Strategy for Accountants Winter 2021 - Part 2

1. University of Winnipeg Strategy For Accountants Winter 2021 - Part 2 Michael Breward BUS-4920 Strategy For Accountants Winter 2021 - Part 2 BUS-4920 Michael Breward University of Winnipeg Table of Contents CircusTrix: The Ups and Downs of International Expansion.............................................................5 2. 9B16M211 CIRCUSTRIX: THE UPS AND DOWNS OF INTERNATIONAL EXPANSION Simon Greathead, Case Lawrence, and Jonathan Richards wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-12-12 Case Lawrence founded CircusTrix Trampoline Parks (CircusTrix) after first experiencing an indoor trampoline park in San Francisco, California, in 2011. Less than five years later, his business had grown to more than 28 facilities worldwide, grossing US$24.5 million1 in 2014 alone (see Exhibit 1). Lawrence had originally expanded internationally to maintain his first-mover status in the emerging extreme recreation industry, but now he was facing a problem that could derail the company’s international growth for years to come. It was the end of February 2015. Earlier that month, a customer in the brand new CircusTrix park in Edinburgh, Scotland, had injured himself and blamed CircusTrix. As a result, city officials had demanded that Lawrence close the facility and file for additional permits—a descent into a bureaucratic nightmare that Lawrence was sure would never end—effectively shutting him down. Worse still, he had another park in Glasgow, Scotland, scheduled to open in just over two weeks, on April 15, 2015. In reviewing the situation, Lawrence realized that he needed to amend his strategy for entering new markets. Use outside these parameters is a copyright violation. He needed a better way to analyze foreign markets to identify the young, trendsetter crowd that formed his target audience. He also needed to understand how to work with the customs and cultures of different people, and he needed to act right away. The public relations issue was threatening to cost him not only his brand new operations in the United Kingdom, but likely also the additional upcoming locations in Germany, France, and Holland. CASE LAWRENCE Lawrence grew up in Central California but left to attend college at Brigham Young University (BYU) in Provo, Utah, where he majored in American studies. After BYU, Lawrence attended Duke University in North Carolina to study law. He graduated in 2000 with a doctorate in jurisprudence. For use only in the course Strategy Accountants at University of Winnipeg taught by Michael Breward from January 01, 2021 to April 30, 2021. Realizing that he missed his childhood home, Lawrence decided to move his family back home to California. In the Silicon Valley area, Lawrence signed on with a venture law group in Menlo Park, where 1 All currency amounts are in US$. 5 Page 2 9B16M211 he gained hands-on experience with growing businesses. Then, as real estate values across the nation started to rise in the early 2000s, Lawrence saw an opportunity in commercial real estate development and made immediate investments that saw great success. Unfortunately, the Great Recession of 2008 wiped out his property development company in a matter of months. For the next two years, Lawrence was on the edge of bankruptcy, spending much of his time negotiating with banks. During that time, Lawrence also recognized warning signs that property values weren’t going to rebound quickly, so he decided to find a new outlet for his skills. After two years of fighting bankruptcy, Lawrence took a break from business to spend some time with his boys. He took his kids to see the San Francisco Giants play baseball at their home park. A good friend recommended that during the trip, Lawrence also take his boys to a trampoline park that had opened recently. Lawrence revised his plans, and he and his boys went to the park before the baseball game. They had so much fun that they returned to jump again after the game. Lawrence recalled the experience: I’d never experienced anything quite like it before. The best part was the endorphin high of the physical effort combined with the socio-emotional connection with my boys. But I could also tell that this had the potential to be so much more than that. My creative juices immediately began to flow as I envisioned a version of the trampoline-park experience that was even more eclectic and could simultaneously combine physical, social, aesthetic, and musical experiences. I recognized the building blocks of a novel, winning formula. His boys were equally enthusiastic about the experience and talked about it the whole way home. That was when Lawrence decided on his next business move. CIRCUSTRIX TRAMPOLINE PARKS In 2011, Lawrence founded his new company, CircusTrix, and with investment backing from friends, family, and a few angel investors, opened his first trampoline park in Fresno, California. The park was an instant success, earning almost $2 million dollars in the first year. The park was so successful, in fact, that Lawrence was able to open a second park in Durham, North Carolina, just six months later. Use outside these parameters is a copyright violation. Rolling the investment from each successful park into the next, Lawrence was able to leverage the investments of friends and family into five separate, strategically placed parks. Then, through a mutual acquaintance, he met Jason Peery of Peery Partners, a venture capital firm in Palo Alto, California. Peery took an interest and became CircusTrix’s first institutional investor. With that investment, Lawrence had the necessary capital for rapid growth, and CircusTrix spread from state to state, cherry-picking affluent, metropolitan areas and opening a total of 23 different parks in just three years (see Exhibit 2). Each of the parks was opened according to specific selection criteria (see Exhibit 3). Drawing on his legal training, Lawrence strategically founded each location in the United States as a different limited liability company (LLC) in order to protect himself, his investors, and the rest of the business umbrella from legal problems at any of the individual parks. He knew how prone to lawsuits Americans could be, and he wanted to minimize any issues before they could even occur. For use only in the course Strategy Accountants at University of Winnipeg taught by Michael Breward from January 01, 2021 to April 30, 2021. This individual-LLC approach also gave Lawrence the chance to experiment with different branding techniques and theming elements at each new location. By the time he had jumped from the west coast to the eastern states and spread through the southern states, he had a wealth of insight and experience in the 6 Page 3 9B16M211 trampoline park industry. He also found that having separate LLCs for each park gave him the opportunity to develop a separate social media presence for each. That meant more social media hits, likes, tweets, and shares for the overall portfolio of businesses, which was important for the target audience. Meet Landon One of the key factors to CircusTrix’s success came through heavy market research into the target audience. Lawrence went so far as to put a name (Landon) and face on the target demographic. Landon was a young man (16–25 years old) with few responsibilities and a healthy appetite for adventure. The obvious question was: Why Landon? Why not Wyatt (male, age 8), Emma (female, age 12), or Robyn (soccer mom, age 37)? After all, Robyn held the purse strings for the family, so should CircusTrix not go after the money? The reasoning was that Landon was the trendsetter, the influencer. He was the guy who tried something new and then raved about it online to his family and friends. Once Landon was sold, he would bring his friends—or maybe Wyatt and Emma (his siblings)—along for the fun. Landon also established the norms of pop culture, and pop culture determined what Robyn did with her kids. Landon may have been fictitious, but he was also one of the key elements to CircusTrix’s success. The Next Move With so much success in his domestic market, Lawrence felt like he had the experience and knowledge to go global. Trampoline parks were a huge success in the United States, but the best markets were being taken quickly. CircusTrix’s competition used a franchise model that encouraged independent operators to open new parks in heavily populated areas, and the only real barrier to entry was the necessary capital infusion to lease a building and purchase equipment. This left second-tier locations largely available, but entering those markets required additional research and planning to ensure success. With the domestic market slowing down, Lawrence decided to put additional domestic expansion on hold Use outside these parameters is a copyright violation. and get ahead of the competition by taking the parks international. To enter this next phase of growth, he went back to Peery Partners to show them that there was money to be made on riding the wave of what Landon liked. GOING GLOBAL When looking at how to move into the international space, Lawrence took a moment to consider his options in terms of entrance strategies.

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