Sales Strategies for Existing Bowling Center Operations

CENTER OF EXCELLENCE

ARCADES AND REDEMPTION WHITE PAPER BY:

How can I widen my audience, increase my revenue per customer visit, strengthen my appeal to families, and improve as a birthday and group sales destination?

Answer: Create a state of the art Game Room featuring redemption games and merchandise.

I – Game Rooms can increase the profitability of your Bowling Center: If you are in the process of examining how to update your bowling center, modernize your offerings, and attract and keep new customers, a well assembled Arcade or Game Room operation should figure prominently in your plans. Arcade games have demonstrated appeal to today’s bowlers. A well crafted Game Room will appeal to a wide range of ages and both genders.

Properly set up, an Arcade will often be the most profitable component per square foot in the Center. A Game Room adds “critical mass” as another entertainment attraction to complement the bowling experience. It increases “per caps” or spending per person, adding incremental sales to the overall operation. An arcade helps bowling centers compete for party and group sales and, finally, reduces “veto votes,” which happen when one person in a group vetoes bowling as a night out, by providing another entertainment venue within the building.

II – Today’s Reality: Many existing bowling center operators have “Arcades”-but they have not experienced the revenue power and profitability of a state of the art Game Room operation. The Game industry has two distinct segments: Street operators and Arcade operators. Street operators operate a few games in many locations;

1 Arcade operators operate many games in fewer locations. The Street operator has long been Video Game oriented, it’s what they know. However, the Video Game has been in decline for many years as home systems have become more sophisticated and it’s become increasingly difficult for coin operated video games to keep up.

Redemption is different; it has been the growth industry within the world of coin op entertainment. Most Street operators don’t understand this. Since most bowling centers have used Street operators to provide their games they have often missed the boat on redemption. Redemption games are fun to play, they have a wide age and gender appeal, and they are truly family friendly (no teenage hangout problems). A well crafted Game Room featuring redemption will typically produce revenues 5 to 8 times that of a video dominated game room. A state of the art game room designed with a cost of sales for redemption merchandise at no more than 20% of sales, and redemption games at 80% of the total game mix, will yield a gross profit margin of 84% (before depreciation on games).

Considering that many existing centers utilize third party “Street” operators on a revenue share basis, their income potential is further eroded as 40 to 50% of gross revenues (already artificially depressed as above) go out the door with the operator. As a Brunswick Center of Excellence business partner we are in the business of helping existing center proprietors create, and operate, state of the art game rooms with high powered revenue and profit potential. There is financing available to help you bring your Game Room “in house” and under your management.

III – Short Term Initiatives: There are a variety of steps that an existing center owner can take to start down the path of increasing Game Room profitability. Some items to consider:  Begin the process of study. Conduct due diligence to confirm the performance of right sized and properly designed Game Rooms in today’s Bowling Centers.  Assess the quality of your existing Game Room: If you have a third party operator try working with them to improve the game selection, add more redemption, and upgrade the merchandise mix. You might consider taking control of the merchandise and adjusting the revenue split accordingly.  Consider replacing your third party operator or reworking contract terms to provide you with more control over things like game mix, maintenance standards, and merchandise selection (if any).  If your current space/number of games is too small to support a manned redemption center there are alternatives such as direct prize merchandise games and automated redemption centers (redemption vending).  Revisit your existing space allocation on a sales/profit per square foot basis to ensure the most efficient use of space in your center.

2  Look at alternative spaces within your facility. In many existing centers the game room was an afterthought, often placed out of the main traffic path. Look at a more prominent location.  Analyze lane economics with a view toward removing lanes (while preserving gross bowling revenue) to free space for alternative usage such as a Game Room.

