Trampoline Parks: Fad or Future

Some of the best franchises to own in the business world today are in the trampoline park/children’s fitness and entertainment industry. With industry growth on the rise from 3 parks in 2009 to well over 1,000 parks worldwide by the end of 2017, the question has to asked, “Is it a fad or the future”?

We all witnessed the phenomenal expansion of the frozen yogurt industry around 2010. The first ones onto the market usually supported healthy lines, both in customers and at the bottom of the P&L. Problem was it seemed to be all smoke & mirrors. For the consumer, the product wasn’t as healthy as expected and even though it was charged by the ounce it turned out to be very expensive. For the operators the profit margins began to shrink as the local pie was sliced thinner and thinner with each new color and berry that entered the market. In the end the Froyo businesses shuttered up faster than they opened and the old fashioned soft ice cream stands once again regained the market share they had enjoyed since the 50’s.

The Froyo industry spread like a fire out of control. Are we looking at another flameout in the trampoline park business?

To get an idea of what the future looks like, we need to take our crystal ball and look into the past at how the industry started, what’s fueling its growth and realize that nothing has really changed…kids want to have fun and parents want their kids to be happy.

Since 1934, when the first trampoline was engineered at the University of Iowa to assist gymnasts and springboard divers hone their skills, people have been jumping on trampolines. In 2000 the Olympics added Trampoline as a medal sport and today trampolines are a staple in backyards across America.

In the past kids were excited to travel long distances to visit amusement parks and carnivals to experience activities like bumper cars, games and rides. Downtown parks had huge slides. Those of us at a certain age fondly remember the arcades filled with whack-a- mole and pinball. Video games were the next innovation, remember PONG? Birthday parties were at home.

Evolution my friend. Trampolines, arcades, rides; all those things are still around. They have just evolved. Kids have not changed; they are still as excited as ever to go to the park. And today these parks are becoming in grained into each community.

Pardon the interruption, but if you want more information on becoming a Launch Trampoline Park franchisee please follow this link. Franchise information.

The industry is still in its infancy but we have already witnessed a huge evolution since 2008. In the beginning parks were typically made up of a registration desk and a few trampolines located somewhere in a poorly lit industrial park identified simply by a hand painted sign off some secondary road, entombed behind a series of rights and lefts and over a few speed bumps.   Cheap real estate indeed, and what the heck, it’s the only park within a 90 minute drive.

Today that park is out of business and the kids are being entertained down town at the old K-Mart right on the main drag in a 30,000sf goliath of an entertainment center filled with trampolines, ninja courses, laser tag, climbing walls, battle beams, bowling lanes, tunnels, slides, aerial activities and stunt jump towers with full pizza and ice cream parlors and the air filled with stereoscopic undertones that are not quite musical but more like the buzz of a Las Vegas casino. Fun, action, excitement and reward.

The kids are having more fun than ever just down the street. The parents don’t have to go on a vacation to visit distant amusement parks. Great entertainment centers are no longer hidden in the darkness of the local industrial park. Today the parking lots are large, well-lit and moms are happy to drop off the middle schoolers for an evening of fun, fitness, excitement and confidence building.

The downtown outdoor park, amusement parks, arcades and birthday parties are now coming to a downtown location near you! Another phenomenon that has spurred the growth is the fact that retail has gone on line and landlords need to fill the void left in the “big box” retail market. Fitness, food and birthday parties will never go online. Yesterday’s Sports Authority, Sears, K-marts and BI-LO’s have been replaced with new trampoline parks and entertainment centers. This is an undeniable trend, but it is not trendy.

The industry is healthy, the opportunity is plentiful, and so what’s the outlook?

The large markets with ideal demographics are filling up fast and highly visible retail, real estate is increasingly more difficult to find, but fitness and entertainment are here to stay. Believe me, if you are thinking it looks like a great opportunity, 5 other people in your town are thinking the exact same thing. The brass ring does not come around that often and the carousel is full of competitors all reaching out to snag the best real estate in the market.

The old business idiom; location, location, location is no different in the trampoline park/family entertainment business than it is in any other consumer based model. But the key to staying relevant will be found in how the park owner keeps the operation dynamic and exciting for the kids. Owners will have to believe in evolution.

