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Retail & Entertainment: A Family Affair

Family entertainment centers are assuming a growing amount of mall space, but will the marriage last?

Shopping center owners and managers are always looking for ways to boost traffic and increase sales. And entertainment operators continually seek new venues that will help increase their bottom lines. Both have similar strategies for reaching their goals.

"I think [retail and entertainment] complement each other very well," says David Lee, general manager for Circle Centre mall in Indianapolis. "Strategies and objectives are common to both."

Circle Centre's fourth floor features several themed restaurants and bars as well as a United Artists multiplex theater and a Starport entertainment center. Starport includes a Sega-type arcade, a Showscan motion simulator theater and various virtual reality concepts.

Combined with the retail options, Circle Centre is a "real family-oriented environment," Lee says. "There is something for everyone."

Lee adds that shopping visits at Circle Centre are generally longer than the industry standard, which he attributes to its entertainment component. According to research by mall management, people are "staying almost two hours on the average," he says. Circle Centre, which celebrates its two-year anniversary next month, is managed by Indianapolis-based Simon DeBartolo Group.

Mall "walk-by traffic" is a benefit for Starport, says Curt Hall, chief operating officer of Denver-based United Artists Theatre Circuit Inc., which operates the family entertainment center. He stresses the importance of being located in a strong traffic, high-visibility area. At Circle Centre, for example, Starport appears to be part of the common area with its floor-to-ceiling glass front.

Knoxville, Tenn.-based Regal Cinemas Inc. also has developed an entertainment center partner for its theater complexes. The company opened its first FunScape entertainment center in 1995 and has four operating now. All are attached to a Regal Cinema complex and are located inside freestanding buildings, usually as an outparcel of a mall or strip center.

"We recognize the value of drawing off [shopping centers] as they draw from us," says Phil Zacheretti, marketing director for the company.

The first three FunScape locations average 40,000 sq. ft. to 45,000 sq. ft. in size and feature such entertainment components as an iWERKS motion simulator theater, a children's play area, miniature golf, bumper cars, laser tag, batting cages, video golf, video arcade rooms and a food court. The newest FunScape in Wilmington, Del., is double the size of the others and also includes such entertainment options as a MaxFlight simulator, a carousel and an indoor go-cart track. It is the first component of a larger retail development, Brandywine Town Center, that is under way and will feature a number of retail offerings and restaurants.

Regal Cinemas started developing the FunScape centers when it realized that other businesses, such as restaurants and miniature golf operators, were locating near the theater complexes and feeding off the traffic.

There is no question that entertainment venues thrive on traffic as well as bring in traffic.

Serving as a traffic generator is the best thing a family entertainment center has to offer a mall, says Kevin M. Smith, vice president of attractions for Waltham, Mass.-based Jeepers! Inc., which operates 11 "indoor animated theme parks and restaurants" throughout the United States. In addition, he continues, the business is counter-seasonal with retail, meaning that the months of January, February and March are the company's biggest.

The numerous birthday parties that are held at Jeepers! locations (120 per week) are a "major generator of business and traffic," he adds. Parents usually drop off the children and then have two hours or so to shop.

With the exception of those children attending birthday parties, children in the center must be accompanied by an adult. The 25,000 sq. ft. entertainment centers is geared toward young children (ages 2 to 12) and their parents rather than teens.

It's not all fun and games

While the benefits of mixing entertainment with retail are easy to see, shopping centers owners and managers, as well as entertainment operators, realize that, often, there are obstacles that need to be overcome.

According to Hall, one of the disadvantages of putting an entertainment center inside a mall involves the hours of operation. A mall's operating hours are generally not the same as those of the entertainment center.

Late hours kept by the entertainment center also create a security issue both for the mall itself and for the visitors to the center. In addition, he says, parking may not be as convenient. To overcome these obstacles, Hall suggests that the entertainment complex have its own outdoor entrance or be located on an end cap or separate pad.

He is quick to point out, however, that "the traffic [boost] is important enough to combat the security issues and other problems."

In addition to problems caused by varying operational schedules, there are some obstacles that can come to light while plans are still on the drawing board.

An entertainment provider must first determine if it can afford a shopping center's base rent, says Bill Haralson, president of Dallas-based William L. Haralson & Associates Inc. Haralson adds that entertainment venues do not make the best retail tenants because rents and overrides from other retail-type tenants are generally much better.

