BUYING AN EXISTING PLAY CENTRE – HOW TO MAKE IT WORK
If you’ve ever considered setting up a soft play business, you may have thought about taking over an existing business rather than setting one up from scratch. Buying an existing Play Centre is a quick and easy way to enter the market but there is much to consider. Here are our top ten tips to consider before buying a soft play business second hand.
RESEARCH THE HISTORY OF THE SITE
Do some on-line investigations to see if there is a history of poor press through sites such as Mumsnet for example. If the previous owners are selling their business due to a destroyed reputation, this will require much more marketing investment from you to ensure you are not tarnished with the same brush.
TALK TO THE EXISTING CUSTOMERS
What is the general opinion of the facility like? How can the experience of the existing business be improved for its customers? By hearing first hand from the people using it, this will give you the best foot forward on how you can maximise its success. If the baby area for example is a common area of complaint, this is the thing to focus on first.
THINK ABOUT YOUR COMPETITION
Whilst there is room for many different types of play area facilities as the market continues to grow, if there are too many businesses nearby already or if the business you are looking to take over is old and dated and cannot compete with a new local facility then significant investment may be required in order to get you started or to stand out.
CAN THE BUSINESS BE PROFITABLE?
Any soft play or indoor entertainment business is limited by its catchment area and then further by local competition. It is important to understand what any soft play business is capable of doing. Can the catchment support the visitor numbers necessary to ensure the project is commercially viable? Not all soft play sites are founded with the expertise House of Play offer behind them – it may be impossible based on location, catchment area etc for a business to be profitable which needs to be considered before taking over.
Check any building restrictions
It is important to do your research on the physical property before taking over any business. Check the advertised opening times and cross reference this with the planning history of the site to ensure that there are no restrictive covenants that could be enforced and check with Environmental Health and Building Control that there are no improvement notices outstanding as these could have wide implications.
HOW DOES THE BUSINESS MAKE MONEY?
A close study of three years primary financial statements should be made. Our Financial Director can assist with the interpretation of these. Is the facility achieving the three available revenue streams, pay and play (c.20-30%), parties (c.20-30%) and F & B (c.40-50%) and at what level? Footfall is the key to any business – what is the current foot fall is and cross reference this to the foot fall required to achieve your target. The difference is what you will have to build.
CONSIDER THE LOGISTICS OF THE BUSINESS
Can you get a plan of the facility? The original layout plan would be best. Spatial allocation is crucial for ensuring the correct capacities, simplicity and cost effectiveness of operations and ‘line of sight’ supervision. If the layout is wrong it will cost an inordinate sum to put right, probably requiring a full strip out and replacement. We would not recommend taking on a facility which is fundamentally flawed in design unless the ambition is simply to acquire a ‘D2’ site and start again.
HOW EASY IS IT FOR CUSTOMERS TO GET TO YOU?
Check the parking situation, both demised parking and local public parking. Visit on a wet Saturday between 10.00 am and 2.00 pm and see is the parking is adequate. Since it is simply ‘foot fall’ that drives this business any barrier to entry is an absolute ‘no no’. Also, if you can, visit on a bank holiday when all the adjacent occupiers are working and see what the parking situation is. If customers cannot easily access your site, you cannot succeed.
THINK ABOUT THE LEASE
How long is left on the lease? Note that the existing tenant may have the right of assignment BUT you will NOT get the assigned lease within the security of tenure provisions of the LTA1954. So, can you either enter into a new lease with the LL OR agree a ‘back to back’ deal so that on termination of the sub-lease you can enter into a new lease with the LL at pre agreed terms/rates.
The existing tenant is likely to have signed an FRI (Full repairing and insuring) lease so they have a responsibility to reinstate the premises on termination of the lease. This may well fall to you so, is there a ‘schedule of condition’ memorialising the condition of the premises on commencement of the lease? Estimate the likely cost of reinstatement.
Really, you will need expert opinion of the overall lease which will have to be referred to a solicitor but you can ask some key questions such as the ones above just to get a feel for the overall situation.
NEW COMPANY OR NOT?
It may be worthwhile you trying to understand the implications/liabilities of taking an existing trading entity and continuing to trade it against simply buying the assets and starting a new company. There are advantages and disadvantages to both but this is dependent on your personal circumstances.
The schedule below above is not exhaustive and is provided to give some idea of some of the matters that need consideration in the purchase of an existing play centre. In all analyses it should be remembered that this business is simply a multiplier of foot fall times primary and secondary spend. Without the foot fall there is no business. As with anything, House of Play can help and advice.
From assessing existing equipment to site surveys and everything in between, we can help make it easy for you to take over an existing business if this option is right for you. Please contact us on 01302 846876 and we’d be happy to help!