from that of an East Coast franchise.
Likewise, you will want to investigate the “realistic” opportunities for any given business model. For instance, before opening a business that sells gourmet ice cream and touts high profits in the southern part of the country, you will want to compare and assess whether opening that same business in the northern part of the country where summer lasts three to five months of the year would yield those same results. Regional demographics should be a vital part of your comparison research. A good franchiser will be open to these types of discussions rather than focusing solely on historical cash flow and base expansion.
Pros of Buying An Indoor Park Franchise
- Turnkey System: A franchise offers a proven business model with systems in place for advertising, training and day-to-day operations. All the “heavy” lifting and testing through trial and error has been done for you. If you lack business acumen or have gaps in your resume such as advertising or marketing where you may require additional support, franchising may be better suited for you.
- Support: "You’re in business for yourself but not by yourself" as the saying goes. Building location and negotiations are usually handled by the franchiser. When challenges arise, it’s nice to pick up the phone, call corporate for assistance and discuss potential solutions.
- Brand Name: An established franchise sets the pace and tone for your business without you having to create it during the initial start-up phase. This benefit alone is worth the first year or two in business.
- Lower Inventory Prices: You will have the buying power of a large corporation rather than as a stand alone business. Generally you receive lower costs, lower quantity restrictions and longer repayment terms when purchasing your goods and products through vendors due to previously negotiated terms.
Cons of Buying An Indoor Park Franchise
- Less Freedom: As an independent owner you have the ability to adjust your business based on cash flow, customers’ needs, fluctuations in climate and customers’ purchasing trends. In a franchise, rules and standards are put into place to keep a more uniformed operation. This is due mainly to consistency among the company and brand building, which is extremely important. This doesn’t always bode well for franchisees that face difficult trends in their individual region. Should the need arise to change hours of operation or cut certain products or services that may not be selling well in your region are generally not negotiable.
- Royalty Payments: A fee charged once a year for owning the business rights. The fee is generally based on a percentage of sales (Avg. 8%-15%). In return, you receive ongoing support in the form of marketing, advertising, and some legal and/or accounting support.
- Higher Start-Up Costs: Beyond the cost of start up and build out, is a one-time fee charged for granting the franchisee permission to use the company’s brand, name and logo. The fee can be as low as $20,000-$1,000,000 depending on the franchiser. An average tanning, pizza or sandwich chain may charge a fee of $50,000, where as a larger franchisor such as McDonalds™ or Dairy Queen™ will average $1,000,000. Obtaining financing becomes increasingly more difficult for the average business professional and requires more investors when financing larger franchises such as those previously mentioned.
- Broken Promises: Depending on your business background and your ability to self manage may lead to broken promises from the parent company. Some owner/operators do well and require little if any assistance from their parent company; however, those who rely heavily on a parent company to guide them every step of the way, may find that some parent companies aren’t well equipped to offer that type of hand holding. All franchisers are different. Some parent companies will make sure you get the look and feel of the business model right and then expect you to be adept at running the day-to-day operations. Others will offer a lot of assistance, training and even some field assistance if they see you struggling. It all depends on the parent company’s management style and your ability to dig deeper than the numbers to determine whether their business model is a good fit for you.
An indoor park franchise is no different than any other business venture. Whether you choose to retain sole control of your business endeavor or choose to relinquish some of that control can only be determined with careful consideration. Each has its advantages and disadvantages but both carry some risk. You should weigh them separately against your professional background and the skills you've obtained throughout your working career.
No matter what choice you make, the rewards of business ownership in a fun, entertaining atmosphere offers its own sense of accomplishment away from the everyday hum-drum business model. Imagine going to work and it being a party every day, so pick a path and start running with it!
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