CV&,37; Olo% A UNITED STATES DEPARTMENT OF COMMERCE PUBLICATION V URBAN PROFILE BOWLING ALLEYS 7 U.S. DEPARTMENT OF COMMERCE Economic Development Administration Office of inority Business Enterprise For sale by Superintendent of Documents, U.S. Government Washington, D.C., 20402 - Price 30 cents URBAN BUSINESS PROFILE BOWLING ALLEYS SIC 7933 April 1972 EDA-72-59581 Prepared for ECONOMIC DEVELOPMENT ADMINISTRATION in cooperation with OFFICE OF MINORITY BUSINESS ENTERPRISE U. S. DEPARTMENT OF COMMERCE Washington, D.C. 20230 Peter G. Peterson, Secretary Robert A. Podesta, Assistant Secretary for Economic Development John L. Jenkins, Director Office of Minority Business Enterprise This report was prepared by Boise Cascade Center for Community Development, Washington, D.C., under contract with the Office of Economic Research, Economic Development Administration. The statements, findings, conclusions, recommendations, and other data in this report are solely those of the contractor and do not necessar- ily reflect the views of the Economic Development Administration. FOREWORD As part of a continuing program to provide encouragement and assistance to small business ventures, the U.S. Department of Com- merce is issuing a series of Urban Business Profiles. It is hoped that these reports will serve as a meaningful vehicle to introduce the prospective small urban entrepreneur to selected urban-oriented businesses. More specifically, a judicious use of these profiles could: provide a potential businessman with a better understanding of the opportunities, requirements, and problems associated with particular businesses; provide guidelines on types of information required for location-specific feasibility studies; assist urban development groups in their business creation activities. ^J^-* J ' <• SflnA^TK Robert A. Podesta Assistant Secretary for Economic Development Table of Contents Page I. Recommendation 1 II. Description of the Industry 2 A. Identification 2 B. Dimensions 2 C. Characteristics 4 Nature of the Product— Nature of the Customer- Staffing Needs — Competition and Marketing — Ease of New Firm Entry — Bowling Center Physical and Capital Requirements — Profitability — Market Fluctuation III. Analysis of Business Feasibility 12 A. Review of Key Factors 12 Market— Location— Site Requirements— Complemen- tary Services— Equipment— Management— Work Force B. Special Factors for New Minority Ventures 13 C. Projections of Attainable Returns on Investment 13 10-Lane Bowling Alley— 20-Lane Bowling Center— 32-Lane Bowling Center IV. Establishing the Business 15 A. Approaching the Market 15 B. Facility Requirements 16 C. Financing 16 D. Labor Force 17 APPENDIX OFFICE OF MINORITY BUSINESS ENTERPRISE (OMBE) AFFILIATES URBAN BUSINESS PROFILES URBAN BUSINESS PROFILE Bowling Alleys (SIC 7933) I. RECOMMENDATION The high rate of failure of bowling establishments in the past dec- ade — due primarily to a combination of overreaction to a rising mar- ket, underfinancing, and inexperienced management — suggests that a prospective entrepreneur should enter this industry with caution. In- dividuals should perform thorough market and financial analyses and consult with industry sources (particularly the two large national suppliers of bowling equipment and the association of bowling pro- prietors) before venturing into the industry. The key to the success of a bowling operation is the ability of the management to attract and maintain a full schedule of league bowl- ing. Almost 75 percent of all games are rolled during the course of league play. Thus league attraction and league creation are critical to success. Consequently a strategy for league formation at the pro- posed center should be worked out in advance of facility planning. Initial capital investment is relatively high. Good management is considered essential, although other labor force requirements are easily met. Sites with high accessibility and large parking areas are highly desirable. Potentially attractive market areas will vary greatly from locale to locale, depending on such factors as popularity of the sport with the target community, availability of competing facilities, alternative forms of recreation and entertainment available, and the potential of a marketing strategy to increase the local demand. Increasing popularity of the sport among minority groups provides a growing base upon which minority ventures — relatively rare to date — may establish themselves and achieve a profitable level of operations. II. DESCRIPTION OF THE INDUSTRY A. Identification The traditional bowling alleys of the 1940's and 1950's have evolved into the bowling centers of the 1960's and 1970's, which in- clude all the facilities of the earlier establishments plus additional amusements and subsidiary services. Thus, a bowling center is likely to include, in addition to the basic requirements of the sport (alleys, balls, and shoe rental), food and beverage service, bar service, amusement machines (pinball, children's rides, etc.), pool tables, and other miscellaneous recreation (model car racetracks, indoor minia- ture golf, etc.). The service offered may also extend beyond service and maintenance functions associated with the game of bowling it- self to include operation of the above-mentioned recreation and service activities, bowling clinics, meeting halls, child care facilities, and shops for sportswear and bowling balls and accessories. Many of these services may be operated on a lease basis by individuals other than the bowling proprietor. Establishments whose principal function is to provide facilities for the sport of bowling are classified for statistical purposes as Standard Industrial Classification (SIC) 7933. Four types of bowling are in- cluded: tenpin (the oldest, most popular, and nationally played), duckpin, rubberband duckpin, and candlepin bowling. The latter three types of bowling utilize smaller pins and balls and are popular only in a few areas of the country (notably New England, Pennsylva- nia, and Washington, D.C.). About 95 percent of the bowling done in the United States is tenpin bowling. In this profile, cost and revenue estimates and corresponding user statistics are based upon tenpin bowling centers. The cost differen- tials between tenpin bowling establishments