IAAPA IAAPA Attractions Expo 2013Attractions Expo 2013

Rookies & NewcomersRookies & Newcomers

“The Feasibility Study IsYour Pathway To Success”

Presented by: Jerry Merola, CFOPresented by: Jerry Merola, CFOAmusement Entertainment Management, LLC Amusement Entertainment Management, LLC

12 Elkins Road * East Brunswick, NJ 08816Phone: (732) 254-3773 Fax: (732) 254-6223

E-Mail: Profitwizz@aol.com

Start With a Solid Start With a Solid Road Map Toward ‘Success’ Road Map Toward ‘Success’

You Are

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"It's Only A Mound of Paper" "It's Only A Mound of Paper" "I Just Need Something For The Bank""I Just Need Something For The Bank""We Did The Feasibility Study Ourselves""We Did The Feasibility Study Ourselves""There Is No Competition Here, "There Is No Competition Here,

So Why Pay For A Feasibility Study?"So Why Pay For A Feasibility Study?""There's Nothing Left in the Budget "There's Nothing Left in the Budget

For Feasibility Work" For Feasibility Work"

Common MisconceptionsCommon Misconceptions

The Feasibility Study/Performance Audit:The Feasibility Study/Performance Audit:What Can It Do For Me?What Can It Do For Me?

• Create A Virtual Road Map

• Highlight Opportunities and Develop Market Niches

• Identify Strategies By Which To Compete

• Identify The Importance of Matching Attractions To Markets

• Assist in Developing Budgets Around Feasibility Results: How Much Can YOU Spend on Development and Still Hit Your Return Targets? • Identify Weaknesses in Operating Formats, Controls, Customer Service, and Expense Containment

Recession or Depression?

strangely, entertainment spending

increased by $5.1 Billion !

Timeline of Key EventsTimeline of Key Events

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Dow Jones Industrial Average

(3/16) Bear Stearns acquired by JP Morgan Chase

(11/9) Iceland's Economy Collapses

(6/5) BoA acquires Countrywide

(12/16) Fed Cuts Interest Rates Virtually To Zero

(9/7) A Bailout For Fannie & Freddie

(1/15) Bank of America Gets Extra Lifeline

(9/15) Lehman Folds and Merrill is Sold

(2/17) Obama Signs $787B Stimulus(9/17) A

Loan For AIG

(3/9) Job Losses Mount; Stock Markets Hit Annual Low

(9/25) WaMu Fails and Bailout Stalls (4/30) Chysler Files

For Bankruptcy(9/29) Market Plunges After Bailout Plan Fails; Wachovia In Play

(6/1) GM Files for Bankruptcy

(10/3) Bush Signs Bailout; Wells Fargo Buys Wachovia

(6/9) Banks Begin to Exit Bailout Program(10/26) Oil Prices

Plummet, Extending Crisis(8/7) Signs of Recovery

(8/25) Obama Reappoints Bernanke

Decline In Bank FinancingDecline In Bank Financing

Source: Standard & Poor’s LCD.

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Leveraged Loan Volume & Percent New Money

New loan volume increased dramatically in 2006 and peaked in 2007 ($705B)

Liquidity and appetite for risk disappeared in 4Q08 and 1-4Q09, only now slowly returning

Approximately $450B of middle market loans maturing between 2009-2013

Current Recession: Where’s The Bottom?

• Full Explanation of Market Demographics Specific Full Explanation of Market Demographics Specific To Your Project LocationTo Your Project Location • An Understanding of Where Your Target Patron Lives and How They Will Travel To Your Site • Typical Spending Capabilities of the Region's PopulationTypical Spending Capabilities of the Region's Population • Existence of Current and Planned Competition • Ethnicity and Age Group ConsiderationsEthnicity and Age Group Considerations • Evaluation of the Selected Site Location or An Investigation of Appropriate Sites

What A Feasibility Study Includes:What A Feasibility Study Includes:

• Identification of the Components Necessary to Attract the Targeted Patron 

• Physical Size Needed to Support Anticipated Attendance Physical Size Needed to Support Anticipated Attendance and Attraction Selections  and Attraction Selections 

• Capacity and Throughput Requirements 

• Real Estate Rent/Lease/Purchase Cost Targets and/or Real Estate Rent/Lease/Purchase Cost Targets and/or Building Design Requirements  Building Design Requirements 

• Staffing Requirements to Handle Proposed Attractions 

• Seasonality and Tourism ConsiderationsSeasonality and Tourism Considerations

What A Feasibility Study Includes:What A Feasibility Study Includes:(continued)(continued)

