From technology to trampoline parks…Alan Wilson shares his journey about getting in early with Sky Zone and how he now owns multiple units.
When Alan Wilson decided to stop climbing the corporate ladder and start building his own business, the franchise he found was in its early days. Not only that, the entire trampoline park niche was in its early days. Landlords didn’t understand the business. Banks were wary. But, Alan had two things that pushed him through the obstacles: passion and perseverance. And it paid off!
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Sky Zone: How To Invest In An Emerging Franchise In An Emerging Niche With Multi-Unit Owner Alan Wilson
I’m excited because my friend and neighbor, Alan Wilson, is here to talk about his journey in getting into franchising and owning and operating a couple of Sky Zone franchises. Before we get into Alan’s story, a quick little tidbit is that we got to know each other pretty well, playing golf for a few days in our member guest. How much did we beat you guys by? Was it a half-point to win the fight? You and your brother?
I can’t remember exactly what the number was, but it seemed insignificant. Almost as if it was nothing, but the best part about that is if we weren’t going to win, we didn’t want you guys to win.
We had a good old time. That was fun. We played with his brother Bruce. We had a good old time. Thanks for hopping on here.
I appreciate you giving me the time. All of this is very interesting. To me, the hardest part for some people to get out of the working world, in the corporate world, or working for themselves is that final leap, jump into something that they want to do. Sometimes the challenge is either financial, mental, or emotional.
You had an interesting story because you got into the trampoline park space. I called it the trampoline park. It’s evolved since then, but it was early days. It was 2011.
It wasn’t the Old West, but there were some skyscrapers, but the biggest growth in this space was around 2011, 2012, and 2013. I saw a lot of franchises being sold and opened and a lot of landlords understand that this is a good concept. It can drive traffic to areas. The numbers for the businesses were pretty solid.
It’s a big investment for an emerging space that hasn’t been around for many years, but what were you doing before you got into Sky Zone?
I worked in technology for 22-plus years. I worked with banks. I worked with internet companies and consulting companies. I had a nice little career, but always back of my mind, I’m like, “Is this it?” I’m not a math genius, but I can add, subtract, and multiply. Working for the next several years, I retired fine.
Something said in about 44 that if I’m going to do anything, now’s the time. People need to look at the segments of their life. If you face challenges, how do you come back from them? My thought was, “If I’m 40 and something bad happens, I still have an opportunity to work for fourteen more years and hopefully, money turning every 7, 8, to 9 years based on market return, I could still retire pretty well,” but I felt like that was the time to push the chips in.
Was there something that happened in your life that got you thinking down that path, or was it something that was always in the back of your mind?
The nature of technology is simple. It’s project work and you got to do something. At some point, the work was different, but the process was the same. We were going to be a few days later or a few weeks. We were going to explain that to a person. They were going to say, “Okay.” We are going to move on and implement. Everything was great and we would continue to cycle. I was saying to myself, “It’s fun but I’d rather make my own money.” I remember sitting in my cube and thinking about this, looking at various business plans. I was looking at properties online and making plans on the weekends and in the evenings to go visit them and talk to landlords.
That process got me more and more excited because you are getting some type of feedback. You are in a space where there are not a ton of trampoline parks and you have to explain to landlords and building owners that this is a business that they should be interested in, and they have never heard of it. Without the internet and YouTube, it was almost impossible to explain what an indoor trampoline park was, let alone, have them fully understand what that meant to their building. As to this day, the building we have in Greenville, the owner of the building was like, “In the ’80s, you had trampoline parks but you dug the floor out and then you put the trampoline flat.”
He kept thinking I was going to dig out his floor in the building. I’m like, “No. It’s going to go right on top of it. Here are some videos. Here’s that.” He still goes, “Don’t dig out my floor.” I’m like, “I’m not going to do that.” He came in where we opened and he couldn’t believe the fit finish of the product. He was so impressed but he got it. I don’t want to say we made a big claim, but we said we are going to bring 100,000 people to the shopping center in the first year. We crushed that.
That was back in the day when Charlotte, for example, probably has six parks. Back in the day, they had two. Major cities all have lots of different competitors in the space. It’s a pretty interesting space. Back in the day, there weren’t very many. It was a big investment and trying to convince people to do it was difficult.
It’s brand awareness. Let’s pick haircutting. Great Clips and Sport Clips are well-known brands. Landlords need to know what it means to have one in there and it’s easy. It’s a small space. It’s a small investment, but when you are given up 20,000, 30,000, or 40,000 square feet, these guys are on. Landlords are much different. They want to deal with national credit tenants whom they can easily understand what that business model looks like. It was interesting to try to grind through that as somebody who felt strongly could take care of business.
You’ve taken over like old Kmarts and big-box.
It was big-boxes. The first building I looked at was in Matthews, North Carolina. It was right next to a Target. The building was vacant for about six years. I talked to the property manager. He got the sense of a packet of what I was thinking, and he is like, “I could. Can you give me the number?” I’m like, “You are crazy. That’s a lot of money.” He goes, “This has been vacant for seven years. We don’t care. This is how much it costs.” I’m like, “I thought it was too much money.” Now looking back, I should have signed that deal. That was the first time I realized that the laws of capitalism don’t apply. The landlords don’t care.