and the three less com- mon forms of bowling establishments can be obtained from equip- ment suppliers. Special market analysis would need to be performed to determine if the area under consideration was suitable for smaller pin bowling enterprises. B. Dimensions The popularity of the sport of bowling (as measured by the total number of bowlers sanctioned by the American Bowling Congress) has increased steadily during the past 2 decades. Most rapid growth occurred almost immediately after the introduction of the automatic pinsetter machine by the American Machine and Foundry Company (AMF) in 1955 and by the Brunswick Corporation in 1957. The num- ber of sanctioned bowlers (that is, bowlers with membership cards in the American Bowling Congress — generally required of all league bowlers) increased from 2V2 million in 1955 to 5V2 million in 1960 and to over 8 million by 1963. In response to this rapid rise in popularity, a great surge took place in the number of bowling establishments that were opened to meet the growing demand. The number of certified bowling lanes increased during this same period from 58,200 in 1955 to 108,000 in 1960 and to over 150,000 lanes by 1963. Well over 1,000 new bowl- ing centers opened during this period. While the number of new lanes thus kept pace with the growth in the number of sanctioned bowlers, the new bowlers turned out to be less ardent than their predecessors (as exhibited by a rapid decline in the number of games bowled per lane per day). Hence, there was clear evidence of overbuilding by 1963. This was reflected in a sharp decline in profits throughout the industry after the surge in the late 1950's. The decline in profits was not due solely to overbuilding, although this was the principal cause. Other factors of importance were poor management and undercapitalization. Many people invested in bowling and became proprietors because they had been bowlers for several years, liked the game, and assumed profits came automati- cally. They were inexperienced in running these operations and, in the case of absentee ownership, selected other bowling associates — with similarly weak management — to operate the alleys for them. An accompanying problem was that these new entrepreneurs had not fully worked out all the costs of operating a bowling establishment and had based revenue projections on experiences of early years when the smaller number of establishments then in operation were always crowded. Consequently, they lacked the funds necessary to support the operation during the slack period of the middle 1960's. There are good indications that the bowling industry has now sta- bilized and that opportunities for profitable ventures are possible with well-planned marketing and operating strategies. The total number of bowling establishments in the United States is now esti- mated at around 9,000. The Atlantic and North-Central regions of the country continue to have the strongest concentration of establish- ments, with New York, Ohio, Illinois, and Pennsylvania as the four leading States in this regard. The Mountain and Pacific regions (and particularly California, Washington, Oregon, and Colorado) also have active bowling populations with participation rates above the national average. C. Characteristics 7. Nature of the Product While bowling centers offer a wide variety of services in addition to providing facilities for the sport itself, revenues from bowling are by far the chief source of income, accounting for at least half and usually as high as 70 to 80 percent of all revenues generated. In turn, the major source of bowling revenues results from league bowling. A 1968 survey conducted by the Bowling Proprietors' Association of America indicated that 73 percent of all games bowled across the country were by league bowlers (including practice games apart from league action). This same survey indicated that of the 38 million persons who had bowled at least once in 1967-1968, 30 million were casual bowlers (did not belong to leagues) and 8 million were active bowlers. Of the 1.7 billion annual games rolled, only 27 percent or 0.5 billion were by casual bowlers — the remaining 1.2 billion games were rolled by the 8 million active bowlers. Thus the average casual bowler rolled roughly 15 games per year, while the league bowlers averaged 150 games annually. The reasons given by survey respondents for starting to bowl did not differ significantly between casual and active bowlers. The domi- nant reasons given were (1) seeking fun and recreation and (2) en- couraged to try sport with friends or family. The reasons for continu- ing to bowl also did not differ greatly among casual and active bowlers, and were dominated by (1) healthy exercise, (2) challenging activity, (3) fun and relaxation, and (4) a good form of social activity. The cost of bowling, typically between 50 to 75 cents per game rolled, has not been found to be a serious factor in limiting the mar- ket. League bowlers are accustomed to paying considerably more per game, not only to cover their bowling, but also to contribute to cash funds for end-of-the-season league dinners and for cash prizes and trophies. Casual bowlers are likewise relatively insensitive to bowling prices; their participation is probably more limited by the unavailability of alleys at prime time (nonsummer evenings) due to scheduled league bowling than by the cost of the sport. 