Entertainment operators are looking for the "highest exposure with the lowest cost," says Haralson. His company does market and financial feasibility studies for the entertainment industry.

"It's not that much of a natural fit," Haralson says, considering the cost/benefit factor for both the entertainment operator and the mall owner or manager.

The cost of doing business in a retail setting has turned some entertainment operators away from malls. For example, Kenneth Wagener, vice president of operations for Seattle-based Whimsy USA, says he has looked at mall sites as an expansion alternative. He notes that, while rent might be acceptable, additional CAM costs are too high.

In addition, he says, malls usually cannot devote the amount of space he needs to a family entertainment center. Wagener is looking for sites that can accommodate a 15,000 sq. ft. to 20,000 sq. ft. complex that generally includes full-size, carnival-type rides; redemption games; non-violent video games; and ski simulators.

Created by Hong Kong-based Whimsy Entertainment Co. Ltd., Whimsy USA is just starting to develop sites in the United States. The company has approximately 55 locations overseas that range in size from 4,000 sq. ft. to 36,000 sq. ft. Plans are in the works for Whimsy's first site, which is expected to open by the end of the year at a strip center in the Seattle area. At just under 19,000 sq. ft., the venue will be a "working lab for the United States," Wagener says.

Other operators are targeting mall venues directly. Namco Cybertainment Inc., Bensenville, Ill., has already brought the arcade format to the mall with its Aladdin's Castle, Cyberstation and Timeout units. The 1,200 sq. ft. to 8,000 sq. ft. areas are all "mall-based, family arcades," says Cal Hileman, Namco's vice president of real estate.

Although Namco plans to keep its core business in the malls, new deals are being scrutinized very carefully, Hileman says. He explains that the arcade business has been "tough" the last three years due to product-driven problems as well as to a change in shopping habits. For example, he notes a growing interest in home entertainment options and the increasing number of entertainment alternatives vying for the consumer's dollar.

To combat this downturn, the company is planning smaller centers, ranging from 2,500 sq. ft. to 3,000 sq. ft., because it "cannot justify larger space usage," he says. Namco also is looking at other expansion alternatives. Hileman says the company may: * combine the arcade concept with food or liquor; * open a center on a college campus; * locate in a theater, hotel or larger amusement park and share revenue; * increase the size and entertainment offerings of the center so that it can serve as an anchor tenant in a mall; or * position the arcade near other entertainment venues such as ice skating rinks.

At Coral Ridge Mall in Iowa City, Iowa, Namco plans to open one of its arcades as part of a larger entertainment component being planned for the center. According to John P. Mercuris, senior vice president of Chicago-based General Growth Cos., which is developing the mall, the entertainment area also will feature an NHL-sized ice arena, a 12-screen theater, a food court and a children's science museum when it opens in 1998.

Any large retail project that doesn't include some kind of entertainment component "will shortchange the other retailers in the mall," Mercuris says. "Entertainment provides that extra pizzazz to bring in traffic."

Does mixing the two really work?

"Entertainment is becoming more of an area which can be, will be and should be combined with shopping and movie theaters," says Gerald Johnson, one of the managing directors of Camelot Park Family Entertainment Centers, Newport Beach, Calif.

Camelot Park entertainment centers, which range in size from 5.5 acres to 8 acres, are highlighted by a castle that houses video games, redemption games, air hockey, skee ball, party rooms and a restaurant such as McDonald's or Burger King. In addition, they feature a Castle bouncer, miniature golf courses, racetracks and bumper boats.

According to Johnson, his seven parks are freeway-oriented and located in high-density areas with a half-million people minimum. The company is looking for similar sites that are near shopping centers and malls because one can generate traffic for the other, he says. "We are in the initial stages of talking to developers," Johnson says.

The only negative component he sees is when a shopping center owner or manager approaches him about using Camelot Park to revitalize a declining shopping center, a situation in which his company is not interested.

And knowing when a retail/entertainment mix will work is the first step on the road to success. First and foremost, there needs to be a clear picture of what entertainment is and should be for a particular setting, Haralson says.

While entertainment can range from games and rides to movie theaters and skating rinks to restaurants and food courts, there are few operators in the industry that have combined all of these components successfully.

While there are exceptions, Haralson says, most people that are successful in the food business have not done a very good job in the entertainment business, and vice versa. "Historically, operators of one haven't understood operators of the other," he continues.

