In this on‑site video, Michael, a self‑identified business nerd, walks viewers through the rapid ascent and recent decline of Topgolf. He begins by noting a 10% YoY sales drop at a San Antonio location and then traces the company’s origins to a 2000 UK venture that introduced technology‑enhanced driving ranges. Private‑equity backing enabled a capital‑intensive rollout in the United States, with each venue requiring 10+ acres and $15‑40 million to build. By 2019 Topgolf was growing 30% annually, generating $1.1 billion in revenue, largely by appealing to millennials seeking a social, low‑skill golf experience. In 2020 Callaway Golf acquired Topgolf, rebranding the combined entity and financing an aggressive expansion of roughly ten new sites per year through heavy borrowing. The post‑COVID boom initially validated the model, but as pandemic‑driven habits normalized, consumer spending fell, the $36 average ticket became a price barrier, and the novelty faded. Simultaneously, macro‑economic pressures—persistent inflation, stagnant wages, and sharply higher interest rates—strained cash flow, especially given the debt‑laden balance sheet. Stock performance suffered, and management’s response included over‑pricing, rapid over‑expansion, and operational missteps. Compounding these issues, low‑cost competitors began deploying the same digital‑golf technology in strip‑center locations for a fraction of the capital outlay, eroding Topgolf’s competitive moat. Facing unsustainable debt, the company announced a split, separating the Topgolf entertainment arm from Callaway’s equipment business to create a debt‑free public entity. Michael concludes with a set of strategic lessons: reliance on a fad is risky, capital‑intensive models are vulnerable to macro shifts, and businesses must adapt quickly to changing consumer behavior and emerging competition.
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So I'm here at Topgolf in San Antonio, and believe it or not, despite the parking lot here being pretty busy, uh, this place is in trouble. And in this video, I'm going to talk about how all this came together, why Topgolf stores are suddenly struggling. Sales are down 10% year over year, uh, in their established markets. And, uh, and the way to explain all this is to go back and tell you the story of how Topgolf came together and then the mistakes that, well, frankly got them into trouble. And also, usually in these videos I go in and I actually like experience the place and use that as part of the story. I'm not gonna do that today. I am gonna go in, but I'm not gonna be a customer. And I'll tell you why towards the end of the video. It may surprise you. My name's Michael. I'm a business nerd. I have gotten into and I love making videos explaining and teaching business lessons using real world examples like Topgolf behind me. If you would do me a huge favor, I'm taking time away and relaxing by doing this, but also time I could spend doing other stuff, do me a favor, interact with the video, leave me a comment, uh, it will make me feel better about myself. Like, subscribe, any of the above, just pick one. So to explain the situation with Topgolf currently, we kind of got to go back in history a little bit. Um, believe it or not, Topgolf was started around 2000, and not in the United States where it's been pretty popular. It was actually started in the UK by two brothers who were tired of kind of the lame experience they would get in UK like England driving ranges. So they wanted to bring technology to the driving range experience. So they started Topgolf in the UK, and eventually that got noticed by some folks in the US, particularly some big money folks. And that's where a guy named Eric Anderson, who's a private equity guy, came in and brought his firm to put money behind the initial kind of growth of the Topgolf locations. And look, something like this facility behind me, it requires a lot of money to get going. So he was pretty much the right guy to get it started. Uh, there, when When you set up one of these things, you're going to go buy 10+ acres of land. This is 10 acres in a really nice area of San Antonio. We're right at the intersection of two interstates and a pretty busy end of town, pretty high-dollar corner of town as well. So put all that together, plus the buildings you see here and all the fences and, well, just the machinery and the electronics and the kitchens and everything, like, you're looking anywhere from $15 to $40 million to build one of these Topgolfs. Like, it's a lot of capital. But as time went on, Topgolf grew like crazy. People loved it. Uh, and by 2019, the chain itself was growing 30% year over year, just incredible growth at scale. And by 2019, the chain brought in $1.1 billion in revenue. And it did that pretty much because it appealed to people who weren't kind of standard golfers. There were people like me who didn't even really like golf, uh, but were looking for a unique activity to, well, basically go out with friends and family and go do something cool. And it really came at the right time. You know, Topgolf came along when millennials were starting to get money and millennials love the activity of going out as a group, buying drinks, maybe having a little bit of competition, but also cooperating, like just kind of perfect. And that's when the golf brand Callaway, famous for making really high-end golf clubs and clothing and all that kind of stuff, they came along in 2020 and the idea was to buy Topgolf and merge it with their existing business, creating kind of a golf well, basically powerhouse. The idea being that more people who were noobs at golf and interested in it would come to places like Topgolf and they would potentially buy the kind of gear and equipment and stuff that Callaway had grown up and gotten to be a big business selling on its own. And Callaway went all in on this idea. They were trying to create basically a whole new type of golf company that would be an experience and an equipment company. And they went in on it so much that they renamed the whole company to have Topgolf as part of the name of the company. And this new company dumped, well, hundreds of millions of dollars and borrowed it to get the money in order to build