2. Nature of the Customer This same 1968 survey indicated that, of persons in the United States 11 years of age and over, some 58 percent had bowled ten- pins at least once in their lives and an additional 5 percent had bowled smaller pins. Some 26 percent — of which 6 percent were active league bowlers — had bowled at least once in the past year. While a greater percentage of metropolitan area residents had tried bowling than nonmetropolitan area residents (62 compared with 47 percent), among those who had tried bowling, the percent- age of presently active bowlers was similar in the metropolitan and nonmetropolitan areas (10 compared with 9 percent). An analysis by age of population reflected the surge in popularity of bowling in its "golden years/' 1955 to 1962. While only 34 per- cent of the population sampled over age 50 had ever bowled, the percent rose markedly to 68 percent from ages 40 to 49, 76 percent from ages 30 to 39, and 79 percent from ages 20 to 29. In the youngest age group, 11 to 19, a total of 67 percent had bowled at least once. Of active league bowlers, the 30 to 39 and 40 to 49 age groups each had 9 percent of their populations represented, while 7 percent of the total population from 20 to 29 were league bowlers. Statistics broken down by sex revealed that 36 percent of the males sampled had never bowled compared with 45 percent of the females sampled. However, among those who had tried bowling, 10 percent of the males and 9 percent of the females were now regular league bowlers. As a general rule of thumb, industry sources recommend that a population of at least 1,000 persons per lane is needed to support a bowling center. This figure needs to be adjusted, however, to account for such factors as recent population growth (10 percent growth for the 1960-1970 period is considered a good gauge of increasing mar- ket size and potential), proximity to competing bowling centers, neighborhood bowling history (blue-collar areas traditionally have been thought to be better sources of bowlers than white collar areas, although this may be more stereotypical than factual); racial compo- sition (minority community members have only recently begun tak- ing up the sport in significant numbers); accessibility (high-traffic areas — such as shopping centers — are prime locations); and climate (warmer climates favor competing outdoor recreation such as golf and boating). On the basis of these factors, it is clear that each city — and, in fact, each neighborhood within it — must be analyzed sepa- rately; there are no simple rules of thumb to pinpoint with cer- tainty a favorable location or to define the local population size needed to support a lane or center. 3. Staffing Needs As indicated above, one of the major causes of failure in the bowling industry has been the absence of sound managerial skills. Accordingly, manufacturers of bowling alley equipment, Brunswick and AMF, have set up management clinics that cover such areas as marketing and public relations, business management, human rela- tions, advertising, and instruction on how to teach bowling to begin- ners. In addition, they provide assistance in planning of the center as well as in financing equipment and other facilities. The Bowling Pro- prietors' Association of America (BPAA) periodically organizes con- ferences and seminars and also publishes a monthly journal, Bowling Proprietor, containing management articles and advice. Because leagues are the backbone of any successful operation, an owner or manager must be able to work well with league represent- atives, present his bowling center in its best light, and be able to co- ordinate the league activities throughout the season. In this regard, managers with intimate knowledge of the sport have a slight com- petitive edge on managers without bowling background. However, since leagues are always looking around for new arrangements — es- pecially those leagues with bad past season experience — an ability to negotiate skillfully is essential. The number of employees needed to run the center will depend upon the size of the center and the variety of subsidiary services of- fered. A rule-of-thumb figure is one full-time employee for every four lanes; these employees may include a manager, an assistant manager, a counter control man (who assigns alleys and collects fees), an alley maintenance mechanic and an assistant mechanic, janitorial staff, and clerical staff. Other employees — depending on the presence of the service — may include a bartender, waitresses, snackbar personnel, a nursery attendant, playroom supervisors, bowl- ing instructors, pro shop attendant, and billiard room manager. Clearly, these latter employees may be paid and supervised by a les- see of the facilities in which they work. Typical 1970 wage and salary ranges for bowling employees were managers — $8,000 to $16,000 per year, plus percentage of profits; as- sistant managers— $6,500 to $12,000 per year, mechanics— $7,000 to $12,000 per year, counter control man — $2.50 to $3.50 per hour, and janitors — $2 to $3 per hour. The snackbar and playroom attendants generally earn between $2 and $2.50 per hour. In total, bowling cen- ters spend between 15 percent and 30 percent of their gross income for employee wages. The ratio of male to female employees in the industry is approximately 3 to 1. 4. Competition and Marketing A bowling establishment faces two levels of competition: (1) com- petition from other bowling establishments in the area and (2) com- petition from other recreation and entertainment alternatives. Competition among bowling establishments for their share of the local bowling market focuses largely on attracting leagues to their respective establishments. Since the basic service offered (reserved lanes, balls, and shoe rental) are rather standard throughout the in- dustry, the proprietors tend to emphasize the availability of adequate parking, the complement of secondary services available (primarily snackbar and bar), and the overall cordial and friendly environment of their respective establishments. Of critical importance is the abil- ity of the establishment to insure that (1) lanes are available on time, (2) equipment failure is minimized, and (3) the facilities are clean at all times. Price-cutting is rare, although some establishments offer re- duced rates continually for children and at offpeak hours (weekdays and weekend afternoons) for adults. The establishments often award trophies free of charge to league winners as an inducement for pa- tronage of their alleys. Other promotional features, such as awards for bowling perfect "300" games and rolling a strike when a spe- cially marked pin is in the head position, are sometimes offered at offpeak hours as well. Free group instruction, special group rates at offpeak hours, and introductory promotional games at reduced prices through community Welcome Wagon operations are also used to attract new bowlers. Finally, the sponsoring of prestigious local or national tournaments or special match games with outstanding bowl- ers is employed to publicize establishments. In order to increase the overall bowling market, both Brunswick and AMF and the Bowling Proprietors' Association of America con- duct nationwide advertising campaigns and provide assistance to local establishments in organizing individual or group advertising ef- forts. The weekly exposure of large segments of the public to profes- sional bowling tournaments through the television media ("The Pro Bowlers Tour") also stimulates interest in the sport. More subtly, the bowling industry encourages the use of bowling in advertisements for unrelated product lines (such as the use of amateur bowlers in a prime time commercial for life insurance). 