Family Entertainment/ Recreation Industry:

Business Plan

Benjamin Wright

Executive Summary

1.1 Mission1.2 Keys to Success

Target Vertical2.1 Industry Summary2.2 Competition/ Barriers to Entry

Value Proposition 3.1 Products & Services3.2 Competitive Comparison3.3 Fulfillment/ Technology

Situational Analysis4.1 SWOT Analysis4.2 Prospect Culture4.3 Decision Making Process

Marketing Process 5.1 Main Competitors 5.2 Market Segmentation 5.3 Strategy and Implementation Summary

Financial Plan 6.1 Important Assumptions/ Indicators 6.2 Projected Revenue

Key Sources

1. Executive Summary

For families with multiple children, parents are always in need of opportunities to get the kids out of the house to divert some of their never-ending energy. Therefore, there is a lot of opportunity for entrepreneurs to open facilities that offer entertainment options to people of all ages and from all walks of life.

1.1 Mission

The mission of companies in the family entertainment industry is to provide affordable entertainment options that are not limited in the scope of age. Customers are able to visit these facilities with the whole family, at their own convenience, and without significant planning or spending.

The goal is to please the local community by giving them opportunities for diversion that suit the whole family, and do not require significant travel or time requirements. Customers should be provided with affordable games, activities, food, refreshments, and fun in a safe and clean environment, while receiving great customer service.

1.2 Keys to Success

In order for a business in the family entertainment vertical to be successful, the company must explicitly differentiate itself from competitors. Family entertainment is a very broad category, and includes businesses such as: movie theaters, bowling alleys, arcades, mini-golf courses, indoor and outdoor recreation facilities or adventure parks, ski facilities and more.

In addition, many towns offer multiple of these facilities, especially in urban areas. Therefore, it might be difficult for a new business in this field to attract customers. Companies offering family entertainment options need to specify why their service is the best candidate for customers to bring their whole family to for a stress-free night on the town.

2. Target Vertical

2.1 Industry summary

This industry vertical is comprised of: 1) establishments that operate

facilities or provide services that enable patrons to participate in

recreational activities, or pursue amusement, hobbies, or leisure-time

activities, 2) establishments meant for producing, promoting, or

participating in live performances, events, or exhibits, intended for

public viewing, and 3) establishments that preserve and display objects

and sites of historical, cultural, or educational interest.

Number of employees (nationwide):

Amusement and recreation attendees- 274,230 (2014)

Gaming Supervisors- 24,100

Average Wages:

Amusement and recreation- $9.70/hour

Gaming Supervisors- $22.12/hour

Work related fatalities, injuries, and illnesses (nationwide):

o Fatalities- 78 (2013)

o Injury/ Illness- 4.8/ 100 full-time workers (2013)

Range of establishments to pursue includes movie theaters, bowling

alleys, arcades, historical sites, small museums, state and national parks,

golf courses, paintball courses, skating rinks, rope courses, amusement

parks, ski facilities, adventure parks, training/ fitness facilties, and much

more.

2.2 Barriers to Entry/ Areas of Concern

Heavy capital expenditure needed for start-up for some

establishments (ski facility or any highly automated facility)

Difficulty obtaining funding to start-up

Failure rate of start-ups

Changing consumer preferences; companies need to stay ahead of

the ball on changing technologies and popular trends in recreation

(especially in children’s changing tastes as they are a key part of the

market)

Insurance issues: some establishments may require customers to

sign waivers prior to accessing facilities and licensing may be

required by state/ federal government depending on the nature of

the establishment

This industry’s insurance needs are currently provided by a few

insurance agencies. Provider needs a detailed plan of how to attract

clients in this industry before entering the market.

3. Value Proposition

3.1 Products and Services

Most establishments in this market provide services rather than

products. People pay to use the facilities in order to entertain

themselves. These types of establishments require various insurance

policies that Provider Group specializes in offering, including, but not

limited to, employee benefits, workers’ compensation, and various

property and casualty policies. Many of the establishments in this

vertical require heavy equipment with high degrees of automation.

These establishments require specialized insurance programs that

Provider Group could expand its offering to include, such as automobile

liability, commercial general liability, prize indemnity insurance, sports

incapacity insurance, and much more. Whenever heavy machinery is

needed for operation, there is inherent danger involved for both

workers and customers. Therefore, companies in this industry require

multiple insurance policies to mitigate the risk of an accident occurring

on the premises. Provider Group can help these companies by managing

their risk bearing activities and providing insurance to bear the

financial burden of these risks.