Selecting Target Markets

Analyzing Drive Times

Analyzing Population Trends

Understanding Patron Capability

Deciphering Age Groups Trends

Establishing Attendance Projections

PROJECTED REVENUE

ALL ATTRACTIONS & CONCESSIONS

Year 1 Year 2 Year 3 Year 4

Core Core Core CorePatron Patron Patron Patron

Projected Attendance 220,278 229,278 238,568 247,845

Per Capita Expenditures

Food Service $2.40 $2.42 $2.45 $2.46Beverage Service $0.90 $0.91 $0.92 $0.92Amusement Games $1.90 $1.92 $1.94 $1.95Ballocity/SoftPlay Unit $0.60 $0.61 $0.61 $0.62Bumper Karts $0.45 $0.45 $0.46 $0.46Rock Climbing Wall $0.30 $0.30 $0.31 $0.31Glow Golf $0.65 $0.66 $0.66 $0.67Cybercoaster $0.35 $0.35 $0.36 $0.36Laser Tag $0.80 $0.81 $0.82 $0.82Frog Hopper Free Fall $0.25 $0.25 $0.26 $0.26Open Play Bowling $3.60 $4.50 $5.18 $5.43League Play Bowling $2.30 $2.76 $2.90 $3.04Merchandising $0.35 $0.35 $0.36 $0.36Shoe Rental $0.60 $0.61 $0.61 $0.62Locker Rental $0.10 $0.10 $0.10 $0.10

Total $15.55 $17.01 $17.92 $18.38

Projected Revenue

Food Service $528,667 $555,770 $584,072 $609,818Beverage Service $198,250 $208,414 $219,027 $228,682Amusement Games $418,528 $439,984 $462,390 $482,773Ballocity/SoftPlay Unit $132,167 $138,942 $146,018 $152,454Bumper Karts $99,125 $104,207 $109,513 $114,341Rock Climbing Wall $66,083 $69,471 $73,009 $76,606Glow Golf $143,181 $150,521 $158,186 $165,159Cybercoaster $77,097 $81,050 $85,177 $89,374Laser Tag $176,222 $185,257 $194,691 $204,284Frog Hopper Free Fall $55,070 $57,893 $60,841 $63,839Open Play Bowling $793,001 $1,031,751 $1,234,589 $1,346,728League Play Bowling $506,639 $632,807 $691,370 $754,168Merchandising $77,097 $81,050 $85,177 $89,374Shoe Rental $132,167 $138,942 $146,018 $153,213Locker Rental $22,028 $23,157 $24,336 $25,535

$3,425,323 $3,899,216 $4,274,415 $4,556,348

Assessing Per Capita Spending

PROJECTED NET OPERATING INCOMEINDOOR ENTERTAINMENT VENUE

ALL CONCESSIONS AND OPERATIONS

YEAR 1 YEAR 2 YEAR 3 YEAR 4

Projected Revenue - Food $528,667 15.4% $555,770 14.3% $584,072 13.7% $609,818 13.4%Projected Revenue - Beverage $198,250 5.8% $208,414 5.3% $219,027 5.1% $228,682 5.0%Projected Revenue - Merchandise $77,097 2.3% $81,050 2.1% $85,177 2.0% $89,374 2.0%Projected Revenue - Bowling $1,299,640 37.9% $1,664,558 42.7% $1,925,959 45.1% $2,100,896 46.1%Projected Revenue - Attractions $1,167,474 34.1% $1,227,325 31.5% $1,289,826 30.2% $1,348,830 29.6%Projected Revenue - Rentals $154,195 4.5% $162,099 4.2% $170,354 4.0% $178,748 3.9%

Total Revenue Sources $3,425,323 100.0% $3,899,216 100.0% $4,274,415 100.0% $4,556,348 100.0%

Projected Operating Expenses

Cost of Sales

Redemption Expense @ 25% Payout 52,316 1.5% 54,998 1.4% 57,798 1.4% 60,346 1.3%Beverage Products @ 26% 51,545 1.5% 54,188 1.4% 56,947 1.3% 59,457 1.3%Food Products @ 32% 169,173 4.9% 177,846 4.6% 186,903 4.4% 195,142 4.3%Merchandise Products @ 45% 34,694 1.0% 36,473 0.9% 38,330 0.9% 40,218 0.9%Direct Occupancy (mortgage equivalent)** 478,027 14.0% 478,027 12.3% 478,027 11.2% 478,027 10.5%