5. Ease of New Firm Entry The relatively high capital requirements needed to start bowling centers have not acted as a major deterrent to the establishment of new bowling facilities. The large number of bowling center failures in the mid-1960's, however, reduced the appeal of the industry as a business opportunity from its earlier high levels. Both the Bowling Proprietors' Association of America and the two national suppliers of equipment encourage new entry, but they are careful to warn the prospective entrepreneur of the risks involved and the need for well-conceived marketing studies and for well-planned and managed facilities. There is no institutionalized bias against minority firm entry, al- though the number of minority proprietors is small due to the large initial investment required and the historic absence of minority bowl- ers. As bowling continues to grow in popularity with minority groups, the need for establishments serving minority neighborhoods should become more pronounced. The initial capital investment to start a bowling center is consider- able. For example, the investment required for a fully equipped 32- lane center with billiard room, restaurant, and lounge can run as high as $1.5 million. Bowling equipment is expensive, although leas- ing terms are available. AMF and Brunswick both help their custom- ers with financing, but a substantial downpayment is usually re- quired. These two firms will provide continuing assistance to establishments that have bought or leased their equipment. Finding staff to operate the center is not considered a serious problem, since most required skill levels are low. For the more skilled employees — managers and mechanics— adequate training programs and materials are made available by the BPAA and by AMF and Brunswick. The breakeven point in the case of a new bowling center is di- rectly linked to its ability to book leagues for the two evening slots (7 to 9, 9 to 11) each week night. Proprietors opening new centers are often surprised at the number of leagues looking for lanes. The newness of the center is a highly marketable feature, as leagues are continually searching for more modern, better equipped centers. A center that can attract leagues away from older establishments and that also conducts a well-conceived program to establish new leagues can become profitable within the first season of operation. More often, centers will not achieve profitable operations until their second or possibly third season of operation. 6. Bowling Center Physical and Capital Requirements The average bowling establishment contains 15 lanes, although this average is biased downward by the large number of very small bowling facilities at universities, military bases, and clubs with less than 10 alleys. The optimum size recommended by the industry for a full service bowling center is 36 lanes. As indicated above, such a fa- cility together with billiard room, restaurant, and lounge, can require an initial investment of up to $1.5 million. In general, lanes and automatic pinsetters will cost between $12,000 and $15,000 per lane, excluding installation. Other related basic costs include metal storage lockers ($10 to $14 each), custom seating ($250 per lane), pin finders to indicate pins left standing 8 ($150 per lane), elevator bowling ball returns ($800 per lane), auto- matic ball cleaners and polishers ($1,500 each), and automatic scor- ers ($3,000 per lane). Considerable smaller item costs are required for balls, shoes, cleaner, lane duster, pins, scoresheets, spectator seating, and a variety of other supplies and equipment. The indoor area requirements for a bowling center average about 1,000 square feet per lane. This figure includes additional space for auxiliary facilities, such as snackbars, lounge, playrooms, offices, pro shops, and locker and restrooms. An outside parking requirement of seven spaces (or at least 2,000 square feet) per lane is considered de- sirable. Construction costs will vary according to design specifications. A good quality building which includes auxiliary facilities will range from $11 to $15 per square foot. This would include architectural fees. In most buildings, the bowling alley should be soundproofed and the building completely heated and air-conditioned. Approxi- mately one-fourth of the building goes to auxiliary facilities and three-fourths goes to the lanes. The auxiliary rooms and services are: Pro Shops The average pro shop produces a little over 5 percent of the gross income. Inventories include the following: bowling balls, priced from $19.95 to $50 (proprietors state the average price for women's bowling balls are $24.95 and for men $27.95); shoes, priced from $5.95 to $14.95, with an average selling price at $9.95; bowling bags priced from $3.95 to $14.95, with an average selling price of $9.95. The markup on items is approximately 40 percent. Most proprietors plan inventory stock according to the economic structure of their communities. An average inventory will range from $2,000 to $3,000. Rental Shoes and Bowling Balls Shoe rentals are not highly profitable, but they are very essential. An average of 1 to 2 percent of the gross income is from shoe rental; ball use is included in linage (game) fees. Most bowling shoes are purchased by the operator at approximately $6 per pair. A charge to the customer for shoe rental is 25 cents. Shoes are depre- ciated over a 2-year period. Balls cost proprietors $15 each, and there are usually five per lane. They depreciate in about a 5-year period. Cocktail Lounge and Bars A successful cocktail lounge and bar operation can make as much profit as linage receipts. For a successful operation, liquor costs should not exceed 25 percent