Business Case Studies #4: World Mini Golf Domination

What's up, everyone? This is Alex Lieberman, co-founder and executive chairman of Morning Brew. Welcome back to Founders Journal, my personal audio diary, where I give you, the business builder, the tools you need to think better in order to build better, whether that's building a business, a team, or a new product. Today I am talking about taking over the world one mini golf course at a time. I'm not joking. Let's hop into it. So I believe that I've talked about this on a previous episode, but shit is getting real now. I have formed a little SWAT team with 3 of my friends from college, and we are on the hunt to take over mini golf. And so what I want to do on this episode is I want to explain why mini golf, of every possible business that we could be building or buying, why mini golf, what we think the opportunity is once we buy a course. And also for shits and giggles, I'm going to cold call a course At the end of this episode, so maybe you end up seeing me get rejected by a mini golf owner. So stay tuned to the end. Why mini golf? Well, when my friends and I were talking about buying a quote unquote boring business, there are a few things we were thinking about. One, what is a business that is very fragmented, meaning you know is owned mostly by mom and pops? There isn't a national chain. What is a business that generally does well both in up markets as well as down markets? And also just what's a business? Business that we would enjoy being aligned with at all. So, for example, you know, we didn't want to own liquor stores because while we drink alcohol, we didn't actually want to be in the business of selling alcohol. So that's why we started thinking, okay, mini golf courses, this could be an interesting opportunity. Then we did some digging, and I'm going to share some of the learnings from the research we did a few months ago as it relates to mini golf as a business. Very simply, mini golf courses are absolute cash machines. They require some upfront investment if you're going to build one, but they're very low in terms of personnel you need to run a mini golf course. It can be anywhere from 1 to 3 people. Usually it's a relatively junior person, like a college person. There isn't a high cost of upkeep. There isn't a lot of fixed costs of machinery. Really, your cost is the cost of the equipment. The cost of maintaining the course, and then the cost of your people. As we've looked at courses, we've probably looked at the financials of, you know, 6 or 7 mini golf courses. At the low end of mini golf, usually a course can do $100,000 in a year. High end, there are courses who do as much as $1 million a year. And just to give you a sense of a course that I was looking at over the last few days, in the last 5 years, this course, which I don't want to identify, has done anywhere between $800,000 to $985,000 in revenue, which, to be totally frank with you, is far more than I thought a mini golf course that's charging between $5 and $15 a head would do in a year. The margins on that business, an $800,000 to $985,000 business, is anywhere between 19% to 25% margins. So good, not great margins, right? Just to give you context, Morning Brew's margins, let's call it, are in the 30% to 40% range. A software company's margins could be anywhere from 60% to 80%. But again, typically Physical businesses with physical locations are going to have lower margins. Now, what was interesting about this course that I just mentioned to you? There's still some information I need to find out because as you start going down the wild rabbit hole of mini golf, is most of these courses are not just mini golf; they include either batting cages, they include bumper cars, they include something else. They form basically these entertainment complexes, and in the financials of the course I was looking at, it doesn't break it out how much comes from mini golf versus. Other things. So that is definitely a question I want to answer because it'll help determine, my friends and I, are we going to go for pure play mini golf or something that has adjacent entertainment for people who don't enjoy the sport? 2 other things to talk about with the financials. Biggest cost, at least for this course, is personnel. The cost of people on a monthly basis is 45% of sales, meaning if your course on a weekly basis or sorry, on a monthly basis is doing $10,000, $4,500 of that is being allocated to people, and then 15% is going into marketing. I don't know how this course is spending on marketing, whether it's physical ads, whether it's paid local Facebook ads, but 15% of their revenue is going into marketing. And so again, on $10,000, that is $1,500 of your $10,000 going into marketing. Why else is mini golf interesting to us? I mentioned before, but mini golf is recession resistant. People in a down market want an escape and want entertainment just like they want it in an up market. But obviously you have less money to spend on entertainment in a down market as in an up market. And so something like mini golf where it is $5 or $10 or $15, it is a palatable amount of money to spend on having your family have a low-key and enjoyable Saturday night where you're not spending a ton. Other sports that to me are reminiscent of being recession resistant are things like bowling or going to the movies, etc. The next thing I want to talk about is it's fragmented. Most mini golf courses are owned by mom and pops, and there are a few traditional mini golf brands, mainly one that has rolled up other courses. It has created a brand around it and actually has franchisees who own like each of the individual locations. That's a company called Monster Mini Golf. It's based out of Las Vegas. Have owners in basically all of its locations, and it collects a royalty from those owners. But other than that, everything is owned by, you know, let's call it middle-aged families that have been in the business of mini golf for 10 to 20 years, and they're just cash flow machines for these people. The interesting thing is we are not clearly the only one to think about this because