The revenues are strong, great markets are still available and quality franchisors are looking for qualified franchisees. I don’t see this industry as just another Froyo fad. Entertainment and fitness franchises will never fade away and those who capitalize on the opportunity now will be part of the growth toward 2000 parks worldwide.

They said Starbucks was just a fad when they had opened 1000 stores…I was part of that. I see it again.

Get more information on becoming a Launch Trampoline Park franchisee.

5 Things You Must Know Before Buying a Franchise

“Retired” too early, RIFfed, laid off, sick of your job or just ready for something new? Maybe you’re just ready for a transition in your career and you’re convinced you have the business savvy, education and have even managed to save up some money…Now What? It must be time to chase the American dream and go into business for yourself.

Buying a franchise can be a much safer investment than starting your own business. In theory franchises offer business systems proven out over time with strong leadership, great economic models, well financed R&D and experienced support teams…in theory. How can you be sure?

For many people, buying a franchise could be one of the largest financial commitments in their entire lives and it will be a very emotional experience. Friends will say they read something bad about what you plan to do on the internet. Spouses will doubt you. You will doubt you! A little self-doubt can be motivating. You need to ask yourself, “What evidence do I have that I can’t do this?” Then ask yourself, “What evidence do I have that I can do this?” Doubt is just a lack of information. So how do you find a great franchise and get the information you need to overcome the doubt?

Most people pull out their darts and throw them into the franchise cyberspace hoping to hit that great franchise bulls eye; this looks good, that looks good, Oh, how about this one, my friend told me this one was good, never really having any idea if those franchises are really what they are looking for.

The internet will offer some good marketing pieces and flashy sales literature for sure, even some carefully worded FAQs. All of that will certainly work as a decent brand introduction. But then it’s just like when buying a new home, would you ever buy a new home just looking at the sales literature without ever going inside the front door? Of course not! Looks good on the outside, as do many franchise systems, but what about the foundation, the utilities, the roof, the schools or the neighbors? You’ve got to get more information.

You may hire an independent home inspection company, a pool management company, a landscape architect, have a chat with the neighbors and even hire an appraiser all in an effort to learn as much as possible before spending your hard earned money. So why wouldn’t you do the same research on a franchise you are thinking about buying?

I typically tell all of my clients that until they can answer 5 critical questions about a franchise system, they will not have enough information to make a decision. The 5 questions are:

1. Do the unit level economic model proven?
2. Does the franchisor offer a strong value proposition in exchange for the fees they charge?
3. Does the industry have broad appeal…trendy?
4. What are people saying about the brand?
5. Are you a culture fit for the system?

Many of my clients say, “I just want to do some independent research” before I schedule a live call. This is probably one of the most destructive and self-defeating things you can do if you are serious about finding a great franchise.

The franchisor is not in business to deceive or “sell” the franchisee prospect. The franchisor is in business to successfully and quickly grow their brand. Trust them. If they are not trustworthy it will show soon and it will be evident over the course of discovery and validation.

The answers to these simple questions can all be found but you are going to have to open many doors to find them. Read closely, here is the golden nugget in this post…The information you need to make an informed and educated decision on a franchise will not be found online on a public access web site! Believe me on this one!

So where are the answers?

Of course some online research is necessary…but don’t believe it all. Many of the answers can be found in the Franchise Disclosure Document…if you can get one and know how to read it. They can be found in determined validation with the existing franchisee base…if you can get their contact information and know which questions to ask. And can be found by meeting with the franchise leadership and support teams…if you can get an invitation to the corporate office.
Let’s review each question:

1. Do the unit level economics work?
This is usually the first question every prospect asks…what’s in it for me? What are the chances that my investment will make me money?

Every franchise must have a federally required Franchise Disclosure Document (FDD). But of all the information that is required to be in this document by the Federal Trade Commission, a financial proforma or financial modeling information is NOT required. Unfortunately that is true. And if the FDD does not contain that information, then, anyone from the corporate office involved in selling the franchise cannot provide the information even if they have it! So where is it found? By talking with the existing franchisees! The FDD must contain the contact information for every current franchisee and the contact information for all franchisees that have left the system over the past 12 months.

