 |
By J. Paul DeMyer, ESP Investment Advisor and ESP Brain The Importance of Being UniquE |
In a recent industry seminar, I organized a panel of experts to discuss the importance of having an LBE product with unique attributes and to address the strategic planning question: What attributes should an entrepreneur focus on first – those that render the product unique or those that will attract capital or otherwise support the financing efforts? The panel included professionals with different perspectives – operating, marketing, design/development, leasing and financing. Herewith is a summary of the panelists’ considered opinions.
Finance the Product
The question of which issue to focus on first is irrelevant. In the end, the product must be financed or it will join the already swollen ranks of merely interesting ideas. Most entrepreneurs have a wealth of creative skills but are poor in understanding simple economics and/or the harsh reality of the process-oriented business world. As a result, they must often work substantially harder on developing an effective business plan or hire outside experts to objectively evaluate their chances of success. It may be small consolation, but wasn’t it Einstein or another paragon of creativity that remarked, “Genius is one percent inspiration and 99 percent perspiration.”
Understand the Target Market
From the design/development and operating perspectives, the entrepreneur must understand the target market for his/her product and ensure that it: a) appeals to that market for frequent, repeat visits; b) maximizes revenue opportunities on a multi-daypart basis; c) minimizes operating expenses overall; and d) differentiates itself – or creates the ‘uniqueness factor’ - from numerous existing or would-be competitors on a sustained basis.
Uniqueness Is Not a Long-Term Guarantee
Uniqueness is an inherently temporary phenomenon. Success in any business endeavor will always breed competition from other entrepreneurs who may see ways to improve upon various attributes and who may be better positioned organizationally and financially to capitalize on a viable trend. Even control of a proprietary brand name or characters is no guarantee of sustained success/profitability.
Developers Are Not Partners
Developers are not usually a friendly audience for the entrepreneur. They typically seek credit tenants and only want to know what credit-worthy individual or entity will sign a lease in their project. At best, the developer may be a source of some capital in the form of higher tenant improvement allowances, but they do not want to be an operating partner.
Understand Your Industries
“LBE” starts with the word “location” and ends with the word “entertainment.” This effectively defines the complex relationship between two distinctly different industries – real estate and entertainment - and emphasizes the importance of a thorough understanding of both. If your location is not unique, your concept must be! Obviously, it would be better to have both elements perceived as capital-enhancing assets.
Support Your Concept
The chosen real estate platform defines the product concept and vice versa
– they must be complimentary! In other words, the platform (i.e., attraction,
restaurant, theater, arcade, museum, retail store or combination thereof) must inherently
support the entertainment concept. Each of the panelists agreed they had seen too many
concepts trying to be too many things to too many people and, as a result, were doomed
from the start. A restaurant concept must work as a restaurant; an attraction must succeed
as an attraction. The “main event” must be carefully conceived and planned as a
business endeavor in itself – all other ancillary businesses (e.g., retail sales) are
secondary in importance.
All of the panelists agreed with my philosophical closing comment: “Ideas do not get
financed, assets do.” Therefore, the first order of business for entrepreneurs must
be the defining, improving and differentiating of their assets in order to attract
capital. Uniqueness can be an asset if it positively differentiates the product from
others in the competitive marketplace.
J.Paul DeMyer is a principal in Rochlis & DeMyer. He is a leading theme and
entertainment real estate consultant who has headed thousands of entertainment specialty
projects throughout the world, including retail malls, hotels, resorts, restaurants, theme
parks, entertainment centers, mixeduse facilities, sports complexes, and convention/civic
centers. Mr. DeMyer may be contacted at Rochlis & DeMyer, 2607 24th Street NW, Suite
4, Washington, DC 20008; 202-588-0800, Fax 202-588-8005; e-mail: JPDeMyer@aol.com.