operator profile - Family Entertainment Group

operator profile
N
obody told George Smith that the
amusement trade was a shrinking
industry that only made sense for
those who were already dug in for the
duration. Or, if they did, he didn’t pay any
attention.
Over the past eight years, even as consolidation and a tough economy have
plagued many in the business, Smith has
built a burgeoning family entertainment
empire by seeking opportunities that many
others missed.
Smith, a 35-year industry veteran who
started at the Dream Machine arcade chain
and worked for Namco Cybertainment in
field operations and later business development for a dozen years, founded the
Family Entertainment Group (FEG) in
2004. The company, which develops and
operates amusement game facilities,
focuses on several types of locations
including cinemas, bowling centers and
corporate restaurant locations like CiCi’s
Pizza stores as well as major indoor water
parks.
“A few years ago when the economy
was going down, we targeted locations
with nominal food costs,” said Smith,
explaining the focus on the value-priced
pizza locations. “We figured that people
were still going to eat out but for just a little less.”
Smith said the company got in the
water park business “by accident” when he
agreed to help redesign the amusement
game operation at Castaway Bay, a Cedar
Fair location in the roller coaster capital of
the world, Sandusky, Ohio. FEG
redesigned the 5,700-sq.-ft. location,
developing a new lighting scheme that
changes depending upon the time of day
and incorporating debit cards in what had
been a traditional token game room.
“We helped them design it and build it
and we help them run it with our staff,”
said Smith. “We advocate the use of debit
cards in all of our locations because of the
many advantages they offer including
management efficiency, security and mar-
The colorful and well-appointed prize counter at Kalahari Resorts (Sandusky, Ohio).
An overhead shot of redemption games and the prize counter found in the Kalahari
Resorts location in Wisconsin Dells, Wisc.
October 2012 • RePlay Magazine • Page 53
Operator Profile
keting opportunities.”
Today, FEG operates in 18 states and
employs 180 staff members in various full
and part-time capacities. Most of those
staff members work from one specific
location, although the firm also employs
some roving route professionals for its
games in restaurants, bowling centers and
theaters.
Water Park
Specialists
Customers play Adrenaline’s Fruit Ninja FX at the Great Wolf Lodge.
It’s fun and games at KeyLime Cove in Gurnee, Ill.
Operating games in a water park presents unique challenges to meet the needs
of a transient clientele looking for a highquality experience.
“An indoor water park is like a cruise
ship that doesn’t move; it’s a two-day to
one week vacation to which most people
drive,” said Smith. “A lot of people come
back to the same location year after year
so we are also making changes and initiating upgrades every year. That results in
spending 25% more on game and attractions than a comparable operation and that
helps keep us healthy.”
FEG works with some of the most
respected brands in the water park biz
including the largest indoor water park
resorts Kalahari (in Sandusky Ohio and
Wisconsin Dells, Wisc.) and 10 Great
Wolf Lodge locations around the nation.
According to Smith, the water park industry has weathered the so-called Great
Recession pretty well. “However bad the
economy may get, the last place you make
a cut is with your kids,” he noted.
Water park game operations are characterized by a range of redemption prizes
second to none, games said to work flawlessly, cutting-edge attractions (black-light
rides and motion-based theater) and prize
payout ratios that ensure the customer
walks out feeling like they got their
money’s worth.
“We want people to go away saying,
“That was a great experience,” said Smith.
“If you are consistent about your capital
reinvestment, you don’t have to fear your
competition.”
A Contrarian Point
of View
Just some of the games on location at Knuckleheads in Wisconsin Dells, Wisc.
Page 54 • RePlay Magazine • October 2012
The success of Family Entertainment
Group derives from what Smith admits is
a contrarian view in some industry circles,
but it’s not unlike the savvy securities
investor who buys when everybody else is
selling. Instead of hunkering down during
Family Entertainment Group specializes in game operations in water parks, but also in
setting other player-popular attractions such as bowling (both traditional lane bowling and
QubicaAMF Highway 66), blacklight miniature golf, LazerFrenzy lasertag, Triotech XD Theaters,
NASCAR simulators and more. Creating memorable experiences for the customer and reinvesting is key to staying on top of the competition, according to FEG’s George Smith.
tough times, Smith has pursued investment
and growth even through the worst of the
economy.
“If you are too shortsighted, you leave
the door open to the competition,” he elaborated. “As it turns out, the economy is
improving, and it’s not the end of the
world. Spending is starting to increase.
Plus, we are competing against mobile
content and home entertainment technology so constant reinvestment in our products and services is a must.
“Each of these small things keeps us
healthy and growing,” Smith continued.
“As you can tell, I am pumped up about
the opportunity this industry continues to
offer entrepreneurs. People want to be
entertained, and we are focused on treating
Page 56 • RePlay Magazine • October 2012
all of our guests like they are our family.”