Subtotal - Cost of Sales 785,755 22.9% 801,532 20.6% 818,005 19.1% 833,191 18.3%

Gross Operating Profit $2,639,568 77.1% $3,097,684 79.4% $3,456,410 80.9% $3,723,157 81.7%

Operating Overhead:

General Manager 50,000 1.5% 54,000 1.4% 58,320 1.4% 62,986 1.4%Payroll - Administrative/Operating Staff 739,710 21.6% 828,475 21.2% 927,892 21.7% 974,287 21.4%Payroll Taxes and Benefits (13%) 102,662 3.0% 114,722 2.9% 128,208 3.0% 134,845 3.0%Utilities 137,013 4.0% 143,864 3.7% 148,179 3.5% 152,625 3.3%Bank Charges 6,851 0.2% 7,798 0.2% 8,549 0.2% 9,113 0.2%Medical Supplies 3,425 0.1% 3,899 0.1% 4,274 0.1% 4,556 0.1%Attraction Supplies 13,701 0.4% 15,597 0.4% 17,098 0.4% 18,225 0.4%Postage 17,127 0.5% 19,496 0.5% 21,372 0.5% 22,782 0.5%Printing 75,357 2.2% 85,783 2.2% 94,037 2.2% 100,240 2.2%Security and Trash Service 20,552 0.6% 23,395 0.6% 25,646 0.6% 27,338 0.6%Advertising and Promotion 99,334 2.9% 116,976 3.0% 119,316 2.8% 120,509 2.6%Telephone 15,414 0.5% 15,597 0.4% 17,098 0.4% 18,225 0.4%Training 23,977 0.7% 27,295 0.7% 29,921 0.7% 31,894 0.7%Travel and Entertainment 10,276 0.3% 19,496 0.5% 21,372 0.5% 22,782 0.5%Uniforms 17,127 0.5% 15,597 0.4% 17,098 0.4% 18,225 0.4%Maintenance/repairs/modifications 66,794 2.0% 62,387 1.6% 68,391 1.6% 77,458 1.7%Supplies 78,782 2.3% 105,279 2.7% 115,409 2.7% 123,021 2.7%Legal and Accounting 17,127 0.5% 27,295 0.7% 29,921 0.7% 31,894 0.7%State and Local Licensing 9,000 0.3% 9,360 0.2% 9,734 0.2% 10,124 0.2%Debt Service*** 383,101 11.2% 383,101 9.8% 383,101 9.0% 383,101 8.4%Real Estate Tax Allowance ($1.60/ft) 96,000 2.8% 97,920 2.5% 99,878 2.3% 103,874 2.3%Insurance 106,185 3.1% 124,775 3.2% 136,781 3.2% 145,803 3.2%Pre-Opening Expenses and Theming 90,000 2.6% 0 0.0% 0 0.0% 0 0.0%Reinvestment In Infrastructure 0 0.0% 175,000 4.5% 125,000 2.9% 175,000 3.8%

Subtotal - Overhead $2,179,515 63.6% $2,477,107 63.5% $2,606,596 61.0% $2,768,908 60.8%

Net Operating Income* $460,053 13.4% $620,578 15.9% $849,814 19.9% $954,249 20.9%

Creating The Projected Income Statement

PROJECTED ATTENDANCE PATTERNS AT PROPOSED ENTERTAINMENT FACILITY

Year 1 Year 2 Year 3 Year 4

Annual Attendance 220,278 229,278 238,568 247,845

Peak Month's Attendance 26,433 27,513 28,628 29,741@ 12% of year

Peak Weekly Attendance 6,100 6,349 6,606 6,863

Peak Daily Attendance @ 1,525 1,587 1,652 1,71625% of Weekly Attendance

Peak In-House Attendance 458 476 495 515@ 30% of Peak Daily Attendance

Required Entertainment Capacity 412 429 446 463@ 90% of Peak In-House Attendance

Identifying Throughput and Capacity Capability

A Feasibility Study A Feasibility Study May Prove To Be May Prove To Be

The InvestmentThe Investment You Ever MakeYou Ever Make

BestBest

Jerry Merola, Managing PartnerJerry Merola, Managing PartnerAmusement Entertainment Amusement Entertainment

Management, LLCManagement, LLC

Questions?

Or visit our website at:Or visit our website at:

www.AEMLLC.comwww.AEMLLC.com

12 Elkins Road12 Elkins Road

East Brunswick, NJ 08816East Brunswick, NJ 08816

(800) 253-4045(800) 253-4045