March 21 (Bloomberg) -- (An earlier version of this story incorrectly reported the size and the growth rate of the family entertainment center industry in the fourth paragraph.)
Players soaring through the air, bouncing over a court made of trampolines and competing to score points by jumping through a spinning hoop six feet off the ground: That was Rick Platt's vision for SkyZone, a new sport he helped found in 2004.
Though he built it, spending $2 million to recruit athletes and construct a 17,000-square-foot arena in Las Vegas, the crowds never came. SkyZone, as a sport, was a flop.
But soon local skateboarders started banging on his door to play in the arena, so Platt bought a cash box and began charging $8 a head. Six months and 10,000 jumpers later, he realized he might have a business after all. When his son, Jeff, opened a second indoor trampoline park in 2006 in St. Louis, where he was attending college, it was cash flow positive within six weeks.
On average, a typical family entertainment center in the U.S. draws about 200,000 visitors each year, according to data from the International Association of Amusement Parks and Attractions. There are about 1,500 centers in the U.S., a number that's increasing by 20 or 25 each year, says David Mandt, a spokesman for the trade group.
Now based in Los Angeles, Jeff Platt is chief executive officer of Sky Zone Indoor Trampoline Park. The company had $15.7 million in revenue from four corporate and 15 franchise locations in 2011 and plans to add 34 franchises this year. Sky Zone has about 50 full-time and 500 part-time employees. Platt faces a pair of challenges: managing the company’s growth and luring repeat customers after the novelty wears off.
Platt spoke recently to Bloomberg contributor Karen E. Klein about the unexpected success of Sky Zone and how he’ll prevent trampoline arenas from becoming a short-lived fad.
Q: What was your father thinking when he started SkyZone?
A: He met some guys who had this idea for a new team sport where a 6-foot-8 athletic individual would have no advantage over a small guy who could jump. He’d just gotten out of a very successful scrap-metal business and wanted to take a leap of faith, so he bought their patent and decided to make it happen. My mother was telling him he was crazy, and I was thinking this was the coolest thing in the world because we would own our own sport.
Q: What challenges do you face at Sky Zone?
A: As you grow a business and get different operators and franchisees, everyone has a different management and training style. It’s critically important to maintain consistency as you grow a brand, so we want to get our training the exact same way at every location. Your competitors can adopt what you have created and do similar marketing, but they can’t clone your people.
Q: What are the barriers to your continued growth?
A: Real estate is surprisingly challenging for us because we need unique buildings with high ceilings. A lot of landlords prefer industrial tenants. And there are also city zoning challenges for retailers in industrial areas.
Q: How difficult was it to get insurance for a business that involves trampolines?
A: It took a long time. I must have tracked down 30 insurance companies and nobody would touch it. Trampoline injuries mainly happen because they are not enclosed with nets, they’re not maintained properly or they are unsupervised. We got an insurance company to realize that we had figured out all the safety hazards and designed the arenas with nets so people cannot fall off, and we spread people out so we can manage the risk with proper supervision.
Our activity is similar to skiing. Broken bones do happen, particularly when people try to do things beyond their limits. But even when people are in control, there are freak accidents. A big part of safety is educating customers and scaring them a little, so we give a rules speech with a safety video. So far we’ve been fortunate not to have any major injuries.
Q: When did you start franchising?
A: In 2009. We have a lot of deals under construction, in site development or looking for real estate right now. Our franchise license is reasonable, $60,000, but the total investment is $1.1 million to $1.5 million due to construction of the 25,000- to 40,000-square-foot facilities.
Because of that high cost, most of our franchisees are prior business owners in their mid-30s to 60s who have been C-level executives or professionals earning a nice income. This is not something for a startup entrepreneur.
Q: How do you advertise the locations?
A: We are doing some TV ads and trying to get local news attention from magazines and newspapers when we open a new franchise location. Of course we get a ton of word-of-mouth marketing, and we’re focusing a lot of effort on social media: Facebook, Twitter and YouTube are a tremendous pull for us.
Q: How do you prevent Sky Zone from becoming one of those concepts that hits big and then fades?
A: One thing we’re doing is offering all kinds of fitness classes, from yoga to Pilates and martial arts. Our instructors put a new spin on basic exercises to incorporate the trampolines and they have come up with some unbelievable workouts. Some of them are the original athletes who trained with us to play our new sport, which my dad still plans to start someday.
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