WEBVTT - Sky Zone CEO David Hoffman Talks Summer Economy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Dave Hoffman would certainly

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<v Speaker 1>say that's those solution. He's the CEO of the indoor

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<v Speaker 1>trampoline park Skyzone, hundreds of locations around the US, and

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<v Speaker 1>they are growing. I'm building more. He joins us from Dallas. Dave,

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<v Speaker 1>good to have you on the program. You've got a

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<v Speaker 1>great background includes Duncan McDonald's and Moore. You have a

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<v Speaker 1>history and franchise business as well. For those who haven't

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<v Speaker 1>been to a sky Zone, describe the experience and who

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<v Speaker 1>it's for.

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<v Speaker 2>Yeah, and look, we are the leader inactive and social play,

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<v Speaker 2>and like you said, we've got actually nearly three hundred

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<v Speaker 2>locations we're focused on and I don't know if people

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<v Speaker 2>know this, but we're focused on kids six to fourteen

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<v Speaker 2>in a particular park. If you can kind of imagine this,

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<v Speaker 2>just think they're forty thousand square foot boxes, so quite large.

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<v Speaker 2>We'll have twenty to twenty five attractions in that indoor park.

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<v Speaker 2>And like you said, Tim One, we're known for tramp

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<v Speaker 2>We've got everything in there now, from dodgeball courts which

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<v Speaker 2>are amazing, ninja courses, multi story megaslides, basketball and soccer courts,

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<v Speaker 2>zip lines, you name it. We've got a lot going

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<v Speaker 2>on in there. And really our thesis here or what

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<v Speaker 2>we're trying to do is is we're all about active

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<v Speaker 2>and social play and we feel both of those are

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<v Speaker 2>important social in today's environment, especially in a post COVID

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<v Speaker 2>world and everything that's going on with technology. We want

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<v Speaker 2>to be the place where kids can come build confidence,

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<v Speaker 2>burn off energy with their friends, and so everything we're

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<v Speaker 2>doing is about the power of play.

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<v Speaker 3>Well, Dave, I can imagine that this must be one

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<v Speaker 3>of the biggest seasons for you all, being that it's

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<v Speaker 3>summer vacation season for all the students, all the kids.

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<v Speaker 3>What's it been like for you all as of late.

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<v Speaker 2>Yeah, I think you know, as an operator for thirty

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<v Speaker 2>plus years, as you mentioned upfront, I think you're always

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<v Speaker 2>looking for at tension in the marketplace and how you

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<v Speaker 2>can solve that tension for the consumer. And so look,

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<v Speaker 2>nothing new, Just would you guys continue to report on here.

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<v Speaker 2>The tension for our offering would be, you know, the

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<v Speaker 2>consumer's wallet is under pressure. Yes, some prices have come down,

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<v Speaker 2>but the family wallet is certainly under pressure, and so

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<v Speaker 2>how do you make it easier for the families to

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<v Speaker 2>use you and give the you know, their son or

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<v Speaker 2>daughter child this summer that they deserved. And so that's

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<v Speaker 2>the tension that we've been trying to solve. We think

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<v Speaker 2>we came up with something that works for us, and

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<v Speaker 2>it's going to be an ongoing strategy for us. But

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<v Speaker 2>this summer we call it the you know Summer of

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<v Speaker 2>Sky Zone. It's anchored by our seasonal Pass. And and

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<v Speaker 2>when I talk about the seasonal Pass, it's you know,

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<v Speaker 2>that's one type of price point that we have and

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<v Speaker 2>to your previous guests, we want to be the leaders

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<v Speaker 2>and affordability and accessibility. And again that's if you if

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<v Speaker 2>you draw that line in the sand, which we have,

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<v Speaker 2>then there's other things that you can go down. But

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<v Speaker 2>this this summer Pass essentially it started in April, but

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<v Speaker 2>you can still buy it now. And if just think,

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<v Speaker 2>if you buy it now, you pay one month, you

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<v Speaker 2>get a second month free until the end into the

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<v Speaker 2>end of August. And so we think that's very compelling

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<v Speaker 2>for the family wallet. It's selling about eighty percent over

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<v Speaker 2>last year, So I think that speaks to the tension

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<v Speaker 2>again that's in the marketplace. And then the offer and

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<v Speaker 2>how will this offer has been received, but it's not

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<v Speaker 2>the only thing that we try to do there. We've

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<v Speaker 2>got our obviously, our monthly memberships if you're jumping two

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<v Speaker 2>times or more and just think that's a dollar a day,

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<v Speaker 2>which we think is a great investment in your child

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<v Speaker 2>for a dollar a day. The annual past, and then

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<v Speaker 2>we pulse in things like this weekend. I'm really excited.

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<v Speaker 2>We're doing a clever, cute little play on our two

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<v Speaker 2>hundred and fiftieth birthday and it's red, white and Bounce.