What do you mean by that?
For a landlord to be vacant, especially reaching people that own multiple buildings, they want the right tenant because a bad tenant, for a lot of people, you don’t get your building back right away. Your leases have various clauses in them and rights to cure. Landlords are protective of their buildings because if they do a bad lease, they could type that property for a year before they get back.
It’s one of those things, and then the building was vacant and I’m like, “It’s been vacant for five years.” It’s like, “We still care.” They take that as a loss against other buildings. They will sit on it. For example, 74 was another building I looked at and that was vacant very long. They are like, “We are not going to do a deal unless we feel good about it.” I’m like, “I have money. You need money. Seems like a match made in heaven.” It doesn’t work that way. Even the building I have in South Carolina, six months of negotiating, and we agreed to the terms immediately and they sat and thought about this.
I can’t imagine the broker that I had. Greenville being a very small town, the broker knew who the president of the company was. He’s like, “Don’t make me send kids down there to tell, ‘We want to jump on trampolines.’” They finally agree. It was a surprise. For a lot of these guys, huge spaces, but now, you jump forward ten years, landlords all know what the businesses. They know it’s good.
They know that the right operators can bring in a lot of traffic to retail spots. What we are seeing as a big change in retail is entertainment spaces. Most people are shopping not brick-and-mortar but online. Looking at your existing spaces, as more entertainment, eating entertainment, looking at the outside of our neighborhood Waverly, it’s predominantly restaurants. It’s entertainment.Today, the big change in retail is entertainment spaces. Click To Tweet
You were at the forefront when these landlords were still trying to get their heads around this idea and there was still that shift of online shopping becoming the norm. It wasn’t probably back then as much, but everything was headed that way.
The big-boxes were coming out. They are realizing that they had some challenges space-wise and these buildings were coming vacant. The only people that take space now that are our sizes are going be Gold’s Gyms, Planet Fitnesses, and some type of indoor recreation. It’s interesting to see the difference back in the day from a franchise perspective.
For me, I felt like after meeting everyone, that’s one of the things you guys would probably want to think about from the show’s perspective. If you are into franchising, the good news is, for the most part, these people are bringing expertise that you may not have. Talking with the folks from Sky Zone was amazing. They did have the sense that they were the leaders. They knew what they were doing. They started the product. They understood the concept and how to run it.
I’m not going to say every franchisor is like that, but that’s something that can help people if they are like on the fence. “Should I get into franchising or not?” There’s a level that you are buying their product and they are an expert and can help you. That’s the part that you are not in it alone. Some of the parts you are, but other parts you are very much with them and they are helping you.
What have been some of the areas with your Sky Zone business that you have felt like you’ve gotten the most value in terms of support, insight, and advice from the corporate team?
It’s no question. It’s from a support perspective from operations. This is the spaceship, but there are some best practices. They are out there working with all of us and we have people that help us and advise us. At the end of the day, that’s one of the things that for people that are on the fence, on franchising, sometimes it’s like, “How am I going to do this?” You don’t necessarily have to know how to do it. You have to be able to execute. That’s one of the things.
When you think about talking to people about franchising, the big thing is, “Can I run this business? Is it profitable? Can I get financing? How is it going to change my life?” Those are four questions if you are not asking yourself. I remember talking to people because as we went through franchising discovery days and when we are going through the growth phase, you would call the franchisor. They set you up with a couple of partners to see how the business was.
I remember talking to people in the business like, “How do you like it? How’s this?” That part was invaluable for people. Talk to actual people that are doing it. Now, granted they do sometimes cherry-pick, but at the end of the day, being truthful in your experience is your experience. That part is important.
Validating with existing franchise owners and doing research on a franchise is a lot of work. It’s a big decision. It should be a lot of work, but most people underestimate how much work it is from a time, perspective, and surely from an emotional perspective because it’s a roller coaster of emotions. Most people who buy franchises on their own see the widget. They fall in love with it. They buy the franchise, but they don’t vet it. They don’t do the due diligence and they don’t talk to franchise owners. It blows my mind that happens, but it happens out there in franchising. How did you stumble across this trampoline park/entertainment industry way back when?
I read two newspapers. I read the Star Tribune, and then it was the Tampa Bay Times or the St. Pete Times. It was about the summertime of July 2011, and the same week there were two articles about this business. I never heard of it. I have never seen it. I had some pictures in the paper online. I was like, “This is amazing. I got young kids. It looks fun.” I told my wife, “What do you think of this?” She gave me the standard, “I don’t care as long as you don’t go bankrupt.” Check. It makes sense.
If you want to guarantee life, get taxes. It was about December 23rd or 22nd. They opened a park called Jump Sky High in Charlotte. We bought some groupons. We went there on the 26th right after Christmas. I felt like a child. I was playing dodgeball and running around. It was the funniest thing you could ever imagine.