new facilities like the Topgolf behind me. They opened 10 locations a year for the years 2019 through 2023. Just insane levels of capital commitment and insane levels of growth. And I talked earlier about how expensive it is to build one of these locations. Well, the good news is they'll do $10, $12, $15, $18, even $20 million a year in revenue to hopefully get a return on investment for all that capital. And post-COVID, people were hungry for kind of in-real-life things that they could do. And look, I've been to these places, and Topgolf in particular, during the post-COVID era. I liked it. It was fresh air. I didn't have to worry about somebody sneeze getting me sick. You know, it totally worked. And things went great with the merger. Uh, eventually in 2023, the Topgolf brand as part of Callaway got to 40% of their total revenue. Just kind of crazy growth and a crazy percentage on what they were trying to do. But then 2023 came and that's when, well, things all changed. You see, post-COVID, there were a lot of businesses, including this one, that benefited from people's change in attitudes. And a lot of us thought at the time that people's desires and their behaviors would change permanently. Well, it turns out they didn't. And the normalization, as the management called it, of what was happening at Topgolf, well, it came pretty quickly. And a lot of the tailwinds that Topgolf had seen, well, they suddenly turned into headwinds. Number one being this behavior of consumers. But a second problem came post-COVID, which was the government stopped printing money. And when the government stopped printing money, inflation was still a problem. And also people's wages weren't going up. And if you go to a Topgolf, and I've experienced this too, the average spend per person is $36. In an environment where people's salaries aren't keeping up, to what the expenses are out in the marketplace, that's a lot of money to ask people to spend. And I remember scheduling a corporate event where we went post a board meeting to do Topgolf. They wanted $650 just to reserve the little slot at 2:00 PM on a Tuesday. I was like, whoa, this is insane how expensive this is. And so I promised to tell you why I wasn't going in, which is today to be a customer, which is this morning. It's a Saturday afternoon. That's why they're kind of busy. I tried to get my family to come do Topgolf. Nobody wanted to come. They were like, oh, it's kind of boring. We did it before. We're not interested in doing it again. And really that showed kind of the third problem of Topgolf and the lesson, which is sometimes you can have something that's just a fad and then it normalizes over time. People get tired of it and they don't want to come back. And the trick for something like Topgolf has been, well, how do we get these people that tried us to come back again rather than it to be basically one and done? Oh, and they had one more problem post-COVID. Which was that interest rates have gone up like crazy. Now, remember I told you before that all these developments, well, they were built with borrowed money, meaning they went and borrowed money and they're having to pay interest on that money that they borrowed and turned into, well, fences, dirt buildings, and golf clubs. And when you have borrowed money like that, well, it starts to slow down— slow down the amount of free cash that you're generating because you're having to pay more in interest. And that's precisely what hit the new Topgolf Corporation, Topgolf Callaway. And in their case, the stock went down nearly 40% in the early 2020s. And in the end, those are the factors that were once kind of tailwinds for the combined Topgolf Callaway Corporation that have all suddenly turned into big headwinds. Changing consumer habits, people thinking it was kind of a fad, and inflation and high prices. And you combine that with some management missteps like charging people a lot of money, not executing well, and growing too fast. Well, you've got a recipe for disaster. And basically the only thing that's been keeping revenue growing over the past few years at Topgolf Callaway has been the fact they keep investing more money. In building new stores. Well, the bad news is you can't keep doing that forever. So with lots of pressure, management is kind of, well, I would say almost panicking. They're splitting up the company. They're recognizing that the merger really was a mistake and trying to see if they can save both companies. Um, you know, I think they will. Golf is still very popular. But in the end, there's a lot of lessons here. You can't count on the public to continue shopping on a fad, and you can't count on the world not to change underneath you. And here are some huge lessons that were learned. Well, and here you can see a $15 million one right behind me where they built this one in San Antonio. Oh, and I forgot one more thing. Part of what made Topgolf special was for a while they were the only people with these kind of digital golf kind of scenarios and where you'd have these machines tracking your shots and stuff like that. And now you're seeing lots of people who are basically taking that kind of equipment and putting it even in indoor driving ranges. And when you're in a strip center, you don't have to spend $15 million to build a big facility like this. Basically, you could just put it into any kind of rented spot and the capital requirements are a lot lower. And in fact, I have a friend who's doing it in Florida. He went and he bought 3 of those machines. He put them in a strip center. He maybe only spent like $75,000 or $100,000 to do it, not $20 million like this one behind me. In the end, Topgolf will probably be okay. They're coming as a new public company spread out from split up from the old Callaway and they're starting out with like no debt. So hopefully that will be okay for the chain going forward. But there's a ton of lessons and how this place basically boomed, turned into a bust, and now is trying to save itself. So let me know what you think in the comments below. Is this what you would have done, or would you have done something differently? And what do you think is the future of Topgolf? We'll catch you next time, and yeah, we'll see you later.