The franchisees are not legally restricted from divulging any information they are comfortable sharing. Ask questions! Every franchisee will have a different story, but if you speak to enough of them, the true story will emerge.
Great systems will have strong financial models with greater than a 1:1 ratio of first year sales to development costs, the ability to net a good six figure income, and the ability to repay your initial cash investment quickly.

2. Does the franchisor offer a strong value proposition in exchange for the fees they charge?
Here is where a franchise system will succeed or fail and where the great franchisors set themselves apart from the pretenders. This is where the royalties and fees are earned!
Every franchise will charge a royalty fee and many have additional “brand development” or “national marketing fund” fees.

Royalty fees will typically run from 4-7% of gross sales. A few are less and some are more mostly it depends on the industry. But the support package that is offered is the great differentiator among franchise systems and where the franchise system builds its value. The good ones earn their fees.
Brand Development or National Marketing Fund fees typically run 1 or 2% of gross sales and can only be used for marketing programs that can affect all franchisees equally. This piece is essential and should be charged. This is a bonus for the system and like a high tide raises all ships it will help all units in the system grow. If it is not being charged, ask why and when they plan to implement it. It is some of the best money spent!

Where will the answers be found…in validation calls with existing franchisees and in visiting the corporate office. Call the franchisees and be diligent in your efforts. Remember, the franchisees are busy people. Be well prepared in your questioning and respect their time. They will be your best resource for accurate information.

Visit the corporate office, ask questions and take notice of the scenery. The strong franchise systems are resourced ahead of the curve. They have the technical and human resources in place and are prepared for growth. Strong franchise systems should offer support virtually from the first introductory call through opening and throughout the term of the franchise agreement. Make sure the people and tools are in place.

To earn their royalty fees great franchise systems will offer site selection criteria and assistance, lease negotiation assistance, design assistance, preferred vendor arrangements for cost containment, IT systems for payroll, accounting, data management and security. They will also have tried and proven marketing programs, web sites and operational and administrative support. This is the backbone of the “system”; if these are not in place the system will not be able to support the franchisee.

3. Does the industry have broad appeal…is it trendy?
We all remember the growth and crash of the “froyo” craze; Frozen Yogurt. The early adopters did quite well and then the competition grew in location and brand, diluted each market and now it’s hard to find one still open.

Make sure the industry is based on solid, historical data. How long has it been around? Is this just a new variation on an old theme? This will take some research and some intuition…being trendy won’t last but solid industries will evolve and grow. What are people saying about the brand?
With social marketing these days, this research is easy. Go to the Facebook page of the brand; see if they have a LinkedIn profile, Twitter feed, Yelp reviews. But remember, most people will only comment on social media if the experience was less than expected. Expect some negative but look for the positive. Great brands will show it.

4. Are you a culture fit for the system?
This is the hardest question to answer, but possibly the most important.
Franchise agreements typically run from 7-10 years. They are very difficult to get out of and even if you can, you can bet it will cost thousands if not hundreds of thousands of dollars to terminate the agreement. This I can GUARANTEE, at some point in the term of the agreement you will have a conflict with your franchisor…GUARANTEED. You need to have a good feeling for how the franchisor will handle the conflict.

There will be hints to this:

• How does the franchisor handle “negotiation” on the franchise agreement?
• Are you even allowed to “negotiate”?
• How many terminations in the system (some are expected and even good) and is there litigation connected with the terminations?
• What type of communication style does the corporate office have with the franchisees?
• What is the cultural feel in the corporate office?
• How do the franchisees feel about the corporate office?

Another indicator of culture is in how the employees interact in the corporate office, the “musak” in the background, the branding on the walls and the overall feel of the atmosphere. How the franchisor manages their office is a great indicator of how they will manage the system.
These questions must be answered before the franchise agreement is signed.
A franchise agreement is not to be entered into flippantly or without a thorough understanding of the agreement and the franchisor.

Just like a real estate agent can open the front door on a new home and show you around, the franchisor should open the door to completing and facilitating the proper due diligence in researching their franchise system.

Many franchises look the same from the outside and even in some of the services and products they offer. Successful businesses will always be imitated. The real difference between franchise systems may not be seen from the outside, it is in their commitment to the franchisee’s success. If the franchise system has the necessary components in place and is well resourced, most likely the franchisees are happy and successful. If you are searching for a franchise, it is imperative that you do the research necessary to answer those 5 critical questions and validate the system.