Looking back, that park is pretty much a 1.0 park. Realistically some of the newer things hadn’t even come in yet, but it was a blast. I stood there in awe. I was like, “I can’t believe it. This is a no-brainer.” My wife looks at me. She goes, “No-brainer.” She doesn’t want to lose money. We contacted Jump Sky High. They had one in Charles, so we felt we needed to go with a different brand so we went with Sky Zone.
We spoke with them on the 28th, and that’s how the journey started. It was that simple. I do think going to it and understanding and seeing what it was when you walked out there. You saw the kids walking in happy. You knew the cash was ringing, and the fact that I had as an adult a fun time, I couldn’t believe it.
It all came together. It clicked when you went there and took the family there.
It was a validation part. You could look at something and go, “That’s pretty cool. It could work,” but if you look back in time, there’ll be a pendulum change to where kids were playing outside or people would go to parks, and to where you are going to see a lot more activities being inside. The pandemic is one of them. When we are in the pandemic, few people went out outdoors. They did it by themselves.
At the end of the day, when mom wants to go somewhere to have their kids do some physical activity or entertainment, they are putting them together. Mom sits, gets the internet, reads a book, watches something on Netflix, and the kids run around for an hour and then they leave. That’s nowadays playground. You want to be targeted. There are so many activities out there for families that if you can get an hour and a half, bring more to the trampoline park, run them rugged, and bring them home. That’s the shift in what I consider nowadays playground and that’s what the businesses are.
I have twins and we were over at a company that was not Sky Zone. If you have nothing going on that day on the weekend, it’s an amazing 1.5 or 2-hour activity to let them go and have fun by themselves. It’s one of those experiences. You can’t get it anywhere else. It’s super unique in terms of what they offer. You go to the one, and it clicks. What happens next?
I contact them. We talk about rights to Charlotte. They wanted to sell me two units. This is a business that had never been anywhere. I didn’t know anything. I was like, “I will build one and if that works, I will build another one.” We don’t like that idea. Throughout the process, I’m looking for buildings in Charlotte. It took about seven months, keep looking. I can’t find anything that I feel like’s going to be a great fit for me. I start looking in the various markets. I looked at all the markets within driving distance of Charlotte for me.
I went down to Greenville, South Carolina. I found a building on Lawrence Road, an old Best Buy. I looked at that. I met my buddy Frank who was the broker for the building. I build a suit. Best Buy had abandoned the building and they had five more years on the lease. I needed to get another five years from the owner.
I was going to get a sublease from Best Buy, and then you got to have ten years for a lot of the loans to go through, especially if you are going to do an SBA loan because it’s going to a ten-year term. Through the process, I found out that the gentleman that owned the building was all over Europe. He was a world traveler. Finally, the attorney that represented the building is like, “This guy is never going to do anything with you, so have a nice day.” I’m like, “Okay.”
I talked to the broker. I said, “Do you want to be my broker in Greenville?” He says, “Absolutely.” I go, “Is there any more buildings?” He goes, “Right down the street.” Two blocks away was a building that had been vacant the old Sports Authority, and that’s where we got our building. It was unbelievable. I walk in there. It’s clean. It’s four walls. It’s square. I’m like, “Why are we not doing this?” Months later, they finally signed the lease which was entertaining. We are not talking a little bit of money. We are talking seven figures in rent over five years and missed a lot of money, at least in my mind, maybe not to everybody else.
It’s a big-time investment. No doubt about it.
That’s how that all started. It was an interesting time. I then moved to Greenville for a year.
I was going to ask you how you pulled off the remote living in Charlotte and then operating in Greenville. The second one is in Raleigh, right?
I lived in Greenville in Millennium Apartments. It seemed 8 to 9 months that I lived in a hotel for another 3 or 4 months. At the end of the day, I had to let the kids run the park. I had to let the team run the park. From my perspective, it was good to know how to do it and for them to see me, but at some point, if you are not going to let the people run and do their jobs, it’s going to be a difficult time for you long-term. I can’t be there every day. Frankly, I don’t want to.
If you are going into it with that perspective, knowing where you want to get to from an ownership perspective, and understanding that the business has the potential to allow you to get there and still cash flow and make money and all stuff. If you know where you want to go, you can build it toward that, but it takes time. You got to be present from the beginning.
The one thing about franchising is you are buying yourself or your family a job, or you are going to buy away for you to own multiple and then hopefully give opportunities to someone else. I have met plenty of our partners that are going to be single owners or wanted to be single owners. They wanted one thing. They wanted to live in an area. They want to have a great business.
I did it and I still know a few of them now. The vast majority of the single owners at some local have sold because they got what they wanted out of it. For some people, especially the franchising side of it, depending on what you want to do, sometimes you are buying yourself rather than working in a corporate job, making your own money and making your own hours at some level. That’s the cool part about franchising. You don’t need to know everything. That’s a hard part.
You watch Shark Tank. I’m sure. I love watching those guys that’s like, “I have created this widget. It’s worth $80 billion.” Then somebody on the panel’s like, “I don’t think it’s worth $80 billion.” Imagine the scenario where you are somebody that wants to own their own business, but you are not necessarily going to be creating a product. You can go and buy any business that will do something and generate money. That’s pretty cool. That’s what it brings.