IV – Long Term Ideas: A thorough examination of the Bowling marketplace today will lead you to the conclusion, as it already has with many existing center operators, that significant changes to your facility may be needed to maximize profits and ensure longevity for your center. These changes will include private lanes, upgraded food and beverage, enhanced ability to attract party, group, and corporate sales, and a prominent role for family entertainment components other than bowling.  A state of the art Game Room operation which prominently features redemption games is a proven profit generator in today’s centers. A certain critical mass (minimum size) is needed. While we have been able to generate significant improvements in as little as 600 square feet, minimum sizes in the 1,000 to 3,000 square foot range allow for a more powerful Game Room.  Merchandise is what drives redemption sales. It is critical to have a “right- sized” redemption center, with properly assorted popular prizes, as well as a management system for business, economic, and quality controls.  Space, competitive profile and market dynamics may allow for additional family entertainment attractions to complement the mix, add drawing power, balance seasonality, and add revenue. Today’s bowling centers are including indoor and outdoor attractions such as laser tag, miniature golf, simulators, Go Karts and other rides, to name a few.  With an upgraded facility and expanded offerings it often makes sense to introduce a debit card system as the “passport to fun.” Debit card systems provide customer convenience, enhanced controls and reporting, pricing flexibility, and a wide array of internal and external marketing tools.

V. How we can help you improve your Game Room and other Family Entertainment Components?

Redemption Plus is a leader in supplying redemption merchandise and support systems, one smile at a time, to the Family Entertainment Industry. Our extensive customer list includes a significant number of Bowling Family Entertainment Centers and Hybrid Centers including Big Al’s (Portland, OR), The Alley at South Shore (Tampa, FL), Strikz (Dallas, TX), The Mine Shaft (Houghton, MI), and Andy B’s (Tulsa, OK) to name a few. We offer a tremendous selection of the latest merchandise, selected by our experts to appeal to the family entertainment audience, together with an industry leading

3 website designed to make ordering easy. Our merchandise is delivered bar coded with your customized ticket values to fit your program and we offer a variety of other tools to make it easy and effective to both maximize your Game Room sales and to control the economics. Our No Hassle return policy is but one example of our commitment to Customer Service and Customer Success through Redemption.

Learn more about us at www.redemptionplus.com or call Doug Stokes at 913- 563-4365 or via email at [email protected] .

Through our business unit Pinnacle Entertainment Advisors, we offer consulting services to provide you with everything you need to know about opening, operating, or upgrading a Game Room, rides, laser tag, miniature golf, and many other popular family entertainment attractions. Pinnacle’s president, George McAuliffe, is our lead consultant and offers his 30 years of family entertainment center management experience, innovation, and leadership on our customer’s behalf. We offer assistance with design, layout, economic planning, game and attraction selection, supplier selection, educating your management and staff, establishing the redemption program and, in general, helping you to hit the ground running from the first. Pinnacle provides a management system documented in an extensive operating manual to our consulting clients. As we say “It’s not Rocket Science, but it is Science”, our long list of happy clients will tell you that we earned our fee back many times over with timely advice and by putting our experience to work for them.

We are equally experienced in helping existing center operators in improving existing Game Rooms, upgrading their redemption program, and in negotiating contracts with third party vendors that give proprietors more control over the quality and earning power of their game room.

Learn more about Pinnacle at www.grouppinnacle.com, call George at 913-563- 4370 or email him at [email protected] .

Come see us at the Redemption Plus Booth 1022 at Bowl Expo 2008!

4 VI. Questions for Existing Center Proprietors, Answers shown in [ ].

1. How many lanes is your center? What is the revenue range? [Will help us to put subsequent answers in context and evaluate the opportunity for the proprietor]

2. Do you operate games today? If not, why not? [Are you aware that there are different types of games and that redemption games are extremely popular and have wide age and family appeal?]

3) If so, approximately how many square feet is your game room? How many games? [Important to understanding what is there now, combined with Question 1 will help us evaluate the possibilities for changes]

4) Do you have additional, underutilized, or alternative space in your center? [Will help us identify options for expansion]

5) Can you share your Gross Annual Revenue? Confirm whether that is overall gross or the locations share-if location’s share what is the split? [Will allow us to understand what is there and what the upside is]

6) Do you use a third party operator? Why did you decide to go that way? [Will help us to understand the current environment, upside, and the proprietors willingness to consider operating themselves].

7) Are you pleased with your game operation? [Either Yes or No follow up: Why?] [Current environment, proprietor mindset, potential for change, and gauge sales effort needed]

8) Would you consider taking the Game Room operation in house. If not, why not? [Current environment, proprietor mindset, potential for change, and gauge sales effort needed]

9) Do you operate redemption games? [Will allow us to understand what is there and what the upside is]

10) Are you aware that Redemption Games gross many times more sales than Video Games? [Will help educate and plant the seed]

Redemption Plus is located in Booth 1022 at Bowl Expo 2008!