of gross receipts from the bar. The key to success is careful cost control. The State controls operations at bowling centers by licensing procedures. This license usually desig- nates the eating areas of the center as a bona fide public eating place, which allows cocktail-waitresses to serve drinks to customers on the lanes. Some proprietors indicate that as much as 79 percent of their bar business is done on the lanes. In order to qualify for this type of licensing the center must have a complete restaurant facility, including a kitchen. This means that there must be service of full meals rather than, or in addition to, an exclusive sandwich opera- tion. This license also allows minors (anyone under 21 years of age) to be on the premises. Other types of licenses may be available, de- pending on the regulations of the State Department of Alcoholic Beverage Control. Snackbar-Restaurant Vending machines for food service can lessen operation cost, but many owners insist upon manual snackbars, and some prefer oper- ated restaurants. The amount of commission to the proprietor from vending machines depends upon the volume and amount of servic- ing. Items that are not perishable and will last more than a week are possibilities for higher commissions. Vending machines are advantageous because there are no labor costs, no inventories, no kitchen to equip and supply, and no per- sonnel problems. However, totally automated food service will re- strict the type of liquor license available. Full information may be re- ceived from the State Department of Alcoholic Beverage Control. The proprietor who desires a manual operation should spend no more than 40 percent of gross income for operating and food costs. There should be an entrance that is separate from the center in order to attract additional business to the restaurant. Playroom Many bowling establishment owners find that supervised playroom service for toddlers and young children will attract women to morn- ing and afternoon league play. No direct income can be earned. Equipment such as cribs, tables and chairs, and a few toys should be estimated at $7 to $10 per lane. Older women in the surrounding neighborhood are often ideal employees for this service because they can work short hours (9 to 12 a.m. or 2 to 4 p.m.) on a part- time basis. Because of the high initial investment, both Brunswick and AMF offer financial packages for the purchase of basic equipment. A typi- cal schedule requires repayment in 8 years, at an annual interest rate of 5 to 6 1 /2 percent on the unpaid balance. Usually, a 15 to 30 per- cent down payment of the total equipment cost is required. 10 The payments are usually scheduled to coincide with the peak bowling season. Usually no payments are required during the sum- mer season (June to September), and eight equal monthly payments are required during the peak bowling period. Accessory equipment may be purchased or leased. For example, the new automatic scorers can be purchased for $11,500 per four lanes outright or financed with 5-year notes. Alternatively, the scor- ers can be leased for 10 years at a cost of 3 to 5 cents per game rolled depending on volume of usage. Maintenance of bowling facilities can be estimated at around $500 per lane per year. Equipment is depreciated over a 10-year period in accordance with Federal Government regulations. 7. Profitability The two major sources of income to bowling centers result from bowling fees and from sales of food and liquor. The larger the cen- ter, the greater will be the share of total receipts credited to the lat- ter activity. Thus, for example, a typical establishment with an annual business volume of $65,000 is likely to have generated over 80 per- cent of this income from bowling fees. On the other hand, a typical establishment with annual volume of $475,000 will have generated only 40 percent to 50 percent of this income from bowling fees. Consequently, the profits of larger centers in particular are related to successful bar and restaurant operations as well as to sound bowling business. Typical profitable bowling centers show net profits of between 4 percent and 7 percent of sales, after owners' salaries of up to 9 per- cent. Unprofitable centers may show net losses of similar propor- tions. Trade sources indicate that slightly over half of all centers fall into the "profitable" category. 8. Market Fluctuation As suggested by the analysis above, the bowling industry has expe- rienced both a boom period and a subsequent slowdown in the past decade. While there are more bowlers today than ever before, the average active bowler is apparently not as dedicated to the sport as in past decades. Other recreational sports (notably golf, tennis, and boating and fishing) and other leisure activities (notably television and cardplaying) offer strong competition to bowling. Bowling is un- likely to experience another "golden age" like the 1958 to 1962 pe- riod. It should, however, be able to continue to compete for its share of the growing recreation market. 11 III. ANALYSIS OF BUSINESS FEASIBILITY A. Review of Key Factors The following factors are essential to successful development of a profitable bowling center: 1. Market League bowling is the "bread and butter" part of the industry; those centers that can attract leagues to the evening time slots (7 to 9 and 9 to 11 on Monday through Friday and on Sunday) will gener- ally show an annual profit; other centers usually will not. A general rule is that 1,000 persons without ready access to existing bowling establishments are required to support a lane. This standard must be adjusted to the socioeconomic characteristics of the popula- tion, the historic popularity of the sport in the region, and the availability of competing forms of recreation and entertainment. 2. Location Given the appropriate market, a center should be located in a commercially zoned area with high accessiblity and visibility. A large shopping center complex, for example, is cited by the industry as an ideal location. Highway sites are also popular choices. 3. Site Requirements The center should be located in a structure providing at least 1,000 square feet per lane. Outside parking in the order of at least seven spaces per lane (2,000 square feet per lane) is also suggested. While second-floor locations are feasible, ground-floor locations are desirable. 