You nailed it when you mentioned execution. If you are an executor and you can execute a plan, think about it as you go through it, but you are willing to do it. That’s one of the components that I have seen the most successful franchise owners have inside them is relentless execution. The second thing is that they do the people piece well. They are able to build a team of people, create a culture, and cast a vision that people can get rallied behind and want to work for them.
It’s a little bit more than coming in and punching a clock and getting a paycheck. They tend to also understand sales and marketing a little bit too. They are not afraid to put some money into marketing to drive the leads and the customers, but that depends a little bit more on the business. Did you have any trepidations about living in Charlotte and opening your first park two and a half hours away in Greenville?
No, and I will tell you why. This is my favorite type. There was a marketing company that they had hired that are good friends at the franchise company. It’s not necessarily Sky Zone but the people selling the franchise. I talked to them. I said, “What should we do for the grand opening?” She’s like, “You open the doors. People show up.” I said, “Do we need to spend a bunch of money?” “You don’t need to spend a lot.” I said, “What do you mean?” “Just open the doors. It’s such a unique business. You open the doors and people will show up.”
I remember that. I said to her, “Just open the doors?” “Yes.” I said, “I appreciate your insights. If there’s anything else, just let me know.” I left that conference call, and I was like, “You got to be kidding me.” I make a bunch of marketing with radio. I didn’t know. I just did radio. The first day we open it, it was nuts, absolutely crazy. I’ve opened it up and they showed up. I was like, “Okay.”
If you think of a business as a ship, we’d open and we’d be busy. I’d take a break. I’d go back to my apartment. I’d come back. The parking lot is jam-packed and you’d walk in and you can almost feel everyone’s trying their hardest, but we are busy from the get-go. That ship is sailing itself. We are reacting to things and not necessarily proactive.
After those 3 or 4 months, it’s the same thing. We all get out and we come back and you’d walk in and you could see it as a concert. You could see that the team had figured it out. They’d captain it. The sense of operation was smooth. People knew what to expect. I remember those first couple of months when we were jamming, and I was like, “What bad could happen? What could go wrong?” You could feel a sense of calmness. People stayed with us and got more experience at the business level.
I remember when one of my brothers asked me after the first six months, “Did you make any money?” I said, “You are coming right at me with money. We made money the first month we were open.” You look at a restaurant, the first twelve months, it’s almost impossible to make any money. You are probably going to go out of business in a restaurant.
Within 2 and 3 years, you are almost out. We hit every business milestone in these things and blew him out of the water. My one buddy called me up. There are probably two years in, he’s like, “You’re still doing this thing?” I said, “We are still doing it.” He’s like, “Do you like it?” I said, “Yes.” He said, “You should have gotten that business.” I just laughed.
It’s interesting that after you get open, we had plenty of support from the franchisor there. Watching your team grow and get that experience that the ship, all of a sudden, you see the captain at the wheel. You’re driving that ship in that direction pretty cool. Now looking back, we are going to finish our tenth year in October 2022.
It’s probably one of those feelings that is hard to articulate to somebody else in terms of what it feels like to you personally. It’s one of those feelings you can only get working for yourself, too. It’s hard to get that stuff when you are building somebody else’s business. When it’s your business and you see your team come together, everything clicks. They are running the business and it also helps that you are making some money too. That’s a pretty cool feeling.
For anybody that thinks about franchising or does not necessarily even thinks about franchising, but wants to work for themselves and wants to make their own money, there’s a part that is satisfying. You are beating the odds. Even though the indoor trampoline wasn’t my concept or idea, we bought some. Seeing them, you still got to operate it. There are good operations. I love how you state that people that can operate or execute are going to help out. Everybody should be able to do it. I believe anybody can do whatever they want as long as they want to do it. Passion and persistence to me are two things.
You’ve heard me say that before and I will probably say it to anybody. People ask what makes you successful. Passion and persistence. If you are passionate about something or you’re interested, you are going to try to grind it. If you have persistence, you are going to persevere through the tough times. You are going to overcome that obstacle, but if you don’t have those two things about something, then it’s not going to go well as it could. I didn’t mean to be melancholy on that one.What makes you successful are passion and persistence. If you're passionate about something you’re interested in, you're going to try to grind it out. If you have persistence, you're going to persevere through the tough times. Click To Tweet
No. What you are saying and you are dropping a lot of nuggets on people that are reading in terms of what it’s like. It’s not all rainbows and unicorns. There’s going to be stuff that the franchise company didn’t tell you about.
That’s not all puppy dogs and ice cream.
There’s going to be a lot of stuff you got to figure out and things that you didn’t think about and you can’t plan for. Fight through them if you know you want to get to them. You figure it out and you got help. You got the franchise company there to call and bounce some ideas off of as well.
That’s one thing. I can’t speak for all franchisees or franchisors, but I can tell you, from my perspective, that we always have a great relationship. If you got a question, call them. I have talked to the guys. Most of the people that are working in the franchise business either have worked for a long time or have specific knowledge in that specific industry that you are in.
