May 2005 - FEASIBILITY STUDIES F0R INDOOR GO-KART FACILITIES
Peter F. Olesen, P.E.

Determining the feasibility of developing an indoor go-kart facility is not a simple step. There are many elements that must be considered in the process. When the concept for an indoor concession and/or competition go-kart facility moves beyond general consideration and becomes a serious goal for individuals, groups or a corporate body, the question of feasibility must be resolved. Failure to do so is plotting a course toward failure, or at best, mediocrity. Remember, failing to plan is planning to fail. The first and foremost rule is build what your customer wants, not what you want. Unfortunately this is often a difficult choice for the developer. Over the years a large percentage of the inquiries our firm has received pertaining to indoor karting has come from individuals that have a strong personal interest in racing karts indoors, and further they want to maintain a definite distinction between what they plan to develop and any appearance of being a concession facility or part of a family entertainment center.

There are markets where it is possible to create an exclusive format, but even in those markets it is usually not a “slam dunk”. There are many elements to be resolved to assure success. A large number of issues still have to be addressed, including location, building size, configuration and appearance, budget, marketing program, management and long range commitment to name a few.

This article is intended to specifically address the elements that comprise a Feasibility Study. There are many individual steps to be taken. We will outline the principal elements rather than going into a detailed discussion of each.

Before anyone starts out, they should be aware of the fact that indoor karting facilities have a high mortality rate. The statement that failing to plan is planning to fail covers a wide range of causes for facility failure. Some are very obvious, while others may not be.

Some of the more obvious causes of failure are:
Faulty initial concept and failure to have a realistic business plan
Lack of sufficient capital, both for construction and initial operation
Believing projections made by equipment salesmen
Poor location either in terms of access or physical location
Bad neighborhood
Insufficient and/or poorly illuminated parking
Lack of management skills
Lackluster staff
Poor marketing plan or no plan

Less obvious but just as devastating causes of failure are the following:
Failure to identify the specific target market
Too small a market
Failure to properly assess competition
Poor selection of design and equipment
Lack of supplemental attractions and/or amenities
Failing to change when things aren’t working
Failure to make wise use of consultants

The wide range of issues listed above is beyond the scope of this article. All of the elements identified above are important and should be addressed by everyone entering the indoor karting arena. This is true whether you are planning to build and operate an indoor recreational go-karting facility, competition track, family entertainment facility or a combination facility.

Building a dream can turn into nightmares when your planning relies on manufacturers’ projected revenue claims that have no basis in fact for your specific project. Know your potential for success before you start. In order to arm yourself with as much initial information as possible, a feasibility study is of prime importance. This is not only for the owner’s reassurance, but often becomes a primary element in investors determining the financial potential for the project.

While anyone can perform his or her own projections, unless you have experience in this type of work, you may be making a big mistake. Hiring a consultant and getting a favorable projection does not guarantee success. It is, however an important tool that can give you vital information to use in creating a successful venture. Unfortunately, it cannot make your decisions for you. You have to use it as part of your decision making process if you are to benefit from its findings. The best study in the world is worthless if the client doesn’t utilize its findings.

ESSENTIAL ELEMENTS OF A FEASIBILITY STUDY
Initial data elements required for the preparation of a realistic feasibility study include the following:
Location of the proposed facility
Study based on suitable building – existing or new and a buildable site
Up-to-date demographic data
Existing roadway network and traffic data
Initial construction budget for building, track(s), other attractions and amenities
Knowledge as to the realistic market penetration potential for the project
Knowledge as to the potential per capita spending by guests
Identification of existing and planned competition.
Identification of potential existing and planned cross marketing partners

A good consultant should perform the feasibility study in conjunction with the party planning the facility. This is important, as the initial concept may have potentially negative elements that can be modified prior to making a final analysis.

A sound feasibility study should include the following data:
Demographic data for the target area and market
Centered on the specific site
Contains sufficient number of demographic elements
Review of competition, community and potential cross marketing partners
Considers the wide range of competitors for the disposable income of the target market
Recognizes potential business entities that could become marketing partners
Impact on existing roadway network and traffic flow
Considers governing agency plans for future roadway improvements
Reviews access from outlying communities
Considers entrance/ exit constraints, if any
Impact on surrounding community
Considers impact of increased traffic
Reviews parking demands and capacity
Considers noise, lighting and related issues
Project parameters including attractions and size.
Can planned elements fit in proposed building or outdoor site
Is there room for expansion
Projected Attendance – first five years
Measures market penetration and resulting five year attendance
Based on careful evaluation of attraction’s ability to attract target market
Projected per capita spending – first five years
Utilizes demographic statistics as well as industry data
Considers added attractions and possible up-grades
Projected Gross Revenues – first five years
Attractions
Packages
Food/Beverage sales
Advertising
Naming rights
Projected Operating Costs – first five years
Salaries and fringe benefits
Rent
Consumables
Insurance
Utilities
Advertising
Legal and Financial consultants
Security
Miscellaneous costs and expenses
Projected Net Revenues – first five years
Gross revenues minus gross expenses
Debt service

Construction Cost Estimate
Cost of construction for building and attractions
Engineering and architectural fees
Contingencies
Discussion of study procedures and findings
Discusses assumptions
Identifies problem areas
Reviews findings
Conclusions and Recommendations
Reviews the results of the individual steps taken
Discusses relative feasibility
Makes recommendations

A good study should also discuss steps that can be taken to improve marketing, operations and possible future upgrades. The emphasis should be made that this is not a static industry, motivations, equipment and competition are constantly changing and an operator must be aware of and ready to address changes when they come.

The most difficult element in the feasibility evaluation is the ultimate commitment of the owner/developer/operator of the facility to maintain a solid marketing program, continual reinforcement of on-site staff, upgrading of equipment and attractions and related efforts. While this is the most variable of the elements, it is also the one that can make everything else work or fail.

Hopefully the above information gives the reader a better insight into the importance of a feasibility study and what it should contain.

Good Luck and Good Planning!

Mr. Olesen is a registered professional engineer in eight states, a charter member of the International Association for the Leisure and Entertainment Industry and the International Recreational Go-Kart Association, as well as being a member of the International Association of Amusement Parks and Attractions, the American Council of Engineering Companies, the American Society of Civil Engineers, the National Society of Professional Engineers and the Institute of Transportation Engineers. He has written many articles on the family entertainment industry, presented seminars at various industry trade show and Foundations University as well as directing the study and design of more than 250 entertainment facility projects.

He is president of Peter F. Olesen and Associates, Inc. located in Mount Prospect, Illinois. The firm has performed feasibility studies, prepared master plans and final design for a wide range of indoor and outdoor facilities in 38 states, Brunei, Canada, Cuba (Guantanamo Bay), Mexico and Puerto Rico since its incorporation in 1984. You can get more information on the firm and its services at www.olesen.com, by e-mail at pfolesen@flash.net or by writing the firm at 205 West Central Road, Suite 205, Mount Prospect, Illinois 60056.


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