Don't Blame the Economy, Apply the BasicsGeorge Cloutier
(This piece has been corrected to change 400 cups to 600 cups and $17,000 to $12,000 in the second to last paragraph.)
Editor's note: This is the latest in a series of case studies about business turnarounds. The name and identifying details of the company used as the example have been changed.
Problem: Self-Deluding Owners Are Blaming the Economy
The Happy Trails amusement park in South Carolina's Low Country is one of those throwbacks to the roadside attractions that used to line the highways back in the 1960s. Think "South of the Border," but without the clever billboard marketing.
The park was started by two friends 20 years ago, and they always managed to do well because they had a good gimmick to attract the zillions of families who took to the road each summer. Located right next to a small strip mall, gas station, and litter of chain food restaurants, they are the only real distraction along an otherwise barren freeway with no other stops before or after for at least 50 miles.
Happy Trails caters to children with dinky rides, games, and a petting zoo. It's just enough to get parents to drop $15 a pop to keep their travel-weary kids happy while they relax and grab a bite to eat.
For years the owners, Frank and Rusty, reaped an easy $4 million in sales, but within just two years revenue dropped by more than 50%. Profits are in the tank, vendors are clamoring to get paid, the bank is about to pull its line of credit, and Happy Trails looks as if it's about to hit the end of the road. The owners assume it's because of the economy, but they haven't given up yet.
Solution: Stop Blaming the Economy and Show Up
The owners are being far too lax in the way they run the park. For years, it essentially ran itself. They just needed to hire some kids to run the rides and sell some popcorn. But when things get tough, that's not enough.
We spoke to some of the other merchants in the area, who said traffic wasn't down all that much—maybe 18%. People were still stopping by, they just weren't going into the Happy Trails. Blaming the economy was just a cop-out. One of the glaring mistakes the owners made was expecting the company to continue running itself. They came to the park only once or twice a week to check receipts, do payroll, and make sure everything was running on track. They failed to notice the deterioration of some of the rides. And frankly, today's kids are too sophisticated to sit in pretend fire engines ringing a bell. Too much money was being wasted on running rides that weren't attracting attention.
We had them repair the better rides and carry out some simple cosmetic improvements, such as paint jobs with bright colors. We recommended more games of chance the adults would play. We also did some research and had them invest in a strap-in trampoline, which was a huge hit. The upkeep was minimal.
We also revamped the concession stands. People don't realize that food brings in the biggest profit, and of all the catering items, beverages provide the biggest profit. By simply replacing a soda machine with a fountain that uses water, syrup, and CO2—ingredients that cost only pennies per unit—the profits have been immense. After selling close to 600 cups of soda each day during the month of August, Happy Trails pulled in an extra $12,000. Just from soda.
These changes didn't require any huge investment in the business so much as creativity, a little cost cutting, and a lot more diligence. By the end of the year they'd put the specter of bankruptcy behind them, paid off their debts, and actually started to pull a small profit. Today, Happy Trails is off the financial roller coaster and riding higher than ever.
—With Samantha Marshall