From a Sky Zone perspective, because we were one of the larger companies, we got a lot of people with multi experiences. You are talking to them that they could then pay for our bread that could have been Dunkin’ Donuts. Listening to those guys and understanding, “How do you stay profitable? How’s your marketing? How’s your cost? Are you looking at that stuff?”
I remember coming from your background, my big thing was that I don’t have a ton of inventories, but I want to make sure that we are counting. We are making small things. We are making sure we understand where our money is, and how much money we have in the building from a dead-cost perspective. I remember one of the guys from Dunkin’. We can review, and go back, and forth, and that was one thing. He is like, “This is good stuff because you get to see how your expenses and revenues and all that stuff. From that part, hopefully, everybody realized that if you don’t have all the answers, somebody’s going to be there to help you.
What are some of the key metrics that you look at with your businesses?
For me, my big thing is labor. Everyone knows we are in a tough environment to hire people. Our jobs are usually entry-level, younger folks. We are trying to always hire more people. I look at life as a coaching tree. If you can think of a football analogy, I want kids to come in and work for a few years, go off and do what they want to do, and become great people. Hopefully, we are a part of their life. Hopefully, we are a part of their experience, and that’s the part. Labor is my biggest thing to look at and then make sure our costs are aligned.
We have got a number of years of data. Looking at those trends and making sure that they don’t see a bunch of hockey sticks or something that goes up. You are like, “I wonder why that is.” Everyone is like, “That seems bad.” “What happened?” It’s a way of making sure that when you are running your own business, have your KPIs or your key metrics and identify those and then manage them.
It’s pretty simple stuff. It seems simple to me, but I’m setting up a way to do it that you can understand. Once you do that management, make sure you remember, anytime you set up a metric or a way to control something, that may change over time. Take an honest look back and say, “Should I change this?” “I have had this discussion with my managers. We are doing this. Do you guys want to continue to do this because it doesn’t seem to provide any value?” I will say, “Yes. It’s providing value or no,” and we’ll make changes. Simple stuff.
Get the feedback from the front lines into what you are seeing on the paper and the stuff. You have a workforce that is more generally described as part-time. Somebody’s not going to necessarily have a career path long-term working for Sky Zone maybe unless they were on a management path, but it sounds like you’ve embraced that.
You are like, “This is who is going to be working at our parks. This is whom our team’s going to be. Let’s embrace it. Let’s get some good people in. Help them learn 1 thing or 2. Help them have some fun, and then help them get to where they want to get to and play a small part in that journey for these folks.” Is that how you set up the hiring? What do you do to get the people that you want to come to your parks?
To say most of the people that come in, just come in. We’ll have an indeed ad. We will put a Facebook post up. For the most part, a lot of our folks come to the parks. In one of the parks we have, we have a third-generation person working there. We have a brother and a sister, and now we have the other sister. I was like, “Look at the name. I’m pretty sure who that is.”
We have another set of three gals that all worked and they are still working for us now. To me, what I tell the staff is, “Would I like everyone to work for me forever? Absolutely,” but that’s unrealistic. What your job and my job is to give them the best information and skillset possible so that when they go out and look for their next job, you’ve given them the ability to say, “I’m a leader.”
From a management perspective, I’m a good leader. I understand business. I’m punctual and on time, all the other pieces. Whatever they want to learn, whatever I can give them, they have my phone number. Call me 24/7. From a part-time person, we get a lot of folks that were in fast food. I’m going to be honest with that. If I had a choice between working at a trampoline park or fast food, I’m working trampoline park because it’s that much fun, but that’s what we get.
From our perspective, still difficult given the challenges, everyone is aware of that and the country now. We managed to get through the pandemic and we’re sometimes light on staff and sometimes it’s not. The reality is that kids want to come and work and we give them an environment hopefully that they like. It’s indoors. You don’t smell like a French fry, and hopefully, they have some fun.
When did you decide to open up your second location in Raleigh?
I always wanted to get to another location. I’m living in North Carolina. I always felt like there was a spoke in the wheel. I didn’t think about having them in Texas. It was the area. Given the size of the investment to put them in, they sold quickly. I was trying to buy different ones over the last few years, and we were able to buy one in Raleigh, North Carolina. It was a nice park and we took that one. That one unfortunately did close. At that point, that was the only Sky Zone that closed and reopened. It closed in November and we reopened it in March 2018. That one’s been going since 2014. We bought it in 2018 from a bank. It’s unfortunate.
Was it a Sky Zone? You took over a business that had been not run properly.
I didn’t want to. I remember the day it closed. They called me up and I called the owner. I’m like, “You didn’t call me back.” Unfortunately, the bank called me the following day and asked me if I was still interested. I said, “Absolutely,” and we made it happen, but it was challenging. I remember being in the building in January of 2018 when we closed. It had been closed since November. I went through it, dusted it off, got ready, and tried to figure out what we need to do.
There were people knocking on the door. I opened. “Are you guys just opened?” “We will open shortly.” “Do you know when?” I said, “I don’t know when, but stay tuned to the website.” That happened throughout the day. I was there for six weeks. That’s crazy to me. It took a whole year for the community to realize we had reopened, but after that, it’s been great. It’s been a fun business.