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<v Speaker 2>We've got a price point dedicated to seventeen seventy six,

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<v Speaker 2>so it's seventeen dollars and seventy six cents, which for

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<v Speaker 2>a two hour jump ticket, a one time jump ticket,

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<v Speaker 2>that's probably one of the best price points in the industry.

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<v Speaker 2>And we're giving away a bunch of choch keys and

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<v Speaker 2>food and things like that at the same time. And

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<v Speaker 2>you know, as you move through July, we've always got

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<v Speaker 2>these things where if you don't want to be a

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<v Speaker 2>member and you just want to come one time. World

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<v Speaker 2>Jump Days coming up July twentieth. You knew Jump Day

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<v Speaker 2>just like National Donut Day back in the day, but

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<v Speaker 2>World Jump Day is something we're going to do and

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<v Speaker 2>takeover of and so we're always on our calendar. We're

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<v Speaker 2>always trying to pulse in things, so people will try us.

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<v Speaker 2>I think when they try us, they like us, they

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<v Speaker 2>love us, and they come back.

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<v Speaker 1>You were you know a thing or two about donuts

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<v Speaker 1>because you were president of Duncan US from twenty sixteen

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<v Speaker 1>to twenty eighteen, and you've spent You were also CEO

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<v Speaker 1>at Duncan from twenty eighteen until it was sold to Inspire,

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<v Speaker 1>so you know about donut day. Let's get back to

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<v Speaker 1>Trampoline's though, and about I want to talk franchising. Here

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<v Speaker 1>close to three hundred locations in more than forty states

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<v Speaker 1>in the US. Are are any of those owned and

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<v Speaker 1>operated by skyz own or are they all franchise owned?

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<v Speaker 2>No, we're fifty percent company owned, fifty percent franchise. I

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<v Speaker 2>tend to move towards tipping that mix more into franchise.

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<v Speaker 2>I've run both in my McDonald's and Duncan days, as

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<v Speaker 2>you know. But I am a believer in the franchise

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<v Speaker 2>system and working with small business owners. And look, I'm

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<v Speaker 2>really proud. This year we were named one of the

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<v Speaker 2>top ten investments by franchise time. So something you know

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<v Speaker 2>is really resonating with our small business owners, and I

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<v Speaker 2>think they do an amazing job on a company this

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<v Speaker 2>size get into those communities and serving those communities really well.

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<v Speaker 1>So who are your who's the typical franchise franchise e?

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<v Speaker 1>My dad was a franchise e of a different company,

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<v Speaker 1>So I know how this works. You know, you have

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<v Speaker 1>the support of a huge brand, you own an operator yourself.

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<v Speaker 1>Then let's say five ten percent of the top line

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<v Speaker 1>ends up going back to the parent company. So just

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<v Speaker 1>give me the profile of who the franchise e is,

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<v Speaker 1>where the opportunities are geographically, and this seems it seems

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<v Speaker 1>like something that is capital intensive in terms of the

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<v Speaker 1>size of building and the actual equipment that you need.

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<v Speaker 1>So how do you support franchisees with that?

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<v Speaker 2>Yeah, it's a lot in their tim great question. You know,

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<v Speaker 2>we've got a lot of single park franchisees in some

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<v Speaker 2>of the smaller cities, so this isn't about opening up

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<v Speaker 2>and I'm very sensitive to not building on top of franchisees.

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<v Speaker 2>So if you run an amazing single park in your community,

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<v Speaker 2>I want that I want that franchisee to be just

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<v Speaker 2>as successful as somebody that has eight to ten. I

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<v Speaker 2>think our largest franchise e is probably somewhere in the

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<v Speaker 2>fifteen to twenty range right now. So it's a wide spectrum.

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<v Speaker 2>And you know, look at these are people that have

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<v Speaker 2>been in multi unit four wall in the past, and

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<v Speaker 2>they identified this opportunity in terms of sort of the

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<v Speaker 2>uniqueness of trampoline parks, and a big part of it

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<v Speaker 2>is their belief and this is in total sincerity, their

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<v Speaker 2>belief in active and social play, and so they really

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<v Speaker 2>were running other businesses and they like this offering. The

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<v Speaker 2>margins are incredible, so of course high fixed costs, as

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<v Speaker 2>you said, Tim, so you have a high fixed cost build,

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<v Speaker 2>but are you know our margin profile profiles out for

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<v Speaker 2>a wall in the high thirties, low forty percent range.

