Are Indoor Playground Businesses Profitable?
If you’re considering opening an indoor playground, learn which factors will be most important in determining whether or not your indoor playground will be profitable!
This past week I learned that another play space in my area was closing its doors. In a letter posted to social media, the owner wrote, “Sadly, the business has not proven to be financially sustainable.” These words have been in my mind since I read them.
Being so close in proximity to my own business, I couldn’t help but enter into self-reflection and wonder, “Was it the business model that was not financially sustainable, or that particular business?” On the verge of opening our second location in the same town, this was an especially important question for me to answer.
After doing a deeper dive into our own business plan, operating expenses, and revenues, it was easy for me to see where an indoor playground business can go awry. There are specific areas Climbing Vines Cafe & Play hinges it’s success on, and without them, we would surely have posted the same notice on our website during our first year of operation.
This is NOT to say we did everything right when we opened our business. In fact, had we made a few simple tweaks from the beginning, we would be in a much more profitable position today. We are very lucky in that we did enough research and had enough experience, and simply made MORE “right” decisions than “wrong” decisions. This allowed us to be able to pivot and recover nicely enough (though we were sure to make corrections for our second location).
After analyzing dozens of indoor playground businesses, I have found 3 factors to be most paramount in determining the success of this type of business.
1) The Lease
You can read more about the pitfalls that present themselves in a retail lease here, but I want to specifically draw attention to the cost of the lease and the hidden expenses that can arise if you aren’t careful in negotiating your lease. High expenses are the NUMBER ONE reason retail businesses fail, so don’t skimp on the details here.
When I sit down with other indoor playground business owners, the cost of rent is the thing they are most concerned about in their business. However, there are a few easy ways to ensure you don’t sign a lease that’s too expensive for you to manage. Since rent and payroll will likely be your biggest business expenses and the largest checks you write each month, you must first consider the price of street-visibility and how that factors into the cost of your rent.
Many owners feel they need to be on a main road in order to get the word out about their business. However, this is NOT the case. The rent on main roads comes at a high premium. (I know, I’m paying for a premium location now!) This visibility isn’t necessary for a healthy business. You see, parents of small children don’t typically drive by a facility and decide to drop in. They are likely asking friends, browsing social media, or searching on Google for things to do in their area, and plan their trip accordingly. You will want to spend your money getting more visibility online because that is what will improve your traffic and your sales.
Other expenses related to your building and its maintenance can add up quickly as well, such as lawn care and snow removal. Be sure, if you are responsible for this maintenance, that you can afford it. For a full list of questions to discuss with your lawyer before signing a lease, click here.
2) The Owner’s Unique Experience
Most potential play cafe owners that come to me for guidance have experience either teaching or working with children. While this is a wonderful background to have in this business, it means that the owner is likely lacking in other areas of expertise needed to run a business such as legal services, marketing, accounting, or website development and maintenance.
These areas cannot be ignored, and attempting to DIY them can cause very expensive mistakes that may lead to tax penalties, lost revenue from technical outages, or misspending on advertising that isn’t driving sales.
If you do not have a business background, I encourage you to hire these services out. As a business owner, it is not realistic to wear every hat and accomplish all of this yourself. This will lead to those expensive mistakes already mentioned, and can also lead to extreme burnout for you as a business owner.
Get quotes from local professionals in your area and be sure to factor those costs into your business plan.
If you do have business experience but lack experience working with children, you too must price out the cost to hire someone. While these skills will be less expensive to outsource than legal services, specialized teachers you seek to lead classes will likely (and rightfully so) demand a premium price for their time. Having all of this information ahead of time will allow you to more accurately predict your costs and set your revenue goals around these expenses so you don’t find yourself under a mountain of piling bills.
Remember to also examine the season of life you’re in when opening this business. For example, if you have young children that nap, children that have activities and appointments you must be present at, or if you plan on adding any new additions to your family, this will impact your payroll needs. Be honest with yourself about how often you can realistically work, and calculate the cost of filling in the rest of those hours.
3) The Interior Design Choices
The interior design of your play area will play a crucial role in your businesses’ success. I recommend hiring a skilled local architect that specializes in entertainment or retail space. Someone who specializes in office space, for example, won’t be able to help you design a check-in process that will boost your sales and streamline your customer’s experience.
Even if you hire an architect, they will only be able to get you so far in your planning process. Once you come up with a basic layout, largely be determined on your lease and whether it’s build-to-suit or an existing space you must adapt to, you’ll want to keep your customer’s experience and your specific business model in mind when finalizing the details.
Things like adding a private room that can be used for parties and classes, incorporating retail space, being smart about how you handle storage, and how well you build your space around your ideal customers' needs will all play an important role in your monthly revenue, and therefore, will impact how well you’re able to keep up with your payroll and expenses. You can get my best tips for designing the interior of your play space here.
There is no clear answer to the question, “Are Indoor Playgrounds Profitable?” They certainly can be under the correct leadership and circumstances, but it is very easy to make a few simple yet devastating mistakes that can prevent you from ever breaking even. From my observations as a play cafe owner and business advisor, these 3 factors have played the largest role in the closing of many local play places.
I truly, now more than ever, believe wholeheartedly in “community over competition” and am starting to share my secrets 3 years in to prevent the heartache that closing a business can bring to a family.
Join Michele (virtually!) Thursday, July 25th for a Workshop all about creating a profitable business plan for your indoor playground business! Register here- it’s almost sold out!
Don’t forget to download our FREE online guide: Opening an Indoor Playground from Daydream to Opening Day!