How did you get comfortable taking over a location that closed? How did you go about figuring that thing out? What gave you the confidence that you could turn it around?
Being part of the network, I saw some of their numbers and they were good. I knew the business was good. I’m like, “Not everyone’s the same operator.” I felt pretty strong and I liked the business for many years. In fact, I made offers for it prior to that.
You were pretty familiar with it.
There are still some questions about the why but I’m not going to question the why. I’m going to question the how. We got it open. People came back. When they found out that we reopened, they were like, “Thank God you reopened.” What did you realize?” “I’m sorry. They went to a competitor.” I’m like, “Don’t be sorry. Welcome back.” It’s interesting.
We took all the concepts. We had our operating policies which were all realistically in the spirit of everything that we are doing. We just popped it in and validated the concept for it. Since then, I have been trying to buy additional ones. That’s the best path to more units because it is a pretty significant investment and construction costs have gotten pretty high.
It’s a different ballgame on the leases and lease terms these days from back then.
I don’t think that the laws of capitalism apply to any commercial real estate. During the pandemic, I was fortunate enough to work with all my landlords. Have that honest dialogue of, “How are you guys going to do that stuff? How does this mean in that?” Realize that some of the spaces from a retail perspective, that’s a tough market right now. Light, industrial, not as tough. Everyone believes their stuff is worth a lot of money. It’s worth what’s somebody’s willing to pay for it. That’s the challenge.Everyone believes their stuff is worth a lot of money. It's worth what somebody's willing to pay for it. Click To Tweet
You’ve got markets. What we are seeing now is that the biggest is out in Nashville for a national convention. One of the things is consolidation. Existing parks that may or may not be super profitable are being sold and rebranded into different ones because they have the space or the building. Real estate’s one of the hardest parts of this business to get into because of the huge amount of space. If I want to put a 1,200-square-foot yogurt stand, I can find a spot in pretty much any strip. I want to do a dry cleaner or any service business. It’s there.
There’s only a limited number of potential spots for these parks.
I had this discussion. In 2012, looking for a building, “Trampoline park, what is that?” Fast forward to 2022, if you are talking to somebody that has a building, they have been contacted by at least 2 or 3. They know exactly what it is. “Trampoline Park? Great.” It’s so much at a different market, but you are right. Real estate is tough and it’s expensive. Even though we may hit some financial headwinds, that doesn’t necessarily mean you are going to get a break anywhere else.
When I talk to people about the trampoline park business, these are non-business owners. These are folks that are thinking about becoming business owners. A lot of times, people’s heads immediately go to the downside of any business. “That won’t work because of this.” How do you deal with insurance? I would imagine insurance is a thing in your business, but I’m making an assumption. What’s the insurance like at a trampoline park?
One of the big things that our franchiser does is provide insurance coverage. They go and shop for it. It’s a challenging policy, no question. I want to hit on something, not just the insurance program. The thing is that you’re always thinking about the downside. It’s the mentality of someone who wants to get into franchising or work for themselves or make their own money.
My dad said it best. “Expect the best plan for the worst.” There are going to be two sides to the coin. I have had this discussion with many people. I asked them, “How much money do you make on this business?” My first question is, “How much money do you need to make to live?” Inevitably, they tighten up. They don’t want to tell me. I said, “Let’s make some numbers out here.” I said, “If your family is $500,000 to live and you are buying a business that makes $200,000, it’s probably not the right business for you. You need to buy for yourself.”Expect the best plan for the worst. The reality is there are going to be two sides to the coin if you don't know the downside. Click To Tweet
Sometimes you hear the wheels spinning in their mind. “I didn’t think about that.” That’s one of the things when you talk about the downside. My whole downside to somebody is, “How much money do you make? If this is your only source of income and this doesn’t go well, what’s going to mean to you, your family, and your financial situation?”
Make sure you understand. Recognize the risk but expect the best plan for the worst. I remember having a discussion with my accountant and my attorney. I used 401(k), and they said, “We don’t like it.” “Why don’t you like it?” “Your retirement is for your retirement.” I said, “Okay. I’m not dead yet.” They said, “The only way you can do it is to do this,” and then they are good.
I recognized there was a downside. I could lose all my money. How’s my retirement? I’m young. I’m going to keep working. Recognizing the downside, but understanding that there is an upside. Expect the best plan for the worst. Something that’s interesting that you brought up is, “Why won’t something work?” Great. Take those assumptions. Put it in your business plan and say, “Why doesn’t it work?” Look at the pros. There has to be some level of pros because if there is no pro, probably it’s not the right business for you.
The benefit is that you make these assumptions, and it’s good to make assumptions, but know that they are assumptions the good ones and the downside ones. You can validate or invalidate these assumptions by going through the research, for the most part, by talking to franchise owners, and hearing with the franchise company has to say.
Validate a lot of what they have to say too with these existing franchise owners. There’s a little bit of an art to having those conversations to get people to open up to you and be comfortable sharing a lot of personal information and personal insight, but it’s good to make assumptions. Just know that they are assumptions and they need to be validated or invalidated.