When it comes to outfitting its locations, FEG stresses high-end attractions
like motion theaters and interactive rides
from Triotech, Creative Works and
Phantom. The Highway 66 bowling simulator game from Qubica/AMF has also
served FEG well. “Two lanes of Highway
66 looks like a big game, but if you put a
bunch of the units together and theme
them correctly you actually create a fully
integrated bowling center,” noted Smith.
FEG also focuses on other ways to
offer entertainment not available at home
including laser mazes, black-light miniature golf, drop and swing rides and traditional laser tag in locations that have the
space and the right demographic. One of
the big challenges with non-stand-alone
attractions, according to Smith, is making
sure you staff them efficiently. Without
dedicated staff, people will probably shy
away, but one staff member dedicated to a
single attraction will eat into its profitability. “The best scenario is to have two or
three rides that can be promoted and operated by one attendant,” he explained.
When it comes to setting up game
rooms, FEG offers a redemption heavy
mix, comprising as much as 75% of the
games on the floor, with video and novelty
(air hockey, boxing games, gun and driving games) making up 10% and the balance of mix being instant win games. A
typical FEG prize counter offers 300-600
items ranging from penny candy to a
Operator Profile
George Smith, Family Entertainment Group president and CEO
Jim Connolly, controller
Randy Norton, tech services VP
Sam Dando, VP corporate operations
Mike Miller, district manager
Jim Pinkston, district mgr.
Mark Nesfeder, VP of operations
Tom Revolinsky, operations VP
Silvia Lintner, asst. cont.
Pat Hamm, district manager
Jim Paolucci, technical services dir.
Lisa Price, prize dir.
Tom Peoples, district mgr.
Nate Smith, webmaster
Taking aim at their management retreat are Family Entertainment Group staffers.
motorcycle. The business employs four inhouse buyers, and they purchase from 3040 traditional vendors, seek out special
overseas and online deals and attend closeout shows.
“Quality is everything,” said Smith.
“Even if it’s a smaller location and we are
using a Benchmark Tickets to Prizes selfvendor, we make sure there are relevant
prizes in the unit.”
When it comes to rewarding redemption game players, Smith said FEG locations give back “as much as we can possibly afford. That’s why we continue to
shop for the best deals.” Each location is
continually adjusting their mark-up and
pay out formulas to maximize close-out
deals while also shoring up perceived
value. Being vigilant in this arena, means a
location can make higher margin on lower
end prize items, which is important
Page 58 • RePlay Magazine • October 2012
because they have to accept lower margins
on higher end items because consumers
have much higher awareness of the retail
price of many of those items.
In the end, operators should mark-up
prize items “judiciously,” said Smith.
“Remember, we are in the entertainment business, and we as an industry have
done a poor job of entertaining people for
a very long time,” he added. “Quality
shows through when you are investing at
the proper rate. There are no shortcuts to
this business. The moment, I think I don’t
need to invest this year, I know I am doing
the wrong thing.”
Looking Ahead To
the Future
As the economy improves, Smith and
FEG see even more opportunity for growth.
“Many experienced operators are on
up there in age and confused about their
next move,” said Smith. “In fact, a lot
are looking to gambling as salvation, but
family entertainment is not going away,
nor is bowling, eating, etc. The location
that puts forth that extra level of polish
is still going to be able to capitalize on
this consumer demand. There are something like 310 million people in the U.S.,
and that number is continuing to grow,
resulting in more people who want to be
entertained. It’s not going to be the easy
glory days of the 80s, but there is going
to be growth both in this country and
overseas including Eastern Europe and
Asia.”
In fact, FEG has already started building its overseas base, particularly in the
Eastern European area. As this issue was
going to press, an announcement regarding
those FEG efforts was imminent.
“The world is flat and you have to
assume that investments go where you get
the best return so you have to look at that
as an opportunity,” he explained. “The big
challenge when you start looking overseas
is how you strike the balance between
remaining entrepreneurial and nimble
while still developing the scale needed to
operate on a global basis. Getting bigger
has a tendency to foster a more conservative attitude, but you still have to take
risks.”
Closer to home, FEG will also seek
growth opportunities in the U.S. both in
capturing new business and growing
through acquisition of other existing entertainment operations. “We are not perfect
but strive to improve quality and reliability
daily. We have a staff that is the best in the
business from operational management,
prize selection and purchasing, financial
management and oversight to design and
execution. We want to be excellent in
those areas that we touch.
“We have a real appetite for this business,” Smith concluded.
To learn more about the Family Entertainment Group, the company’s website at
www.fegllc.net.
Readers seeking video examples of
FEG’s creative merchandising and displays can view their presentations on
YouTube at www.youtube.com/watch?
v=mWT25JBw-hs and www.youtube.
com/watch?v= HsZW6YLRQcQ.
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