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<v Speaker 2>So again initial big investment because we take down some

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<v Speaker 2>of these decayed, bankrupt big boxes. They're all snowflakes. You

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<v Speaker 2>have to convert them into a sky zone. So it's

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<v Speaker 2>a little bit like Tetris where you're going in and

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<v Speaker 2>laying out these different attractions. You never know what you're

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<v Speaker 2>gonna find behind the walls. So there's a lot it's

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<v Speaker 2>not as cookie cunter as what I've done in the past,

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<v Speaker 2>and so our teams, our development teams and franchises do

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<v Speaker 2>an amazing job of taking these decayed bones in some

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<v Speaker 2>of these communities and repurposing them. And you know, we

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<v Speaker 2>could go through the list of some of these bankrupt

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<v Speaker 2>big boxes, but I love what we're doing. And this

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<v Speaker 2>is a story that never really quite gets out there,

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<v Speaker 2>but how we're repurposing and I think improving the face

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<v Speaker 2>of some of these decayed bones that are in these

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<v Speaker 2>community and making them approachable again and accessible for those

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<v Speaker 2>those particular communities.

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<v Speaker 3>Well, Dave, we talked a bit about the deals that

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<v Speaker 3>you all are offering at sky Zone. I'm curious as

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<v Speaker 3>we continue to talk about franchise ease, what have you

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<v Speaker 3>been hearing from different people leading some specific locations across

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<v Speaker 3>the nation. What has been their sentiment about consumer traffic

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<v Speaker 3>and the brand Really?

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<v Speaker 2>Yeah, well, and you know this will Nora, Like anytime

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<v Speaker 2>you get into live entertainment, there's always going to be

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<v Speaker 2>you're always going to be fighting on a frequency game.

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<v Speaker 2>And so for us, not only has everyone embraced the

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<v Speaker 2>price point and this idea that you know, affordability and accessibility,

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<v Speaker 2>and again, if you put that as a strategic pillar

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<v Speaker 2>and that's been one of my pillars for my thirty

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<v Speaker 2>plus years. Then you start opening up your creativity to say, okay,

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<v Speaker 2>how do I think differently about just a binary you're

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<v Speaker 2>a member or you've got a jump ticket, and how

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<v Speaker 2>do you open it up and give people optionality? And

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<v Speaker 2>so that is one of the things. We've got a

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<v Speaker 2>group within our franchise community. I love it. It's our

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<v Speaker 2>Franchise Advisory Committee and we work closely with them on

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<v Speaker 2>the pricing construct and how we ought to be thinking

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<v Speaker 2>about this, the marketing deals, how we pulls that in.

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<v Speaker 2>But the other piece that is really super important is programming.

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<v Speaker 2>And so you can have great attractions, you can have

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<v Speaker 2>great price points, but the kids and the parents went programming.

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<v Speaker 2>And so our glob parties on Friday and Saturday night

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<v Speaker 2>have been fan favorites. They're running all summer long fan favorites.

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<v Speaker 2>For the older kids. We're running Sky Cup in parallel

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<v Speaker 2>to World Cup right now. So we've got great three

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<v Speaker 2>on three soccer matches inside viewing parties. All kinds of

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<v Speaker 2>soccer football takeover within the parks as well. Birthday Like

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<v Speaker 2>a Boss is a new, upgraded birthday experience that we've introduced.

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<v Speaker 2>So besides just compelling price points, great variety, you have

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<v Speaker 2>got in order to get frequency, you've got to have

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<v Speaker 2>really good programming to get the kids excited about coming

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<v Speaker 2>back over and over again. And so that's been a

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<v Speaker 2>big push for us as well, is to make the

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<v Speaker 2>programming more different. And then I think if I could

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<v Speaker 2>just one last thing is you know, one of the

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<v Speaker 2>things that I focused on in my again over my

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<v Speaker 2>career is kind of operating with the healthy paranoia around

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<v Speaker 2>your brand and so how do you keep evolving? And

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<v Speaker 2>I've always loved the saying, hey, if you don't like change,

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<v Speaker 2>you're going to like irrelevance even less. And so how

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<v Speaker 2>do you keep evolving your offering? And so we've introduced

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<v Speaker 2>sky Labs in our company, it's our innovation arm. It's

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<v Speaker 2>a dedicated team with franchises on how do we evolve

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<v Speaker 2>the power of play in our parks. And some of

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<v Speaker 2>this is you don't want to get away from your knitting,

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<v Speaker 2>which is you know, active play, but how do you

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<v Speaker 2>bring wearables other types of gamification in there that complements

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<v Speaker 2>you know, active play. And so that's a big part

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<v Speaker 2>of you're going to see us continue to peel things off.

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<v Speaker 2>We're working with PhDs in childhood Development on all of this,

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<v Speaker 2>and so again I'm really I think all of that

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<v Speaker 2>is how we're going to continue to evolve this offering

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<v Speaker 2>for our guests going forward.

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<v Speaker 1>All right, next time, join us Dave from maybe the

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<v Speaker 1>ballpit at one of the sky Zones.

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<v Speaker 2>Absolutely, we'll do.

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<v Speaker 1>All right, Dave Hoffman, have a great long weekend. Appreciate

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<v Speaker 1>you taking the time and joining us on Bloomberg Business

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<v Speaker 1>Week Daily. He's the CEO of sky Zone, joining us

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<v Speaker 1>from Dallas, formerly of Duncan McDonald's and more.