there are 2 or 3 mini golf startups that have raised a boatload of money over the last 5 to 10 years. One called Swingers, which started in the UK, Already launched a location in D.C., is about to launch a location in New York, raised $20 million to fuel their expansion. There's another one called Pop Stroke that partnered with Tiger Woods, is at 3 locations and is going to go to 7. They're trying to create kind of this more immersive experience like the Topgolf for mini golf. And so it's something that's definitely on the minds of other entrepreneurs. So what's our idea? This is kind of like why we're looking into it. How do I and my 3 bozo friends think we can do this better? Than the mom and pops running this. First is just from my and my friend's business experiences. We think we can better operationalize these courses. We just think we can better and more efficiently run them to keep costs lower. We also think that we can drive more demand through paid marketing. Given my experience with paid marketing and Morning Brew, we think we can drive foot traffic in a more efficient way for every dollar we spend than these course owners. On top of that, we think we can get creative to drive new demand. We think we can maybe buy cheap forms of entertainment— darts, spikeball, cornhole— to drive families who aren't necessarily all interested in mini golf. We also think we can start tournaments and leagues to get businesses or groups of friends to be repeat customers at these locations. And we also think if we buy many locations and we roll them up, whether or not they are all branded under the same name, there's cost savings to be had. From what I've heard, maintenance and basically repair of the course is going to be a large expense in mini golf over time. And so if you own a lot of courses, you have more purchasing power to negotiate down prices on maintenance and these other things. So those are some of the things that I'm thinking about with my friends to talk about what stage we're at. Basically, we're in the, the sponge phase. We use this term at Morning Brew, the sponge phase, which is like you started the business and for the first 2 weeks you are just sponging up all the information about the business. That is what we're doing with mini golf. And so the way we're sponging this information, because mini golf courses are privately owned and fragmented, is literally pounding the pavement, talking to as many course owners as possible, seeing if they're open to selling, having conversations with them to understand what does a strong mini golf business look like? What does a weak mini golf business look like? How important is having other entertainment that isn't just golf? How important is location? And so basically, my friends, my 3 friends and I have each been assigned 2 states in the US, and we are each focusing on those 2 states. calling as many courses in those states to get conversations going. I was assigned New Jersey and Florida, so we've basically done half seasonal, half non-seasonal courses. The seasonal courses, the reason we picked them is we thought maybe it would be helpful to be within driving distance of our first course so that we can help manage it if we have issues in the beginning. Obviously, non-seasonal courses we picked because in a perfect world you'd be running your business year round and wouldn't be able to or wouldn't have to shut it down for winter. I started calling courses yesterday in New Jersey, got through to one. A message was left for the owner because he wasn't in, but the person behind the desk was in. 3 other courses I called, none of them answered. And what I found out is most of the New Jersey mini golf courses are still closed for the season. Again, going into seasonality, they probably don't open to April. So I've now pivoted my strategy to only calling Florida or non-seasonal courses until the seasonal states Open up their courses. So as I promised in the beginning, and I want to keep my word, I want to call a course in Florida right now. I have no idea if they're going to have— if they're going to answer. I have no idea if they're going to tell me to go fuck myself. I want to take you through the pitch that I'm literally doing for mini golf owners. But as a heads up, legally, I can only share my side of the phone call, not the voice of the person that I'm talking to. But you're about to hear a real cold call that I'm making to a Florida mini golf course. The first one I landed on was this place in Bradenton Beach, Florida. Has 403 Google reviews, 4.6 out of 5 stars on TripAdvisor. That's pretty impressive. So I'm going to give them a call and we'll see if anyone answers or what they say. Hey, is Jake in? Would you mind leaving a message for him? It's a very strange request, but I figured he'd be the best person to talk to. So my name is Alex Lieberman. I'm actually up in New Jersey. My, my grandparents live down near Bradenton Beach. I recently Sold my company, and I'm actually looking to get involved in a new business. And as crazy as it sounds, for the longest time I've been looking to buy a mini golf course because it's like the sport that I grew up playing and absolutely loving. And so I wanted to see if Jake would be open to selling at the right price and just see if he'd be open to a conversation. Okay, well, it's not a no. So spoke to what sounded like the manager at the office. So stay tuned. And if I do get a callback, I'll keep you guys updated and include it on an upcoming episode. But thank you so much for listening to this Founder's Journal. Thought you'd enjoy hearing the shenanigans that my friends and I are going through to take over the world one mini golf course at a time. And with that, I'd love to hear from you. What boring business that isn't mini golf would you love for me to break down in the future and take you through the numbers behind it, why it may or may not be a good business to buy? Just shoot me an email at alex@morningbrew.com and I'll get back to you with thoughts on it and maybe include it in an upcoming episode. Thanks so much for listening and I'll catch you next episode.