3.2 Competitive Comparison

Number of insurance brokers in MA: almost 400

Some insurance brokers specializing in employee benefits- Towers

Watson, Mercer, Buck Consultants inc., Sentinel Benefits and Financial

Group Inc., Northwestern Benefits Association, and TBR Associates

Property & Casualty- at least 46 companies

Worker’s Comp.- More than 350 insurance companies licensed to sell

Industry performance (nationwide):

Arcades/ Amusement centers- 50 largest companies generate 85% of

revenue

Bowling Centers- top 50 companies generate 30% of sales

Fitness Centers- top 50 generate 30% of sales

Golf Courses- top 50 generate 15% of sales

Museums/ zoos/ parks- top 50 generate 35% of sales

Ski facilities- top 50 generate 80% of sales

3.3 Fulfillment/ Technology

Insurance companies ultimately offer similar services to organizations:

a financial safety net that protects against worst-case scenarios for your

business. For Provider Group to differentiate itself against competitors,

we need to communicate how we utilize the resources available to us to

tailor an insurance program that is specified for each individual

business.

Technology/ resources:

Internal loss control reports (OSHA compliance inspection & on-site

safety inspections), training (customized based on report & OSHA

training), OSHA 10 certifications, health care reform consulting, HR360,

analysis & review of claims experience, EXP mod calculation,

development of plan descriptions, wellness assessment, tax advantage

plan and design, and a lot more (see Provider’s website providerig.com)

Wedge:

Although many insurance agencies offer some similar services, it is

important to communicate how our proactive rather than reactive

approach separates us. It is a large reason why we have a 96% retention

rate with our clients. We need to differentiate ourselves by describing

how we utilize the resources available to us to design and implement a

specified program for every client, drive down their EXP mods, and

minimize their exposure to risk and claims. We also need to explain the

resources we make available to clients to help them manage their own

risk.

4. Situational Analysis

4.1 SWOT

Strengths

Environment: people feel like they’re having fun. Encourages them to

stay for a long time and keep coming back.

Encourages customer brand loyalty (both from the establishment to

the insurer and the patrons to the establishment)

The sheer number of establishments in this industry and their high

dependence on insurance coverage provides a large client base

Weaknesses

Competition: there are far too many organizations in this industry for

all of them to be profitable. In addition, the nature of the industry

attracts an endless influx of entrepreneurs.

Leads to a high failure rate for start-ups.

Customer service: employees are often kids who do not value the

work; customer service can lack and suffer from negligence.

Profitability: the profit margin can be low, even though revenues are

often high. This is due to the high capital expenditures associated

with operating facilities in this industry.

Many establishments buy their insurance from people they know or

K&K Insurance, the leaders in insuring recreation facilities

Opportunities

Conglomerate: lack of “one-stop” spots that meets all of one’s

recreation needs. Huge market and profit potential.

Segmentation: organizations in this industry can segment the market

by age, demographic, gender, etc. to corner a market vertical.

New establishments: new recreation facilities are always emerging

and require multiple insurance policies that we can provide

Threats

Differentiation: lack there of. Many establishments are

interchangeable from the patron’s point of view.

Location: difficulty marketing, attracting customers, and beating out

competition, depending on the dispersal of the population and

market leaders.

Some of these establishments have massive potential for losses and

claims; insurance companies need to be wary of this

4.2 Prospect Culture

Because there is such a wide variety of organizations within this

vertical, there are always prospects considering whether or not to enter

the market. In addition, the fun and exciting nature of the vertical

inspires many entrepreneurs to try their hand at starting a business in

the entertainment industry. That being said, many new businesses in

this vertical fail. An entrepreneur must have a detailed marketing

strategy before entering the market, and they must differentiate their

establishment from competitors to attract a strong customer base. In

addition, Provider Group must be certain of a company’s longevity in

the industry prior to signing the client.

Number of prospects:

Movie theaters- 141

Bowling alleys- 60 (incomplete list)

350-500 prospects in this vertical in MA

4.3 Decision Making/ Sales Process

1. Identify problem/ prospect- look for companies in the assigned risk

pool. Find establishments with high potential for lawsuits, losses,

damages, etc.

2. Seek information- cold call, visit the establishment and speak with

gatekeeper. Find areas of pain by speaking with employees. Decide

whether to pursue signing the client.