4. Complementary Services At a minimum, a bowling center must provide alleys, balls, shoe rental, service desk, bowler and spectator sitting areas, and restrooms. Some form of refreshment service (vendin machines, snackbar, lounge, or restaurant) is considered mandatory. Other services, such as pro shops, child care areas, billiard and/or other game rooms, are considered desirable to enhance the attractiveness of the center to potential clientele. 5. Equipment Bowling equipment is available from two large national suppliers: Brunswick and AMF. Both have wide ranges of equipment and sup- plies and are available to assist in planning the center to insure that all needs are met. Several forms of financing are available, although initial capital requirements are still relatively high. 12 6. Management A manager of a bowling center should have both familiarity with the sport itself and a good background in bowling center manage- ment. Training programs are offered by the two bowling suppliers and by the Bowling Proprietors' Association of America. However, it is considered prudent to receive some additional training in an exist- ing center before undertaking the management of a new center. 7. Work Force In addition to the management staff, a number of less skilled workers are required to maintain and operate the facilities. Roughly one full-time employee per four lanes is required to run a bowling center. There are certain economies of scale associated with the bowling operation itself (that is, fewer additional employees are re- quired as extra lanes are introduced), but larger centers usually offer additional services as well and hence require more diverse staff posi- tions to operate the center efficiently. B. Special Factors for New Minority Ventures It has been only in the past decade that significant numbers of mi- nority group members have begun to bowl on a regular basis. Since that time, however, growing numbers have taken up the sport. There are no known industry-imposed barriers to the establish- ment of minority-owned bowling centers. The large initial invest- ment required is the principal deterrent. The two most inexpensive ways in which minority proprietorships can be obtained are: (1) buying an existing establishment in a ra- cially mixed area from a white proprietor or (2) establishing a new, small center of, say, 11 to 15 lanes in a converted structure. A suc- cessful proprietor can at a later date branch out into a larger opera- tion of 30 or more lanes. C. Projections of Attainable Returns on Investment Representative projections are furnished for three typical levels of operation: A center with $65,000 annual volume of business (10 lanes), a center with $150,000 annual volume of business (20 lanes), and a center with $250,000 annual volume of business (32 lanes). It is assumed that as the number of lanes increases, an appropriate level of secondary services is offered at the center in addition to the bowling facilities. Proprietorships are assumed in all cases, and the amount of profit shown has not been reduced by the amount of owner's compensation. 13 Those bowling establishments achieving a smaller level of gross re- ceipts are generally characterized as being less successful in attracting leagues than the profitable centers. The less profitable centers can be characterized as having higher rental and employee costs and greater maintenance costs. Thus, a combination of inability to attract league bowling and less efficient management generally accounts for reduced profits or net losses. 7. 10-Lane Bowling Alley Revenues Bowling income (8-month season) $ 46,000 Bowling income (summer) 5,500 Food and bar sales 11,000 Other revenue 2,500 Total revenues $ 65,000 100% Operating expenses Employee wages (excluding owner/manager) $ 10,000 Supplies and maintenance 4,300 Rental space, including utilities 10,000 Food and bar costs 8,000 Other expenses (advertising, licenses and fees, insurance) 7,000 Total operating expenses $ 39,300 60.5% Gross operating profit $ 25,700 39.5% Other expenses (equipment, interest, and depreciation) $ 15,700 Net profit before owner's draw and tax $ 10,000 15.4% 2. 20-Lane Bowling Center Revenues Bowling income (8-month season) $ 97,500 Bowling income (summer) 14,400 Food and bar sales 31,500 Other revenues 6,600 Total revenues $150,000 100% Operating expenses Employee wages (excluding owner/manager) $ 30,000 Supplies and maintenance 9,000 Rental space, including utilities 24,000 Food and bar costs 20,400 Other expenses 14,600 Total operating expenses $ 98,000 65.3% Gross operating profit $ 52,000 34.7% Other expenses $ 34,500 Net profit before owner's draw and tax $ 17,500 11.7% 14 3. 32-Lane Bowling Center Revenues Bowling income (8-month season) $125,000 Bowling income (summer) 23,500 Food and bar sales 92,000 Other revenues 9,500 Total revenues "$250,000 100% Operating expenses Employee wages (includes nonowner manager) $ 62,500 Supplies and maintenance 14,500 Rental space, including utilities 37,000 Food and bar costs 40,000 Other expenses 22,000 Total operating expenses $176,000 70.4% Gross operating profit $ 74,000 29.6% Other expenses $ 50,000 Net profit before owner's draw and tax $ 24,000 9.6% IV. ESTABLISHING THE BUSINESS A. Approaching the Market A we 1 1 -conceived market analysis study of the intended locale of the bowling center is highly recommended before commitment to begin construction. Emphasis should be placed on studying existing bowling patterns of the intended client community to determine their present level of interest in the sport and to identify other bowl- ing centers in the area that will provide the major competition to the proposed facility. Estimates should then be made of the extent to which: (1) existing active bowlers can be drawn away from these centers to the proposed center, (2) casual bowlers in the area can be converted to active bowlers, and (3) nonbowlers can be encouraged to take up the sport. Estimates of other possible revenue flows (bar, restaurant, billiards, etc.) should also be made. These figures could then be reviewed with AMF and Brunswick and with other bowling proprietors in the city or region to check and revise as necessary. While special attractions (introductory discounts, free drawings for prizes, free games for rolling strikes when a specially marked head pin is set up, opening week tournaments, and special match games between regional professionals) will serve to introduce the new cen- ter to the target community, the critical factor will be the ability to schedule league bowling. Consequently, the market strategy adopted should have this goal as the top priority item. Existing league repre- sentatives should be approached. Potential groups (such as plants in the vicinity, military bases, and community organizations) should be contacted and attempts made to establish a league on a trial basis. 