I remember people asked me. We were a pretty unique business people come into and then, they are like, “Are you the owner?” I’m like, “Yes.” They are like, “We are going to open one here. We are going to do this.” I’m like, “Great.” It’s funny. People would ask me, “How did you figure it out?” I said, “You got to do a business plan.” “Business plan? How do you know what you are going to do?” I go, “We guess.” “You guess?” I said, “Yes. Half the world is about guessing. Maybe my guesses are good. Maybe our guesses are bad. Be conservative.”
Something that you talked about right there and most people struggle with is estimating and guessing. It may not be right. If you don’t put anything down, I guarantee you are going to struggle. If you have a general idea of what your revenues are going to be and what your expenses are going to be, guess. The hardest part for some people is to be like, “How did you know if it was ranked?” “I didn’t. No one knows.” If you could figure out what the future is, we are going to roll into Vegas and bet on some sports.
Nobody can see the future, but that’s the one thing, for an entrepreneur or a business owner, is understanding that you have to guess and hopefully, you make more rights than wrongs. I learned a ton from making mistakes. Everyone makes mistakes and they make them every day. They may seem like not a mistake, but it is. I can think back to a couple of things and I’m not going to share them with you. There were significant lots of money and thinking back, you are like, “Why did I do that?” I thought I was doing the right thing and I was not. I fixed it and I’m like, “I like this a lot better.”
Some of the times, people need to realize that the assumptions or guesses and their estimates may not be right or wrong, but it gives you a point in time, a dollar amount, or a number that they can then control or look at say, “I got to do something different,” and that’s half the battle. That’s something that your readers are evaluating different franchises, business opportunities, or things. Recognize that you are not going to be perfect, but as long as you are directionally correct, good things will happen.
It’s like understanding that 20% of the business drives 80% of the results. It’s worrying about that last 20%, but understanding what the key pieces of the business make it go, and then understanding how you feel about doing what it takes to make this business successful with that chunk that drives most of the results.
I had that same statement. We got to a point after about year four. We had seen pretty much everything. There wasn’t something that we weren’t going to see. We are not very dynamic. We do birthday parties. We have this play time, but I use the 80/20 principle all the time. I said, “We are looking at scenarios. They were customer complaints and service. We look at them and we classify my case. Is this recurring, training, or a one-off? How do you want to handle it? I want to do anything. That’s a 5%, 4%, or 3% that happens once every 10 years.
I said, “Don’t worry about it. We will note it, but 80/20 is a good rule to look at.” If you can figure out how 80% of the time your business runs more smoothly than the other 20%, then work on the 20%. You are going to be miles ahead of every best, but recognize if you are spending more time on the 20% problems, not the 80%, you are looking at the wrong numbers.
People will tell you, “If you don’t save the pennies, you lose the dollars.” I sometimes say, “If you are at the point where you are drowning in and you are sucking through a funnel at some point, you will get the business, and then it will be about managing it and looking at those specific circumstances.” 80/20 is a good thing to think about for people. Something that you said reminded me of having discussions with managers like, “How should we handle this one?” “Let’s not because this is not that important to the bottom-line revenue.”
It goes to what you were saying earlier when we were talking offline about the cashflow. How do you look at the business from a financial perspective in terms of debt and cashflow and using debt to create or build a business that cashflows?
I’m glad you brought that up because that was a lesson that still resonates with me. I have had a couple of guys that I want to go into business with. I still do. They are great guys. One of the things I would tell people is to be prepared to be in debt and not for a few dollars. I remember signing my first big loan, I was like, “Look at this.” One of my buddies, he goes, “I can’t believe somebody would lend you that money. I can’t believe you.”
Be prepared to be in debt and that’s what I have learned. There are plenty of internet wizards out there that will tell you to take $100,000. Go borrow $10 million, buy 17 buildings, and you are going to be a billionaire, but I will say there’s a level of debt that you have to be comfortable with if you are going to be an entrepreneur. It’s going to happen. It’s like kids. You wake up and all of a sudden, you got two kids. You are like, “Where do these kids come from? I’m going to pick you for my team.” It’s like that. Being out there working for yourself, there’s a level of debt.
The big thing is that people are like, “I got to pay that off.” I’m like, “I don’t think you do.” You have to have the ability to pay off and get cashflow. That’s the hardest part. If you could run a business for fifteen years and have $10 million borrowed but at the end of the day, you cashflow that business crazy and you pay yourself a salary, is that a problem?
You have the ability to pay it off at the end, or even if you don’t pay it off then sell the business to somebody else. Pay that debt off and you’ve walked away with all the money during the time you are operating. That’s the one principle that I didn’t get when I first started out. It’s like, “I want to get paid off, and then my life’s going to be better.” It’s not. If you make money, you need expenses and then interest expense is not a bad one to have.