Understanding and communication

A similar scenario rings true for entertainment operators and shopping center owners and managers.

Hileman of Namco points out, however, that "retail people have become more entertainment-oriented," he says.

Smith of Jeepers! agrees, saying, "There's an increasing acceptance [of entertainment] in the real estate community. It is much more noticeable."

When considering entertainment, mall owners and managers have traditionally worked with movie theaters. And while they are increasingly learning more about other entertainment options, their experience with the operation of them is limited.

"There has been a very slow evolution from the mid-1980s to what [retail and entertainment] is today," Mercuris of General Growth says, pointing out how once-hidden movie theaters are now actually promoted and showcased.

"The entertainment industry has come up with some new and exciting things that we hope to be a part of," adds Lee. "We want the shopping center to be one-stop entertainment."

Hileman agrees, saying, "[Retail and entertainment] have always co-existed very well, and I would expect that to continue."

Allyson Sicard is an Atlanta-based freelance writer and a former managing editor of Shopping Center World.

One-stop shopping will soon be available for shopping center owners and managers that are looking for ways to entertain their customers. They will need only look as far as Fun Expo -- the superstore for family entertainment products and services.

Now in its seventh year, Fun Expo, the International Family & Location-based Entertainment Center Show, will showcase the latest in family entertainment technology as well as feature a comprehensive educational program for both newcomers and veterans. Fun Expo is being held Sept. 23 -- 26 at the Sands Expo Center in Las Vegas.

"The Superstore of Family Fun" exhibit area, where attendees can make side-by-side comparisons of the latest and most innovative games, rides, merchandise and services, will be open Sept. 24 -- 26 and will feature such entertainment options as video games and coin-operated rides, virtual reality, simulators, carousels and miniature golf. In addition, family entertainment center development consultants, as well as architecture and design professionals, will be in the exhibit hall.

Shopping center owners and managers will want to come early to Fun Expo to participate in the educational program, which begins on Sept. 23 and continues throughout the duration of the show.

One of the highlights of the Fun Expo seminar program is a comprehensive, location-based entertainment (LBE) conference, which will be held Sept. 23 -- 24 at the Mirage Resort and Convention Center. Location-based entertainment is the buzzword of the minute, but what does it really mean? What's the next new project to pull people away from their in-home theater? And where are the opportunities for long-term success? Seating is limited for this special program, which requires a separate registration. However, LBE conference attendees will be Fun Expo's guests in the exhibit hall.

For those that are looking for a shorter session or basic primer on the LBE phenomenon, the topic also will be addressed on Sept. 25 at the Fun Expo site.

The Developers' Forum -- FEC Development for Long-Term Success, to be held on Tuesday, Sept. 23, will discuss the evolution of family entertainment centers (FECs). Panelists will include owners and operators of FECs as well as consultants and builders who will describe the ups and downs of developing and operating a family fun center.

In addition, seminars will be held on facility design and layout, sports-themed FECs and packaging a fun center in a small space.

According to show manager Bailey Beeken, approximately 9,000 attendees are expected at Fun Expo '97. For more information about the show, please contact Fun Expo at 383 Main Ave., Norwalk, Conn. 06852; or call toll-free 1-888-FUN EXPO (386-3976). Early bird registration ends Aug. 20.

While family entertainment centers continue to spark interest in the retail market, they also have become more popular in the amusement industry.

According to a survey by the International Association of Family Entertainment Centers (IAFEC), White Plains, N.Y., family entertainment centers (FECs) continue to be the fastest growing segment of the amusement industry. In 1990, there were 250 businesses that identified themselves as FECs; today IAFEC counts between 4,000 and 5,000.

IAFEC defines family entertainment centers as "unique, community-based recreation/entertainment destinations with family appeal and a reliance on repeat customers for their success."

The survey, which was released earlier this year, shows that, for existing businesses, total revenue in 1996 compared to 1995 was better for 61 percent of FECs. For businesses like bowling centers, restaurants and skating rinks, which are not FECs but rely heavily on amusements and birthday parties for their annual revenue, 1996 was more profitable for 51 percent of respondents.

Data for this year's survey was compiled in October 1996 at Fun Expo, The International Family Fun Center and Miniature Golf Show, which was held at the Sands Expo & Convention Center in Las Vegas.

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