15 B. Facility Requirements Both of the national suppliers, AMF and Brunswick, will be more than willing to provide the entrepreneur with alternative plans for designing and equipping the facility. A variety of alternatives are available to suit virtually any type of bowling establishment. As indicated above, roughly 3,000 square feet per lane of indoor and outdoor space will be required, with two-thirds of it for outside parking. Thus, a 10-lane bowling alley will require a 3 A-acre site; a 20-lane bowling center will require a 1 1 /2-acre site; and a 32-lane bowling center will require a 2 1 /2-acre site. A single-floor structure is ideal, although use of converted first- or second-floor space in an existing multistory building is feasible. The intended area must be properly zoned, both for the bowling activity and for the sale of food and beverages. The average center will cost about $30,000 per lane to construct and will cost roughly $500 per lane per year to maintain. C. Financing Both AMF and Brunswick offer financial packages for purchase of equipment and supplies. A typical schedule requires repayment in 8 years, at an annual interest rate of 5 percent to 6 1 /2 percent. Usually a downpayment of between 15 percent to 30 percent of the total amount is required. Bank loans may also be available. However, in view of the high rate of failure in the industry in the mid-1960's — due primarily to an overreaction on the supply side of the market to an increasing mar- ket demand — banks may be hesitant about authorizing loans for bowling center ventures. In some cases, a bank loan of up to $350,000 may be secured through a 90 percent guarantee by the Small Business Administration. A relatively low-cost method of entry for a minority entrepreneur would be through the purchase of an existing bowling facility. Alter- natively, a small center of, say, 15 lanes might be developed first, with the ultimate goal of establishing a base upon which to develop a larger center at a later date. In some locales, franchise arrangements may be possible. The fran- chisee will pay as much as half of the original investment. Usually a franchise fee is based upon a monthly royalty per lane plus an initial cost for the franchise. 16 D. Labor Force As indicated above, a full-time labor force of roughly one person per four lanes is considered desirable. As the number of lanes in- creases, certain economies of scale exist in the labor force needed to maintain the lanes. However, other services — such as larger restau- rants, lounges, and gamerooms — will consequently increase the total labor force requirement. A labor force breakdown for a 20-lane bowling operation might include the following. Owner/manager 1 Assistant manager 1 Mechanic 1 _^ u ..._ Maintenance 1 Staff costs: $45 ' 000 Food service 1 A labor force breakdown for a 32-lane bowling operation might include the following: Manager 1 Assistant manager 1 Mechanic 2 Maintenance 2 Food service 2 Staff costs: $62,500 The managers can receive training from their bowling equipment supplier or from the Bowling Proprietors' Association of America. The monthly trade journal, The Bowling Proprietor, also provides valuable management information. Mechanics will receive training from the equipment supplier. The maintenance and food service staff will be drawn from the unskilled labor force. The food service operation and the secondary services (pro shop, gamerooms, etc.) can be leased to concessionaires, if desired. 17 APPENDIX BIBLIOGRAPHY Bowlers Journal, 506 South Wabash Avenue, Chicago, Illinois 60605. Monthly. $4 a year. Mostly consumer oriented. Bowling Magazine. Published by the American Bowling Congress, 1572 East Capitol Drive, Milwaukee, Wisconsin 53211. Monthly. $3 a year. Mostly consumer oriented. The Bowling Proprietor. Published 11 times a year by the Bowling Proprietors' Association of America, Inc., West Higgins Road, Hoff- man Estates, Illinois 60172. The following publications may be ordered from the Superintendent of Documents, Government Printing Office, Washington, D.C. 20402. Tax Guide for Small Business. Internal Revenue Service, U.S. De- partment of the Treasury, Washington, D.C. 20224. 60 cents. Starting and Managing a Small Business of Your Own. Small Busi- ness Administration, Washington, D.C. 20416. 35 cents. ASSOCIATIONS Professional Bowlers Association of America (PBA), 1720 Merriman Road, Akron, Ohio 44313. Founded 1959. Members 900. Profes- sional bowlers. Promotes the status of the qualified bowler to the rank of professional and bowling as a major sport. Assists the American Bowling Congress in enforcing its rules and regulations. Promotes better understanding between professional bowlers and bowling proprietors, bowling manufacturers, and the communica- tions media. American Bowling Congress (ABC) 1572 East Capitol Drive, Milwau- kee, Wisconsin 53211. Founded 1895. Members, 5 million. In- cludes all organized male tenpin bowlers in United States, Puerto Rico, Canada, Canal Zone, Saudi Arabia, and military installations in Europe, North Africa, Japan, Korea, Guam. Sponsors annual tournament competiton. Has State associations (50) local associa- tions (2,995) and sanctions teams (1,268,000). Provides standard rules and tests and approves materials and equipment to be used in sanctioned competition. Publication: Bowling Magazine, monthly. 