Recognize that cashflow is what the banks are going to look at. If you are looking to go into business for yourself, buy a second one, buy anything else, or diversify your cashflow is king. They are going to say, “Can you service the debt?” Let’s make some dollars from it. You want to borrow $5 million and your loan payment is $60,000 but your cashflow is $400,000 a month or $200,000 a month, your two X of that, you are going to be fine. That’s the hard part mentality of people. Understand that you are going to be in debt and get comfortable. Buckle up.
It’s leveraging debt to create cashflow in a very calculated way. You mentioned that the banks were lining up to give you the money to build your first park. You had to fight to go find the right bank to partner with.
There was a couple. It didn’t take long. I talked to the big banks. There’s nothing wrong with our friends at bigger banks. I have a story but I’m not going to say it, but at the end of the day, at that point in my mentality, if financing, I thought the big banks were better than the small ones. Since then, I realized small banks are way better. They are easier to work with and they are easy to get financing. They have small loan committees. They are willing to work with you.
In banking right now, if you are not lending money, you are not making money. That’s the part for some people that whether you are worried about financing or going out, this and that, the money’s one of the big aspects. People are like, “I’d be in business but I can’t get the money.” You can. They are like, “Should I go to a big bank?” I’m like, “No. Go find a small bank. Go work with them and they will work with you.” Those guys are hungry. They want to get it. How do you feel about small banks versus big banks? They are easier to work with, aren’t they?
I had a conversation with somebody. They are going to have to go find the right bank to give them the money for a business. The first question was, “Whom do you bank with?” He said, “Wells Fargo.” I said, “Don’t call them.” Sorry for anybody reading. Wells Fargo or the big ones don’t play in that space. They are not geared that way, and so the smaller regional community banks are the play. I agree 100% with what you shared.
That financing part of it to me is interesting. As a person that works for themselves, buys a business, or does any of this, buckle up for some debt. Don’t worry about it because you got the cashflow. It won’t make a bit of difference and my name is not Grant Cardone.
What’s next in your journey?
A ton of different things. I always try to work on different things. I have worked with a couple of guys. They are going to come around at some point on a business. I’m working with a couple of other guys right now that want to do something similar in the space and we are going to explore that for a while. It’s backing down the hatches at some point here in the US. It depends on how you feel.
One would argue we were already in a recession. They tell me the recession’s historical the last several months. If we were in a recession months ago, then we are halfway through it. It doesn’t feel like it. It’s going to be an interesting ride. We have seen some challenges and interest rates. I had a good conversation with a banker that I used to work with. I’ve asked them where the dollars and cents were from an SBA perspective.
I will throw it out there. My first loan was 6.5%. They are selling money at 9% right now. That’s a big difference. If you are going to do it, remember, as long as you are making money and you’re cashflowing, the interest is tax-deductible. People say, again, “I don’t have too much money.” Not really. Historically, back in the day when I grew up, under 7% back in the day was great. People have gotten so used to having almost, “My interest rate is like 0.5%. I refied three times and my house is going to be paid off in two days.”
That’s great, but right now, some people don’t have that same luxury. I talked to a person about that, and I asked them what the interest rates are. 9%. That’s a lot of money. The cost of lending is changing, but in this economy, you can still get started. This is not a bad time. I don’t think there are better times, but we are going to come through this. What are your thoughts? Q1 and Q2 could be rather interesting.
When I bought my first house in August of 2008, which was about a month before the world stopped, I was at 6.5%. I was like, “Let’s go. I’m ready.” You didn’t know anything different. It was what it was. We have been spoiled for a very long time on the interest rate thing for sure. The pendulum swings back. It always swings both ways. Who knows how hard it’s going to keep swinging and the one way we are headed but it will come back in a different way? Who knows what that’s going to be?
It’s something to look at, but having an interest payment is not a bad thing with the EBITDA. It relates to cashflow and having some pre-tax expenses in your business and all that good stuff. At the end of the day, who knows? I believe in the entrepreneurial spirit. We will figure it out. We’ll get through this thing. There’s always opportunity in these things too.
I feel pretty lucky. Sometimes it’s taking the jump, the leap. A friend of mine started his personal training business. I’m super proud of him. It’s making good money, but half the battle is doing it, getting out there, and trying. Is everything going to be successful? No or maybe. I don’t know. If it’s something you are interested in, you are probably going to spend more time. From my perspective, I put a lot of chips in and there was no other way for us to go but be successful and it worked out. There’s no question. I got a little lucky, but it’s better to be lucky than good.
You nailed it with passion and persistence. If you truly have that inside of you, you are going to figure it out. Who knows what the journey’s going to look like? Nobody knows what their journey looks like, and that’s life. If you are willing to figure things out that come across your business and your life, you’ll get through it. It’ll be okay, but you got to be willing to work. You got to be willing to do it and put the work in to push through it. This has been awesome. Thank you for coming on.
I appreciate you inviting me to chat with you.
I look forward to more conversations on the golf course and taking more of your money on the golf course. I’m kidding. If anybody wants to get in touch with you, how can people get in touch with you and sign up to come to play at your parks?
You can do our website, SkyZone.com/Greenville, and SkyZone.com/Raleigh. We got email accounts right on the websites. Send me a note. I’m happy to help anybody. I appreciate your time and have a wonderful rest of your week.