3. Engage decision maker- set up appointment/ get familiar with

decision maker

4. Choose an alternative/ Drive wedge- drive the wedge: give new

quote, explain the services we offer and our proactive approach, and

demonstrate the resources we can utilize to tailor our program specific

to each client

5. Implement plan- get commitment to change insurance broker

6. Evaluate plan- follow up by visiting establishment regularly,

monitoring activities through consulting and risk management

techniques, and maintaining a favorable relationship with decision

makers.

5. Marketing Process

5.1 Market leaders

Movie Theater: AMC Dine-in Theater

Bowling Alley: Pinz

Entertainment Centers: Dave & Buster’s

Other: Sky Zone, Frozen Ropes, Fantasyland Golf, Merrimack Family

Pavilion

Leading insurance agencies in this industry: Aon, K&K (leading provider

of sports, leisure, and entertainment insurance products), and

Northeast Insurance Agency

Carriers: Philadelphia, Hanover, & Travelers’

5.2 Market Segmentation

These facilities thrive because they offer multiple, unique entertainment

experiences for the whole family. They consistently attract the largest

crowds and have the highest profit margins. They are ideal candidate

for a mid-market agency such as Provider Group.

The AMC Dine-in Theater in Framingham differentiates itself by

filling its show-rooms with luxurious leather recliners, that require

seat reservations prior to the show time. This makes a unique

viewing experience for the audience. In addition, they have

specialized show-rooms where adults can sit and be waited on,

enjoying a full meal and alcoholic beverages if they so choose. This

differentiates the theater and allows it to appeal to a specific market

segment: people older than 21 who are looking for a classier viewing

experience.

Pinz Bowling Alley in Milford implements a similar strategy. Not only

do they have multiple lanes, they put massive tv-screens at the end of

each lane to give the alley a sports-bar feel. In addition, they have a

sports bar that serves full meals and alcoholic beverages. They also

have an extensive arcade and laser tag, making Pinz a place where

parents can take the kids and let them run free, while they enjoy a

more age-appropriate scene at the bar.

Since many generic entertainment centers already exist and have

existed for years, the key to thriving in this industry is

differentiation. Sky Zone succeeds by attracting kids to schedule

their birthday parties at their indoor trampoline theme park. Frozen

Ropes is a more constructive recreation facility where kids can work

with friends and trainers to hone their baseball skills. Fantasyland

Golf and Merrimack Family Pavillion are massive mini-golf courses

that also offer arcades and snack bars to provide a one-stop spot for

any entertainment needs.

In order to succeed in this industry vertical, an organization must go

after a specific market segment. Family entertainment centers need

to offer activities the whole family can enjoy. However, there is too

much competition for a start-up to come in and thrive without

offering some unique services, such as the ones offered by the

market leaders listed above.

5.3 Strategy and Implementation

We need to identify those establishments who have thrived in offering

recreation activities and are highly regarded by the local community.

However, we should limit our scope to establishments that have

experienced repeated losses and claims, or have high exposure to risk

which would allow us to drive the wedge between them and their

current agent. .

6. Financial Plan

6.1 Important Indicators

US personal income (influences how much people spend on recreation) rose by 4.2% in November 2014 compared to November 2013.

Total US consumer spending (indicator of sales in recreation industry) rose 1.2% in November 2014 in comparison to November 2013.

US revenue for arcades and amusement parks rose 9.4% in the third quarter of 2014 compared to the previous year.

Average US retail price for gasoline fell 21.1% in January 2015 compared to January 2014 (decreased cost to operate facilities and for consumers to travel).

Spot price for crude oil (affects energy costs for operating recreation facilities) fell 47.2% in January 2015 in comparison to January 2014.

6.2 Projected Revenue

Bowling center - $700,000-800,000 per year

Arcades/ amusement parks - $90,000 per year per employee

Golf Courses - $60,000 per year per employee (highly seasonal)

Ski Facilities - $70,000 per year per employee (highly seasonal &

labor-intensive)

Parks (state, museums, zoo, aquarium, etc.) - $100,000 per year per

employee (labor-intensive)

Provider’s revenue potential:

o For companies with $1,000,000 (average), expect premiums

of $5,000 for workers’ comp., general liability, umbrella etc.

o Companies with revenue between $5-10 million, expect

premiums of $30,000

Key Sources

Liberty Mutual: First Research industry profiles

Department of labor

Manta

Bureau of labor statistics

Provider’s website

Hoover’s

WCRIBMA

http://www.masshome.com/insure.html