18 Billiard and Bowling Institute of America (BBIA), 23 East Jackson Boulevard, Chicago, Illinois 60604. Founded 1934. Members 125. Distributors and manufacturers of billiard and bowling equipment. Publication: BBIA Bulletin, monthly. Bowling Proprietors' Association of America (BPAA) West Higgins Road, Hoffman Estates, Illinois 60172. Founded 1932. Members 5,150. Proprietors of bowling establishments. Publication: The Bowling Proprietor, monthly. MANUFACTURERS American Machine & Foundry Company, Bowling Division, Jericho Turnpike, Westbury, LI., New York 11590. Bowl-Mor Company, Inc., Newton Road, Littleton, Massachusetts 01460. Brunswick Corporation, Bowling Division, 623 South Wabash Ave- nue, Chicago, Illinois 60605. 19 OFFICE OF MINORITY BUSINESS ENTERPRISE (OMBE) AFFILIATE ORGANIZATIONS Albuquerque National Economic Development Association (NEDA) 1801 Lomas, N. W. Albuquerque, N. M. 87104 508/843-2386 Victor M. Casaus, Regional Vice President Atlanta Atlanta Business League (NBL) 329 Walker Street, S. W. Atlanta, Georgia 30314 404/524-5449 Franklin F. O'Neal, Executive Director Wendell White (OMBE Representative) 404/526-6304 Baltimore Morgan State College Minority Business Enterprise Project 2108 North Charles Street Baltimore, Maryland 21218 301/685-0610 Ralph J. Ross, Executive Director Boston The Roxbury Small Business Development Center 126 Warren Street Roxbury, Massachusetts 02119 Bernard Wiley — Acting Executive Director 617/427-6333 Frank Bispham (OMBE Representative) 617/223-2381 Chicago Chicago Economic Development Corporation (CEDC) 162 North State Street, Suite 600 Chicago, Illinois 60601 231/368-0011 Garland Guice, Executive Director Bennett Johnson, Jr. (OMBE Representative) 312/353-4460 NEDA 537 Dearborn South Chicago, Illinois 60605 312/939-2607 Gilbert M. Vega, Regional Vice President Cincinnati Determined Young Men 3880 Reading Road Cincinnati, Ohio 45229 513/221-0180 Merven Stenson, Executive Director Cleveland Greater Cleveland Growth Corporation 690 Union Commerce Building Cleveland, Ohio 44115 216/241-4313 Melvin Roebuck, Executive Director Minority Economic Developers Council (MEDCO) 10518 Superior Avenue Cleveland, Ohio 44106 Armond L. Robinson, Administrator Dallas Dallas Alliance for Minority Enterprise (DAME) 7200 North Stemmons Freeway Suite 1006, UCC Tower Dallas, Texas 75222 214/637-5170 Walter Durham, Executive Director Denver Colorado Economic Development Association (CEDA) 1721 Lawrence Street Denver, Colorado 80202 303/255-0421 Edward Lucero, Executive Director 20 Detroit Inner City Business Improvement Forum (ICBIF) 6072 - 14th Street Detroit, Michigan 48208 313/361-5150 Walter McMurtry, President El Paso NEDA First National Building Suite 10B 109 North Oregon Street El Paso, Texas 79901 915/533-7423 Jose Manuel Villalobos, Regional Vice President Indianapolis Indianapolis Urban League 445 North Pennsylvania Street Indianapolis, Indiana 46204 317/639-5391 or 253-5418 Sam Jones, Executive Director Kansas City Black Economic Union (BEU) 2502 Prospect Kansas City, Missouri 64127 816/924-6181 Curtis McClinton, President NEDA 703 North 8th Street Kansas City, Kansas 66100 913/342-6663 Richardo Villalobos, Regional Vice President Los Angeles South Central Improvement Action Committee (IMPAC) 8557 South Broadway Los Angeles, California 90003 213/751-1155 Louis Wilson, Director The East Los Angeles Community Union (TELACU) 1330 South Atlantic Boulevard Los Angeles, California 90022 213/268-6745 Claude Martinez, Director of Development NEDA 5218 East Beverly Boulevard Los Angeles, California 90022 213/724-6484 Silvestre Gonzales, Regional Vice President Jack Wilburn, Coordinator 213/824-7691 Powell McDaniel (OMBE Representative) 213/824-7715 Joseph Luna (OMBE Representative) 213/824-7715 Memphis Memphis Business League (NBL) 384 E. H. Crump Boulevard Memphis, Tennessee 39126 901/574-3213 Leonard J. Small, Sr., Project Director Harold Jones (OMBE Representative) 901/534-3216 Miami NEDA 8551 Coral Way Suite 307 Miami, Florida 33155 305/221-5531 Dr. Antonio Machado, Regional Vice President Newark MEDIC Enterprises, Inc. 287 Washington Street Newark, New Jersey 07102 201/642-8054 New Haven Greater New Haven Business and Professional Men's Association 226 Dixwell Avenue New Haven, Connecticut 06511 Gerald S. Clark, Executive Director 203/562-3819 New York Inc. Puerto Rican Forum, 156 Fifth Avenue New York, New York 10010 212/691-4150 Hector I. Vasquez, Executive Director 21 New York (continued) Richmond Capital Formation, Inc. 215 W. 125th Street, Room 313 New York, New York 10027 Hirom C. Cintron, Director, Harlem Office 212/222-9650 Brooklyn Local Economic Development Corporation (BLEDCO) 1519 Fulton Street Brooklyn, New York 11216 212/493-1663 Preston Lambert, Executive Director NEDA 19 West 44th Street Room 407 New York, New York 10036 212/687-1128 David j. Burgos, Regional Vice President Philadelphia Entrepreneurial Development Training Center 1501 North Broad Street Philadelphia, Pennsylvania 215/763-3300 Alphonso Jackson, Director Phoenix NEDA Amerco Towers 2721 North Central Suite 727 South Phoenix, Arizona 85004 602/263-8070 Joseph Sotelo, Regional Vice President Pittsburgh Business & Job Development Corporation (BJDC) 7800 Susquehanna Street Pittsburgh, Pennsylvania 15208 412/243-5600 Forrest L. Parr, President Marian Diggs (OMBE Representative) 412/644-5529 National Business League 700 North Second Street Richmond, Virginia 23219 703/649-7473 Allen Roots, Acting Project Director San Antonio NEDA 1222 North Main Street Kallison Tower, Room 422 San Antonio, Texas 78233 512/224-1618 Cipriano F. Guerra, Jr. Regional Vice President Jesse Rios (OMBE Representative) 512/225-5511 San Francisco Plan of Action for Challenging Times (PACT) 635 Divisadero Street San Francisco, California 94117 415/922-7150 Everett Brandon, President Seattle United Inner City Development Foundation 1106 East Spring St. - Xavier Hall Seattle, Washington 98122 206/626-5440 Wilson Culley, Executive Director Washington, D. C. Mayor's Economic Development Committee (MEDCO) 1717 Massachusetts Ave., N. W., Room 704 Washington, D. C. 20036 202/667-6480 Michael D. Wallach, Director, Business Assistance Center Curley King (OMBE Representative) 202/967-5051 Howard University's Small Business Guidance & Development Center Post Office Box 553 Washington, D. C. 20001 202/636-7447 Dr. Wilford White, Director 22 Profiles of urban businesses are for sale at listed prices by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402. 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