FDD Talk 2019: Sky Zone Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Sky Zone franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Sky Zone franchise, based on Item 7 of the company’s 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Sky Zone franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Sky Zone outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of Sky Zone’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 average open jump revenue, event revenue, non-jumping revenue, total revenue, cost of goods sold, advertising and promotion, labor, occupancy costs, royalties, other operating expenses, total expenses, operating income, EBITDA, and EBITDA + owner’s compensation for the 103 franchisee-owned Sky Zone Trampoline Park locations that were open from January 1, 2018 through December 31, 2018

• 2018 average jumping revenue, event revenue, non-jumping revenue, total revenue, cost of goods sold, advertising and promotion, labor, occupancy costs, royalties, other operating expenses, total expenses, operating income, EBITDA, and EBITDA + owner’s compensation for the 39 franchisee-owned Gen 2 Sky Zone Trampoline Park locations that were open from January 1, 2018 through December 31, 2018

• average daily revenue generated by the 2018 franchisee-owned New Parks compared to the 2017 franchisee-owned New Parks

Section I – Background Information

15 Things You Need to Know About the Sky Zone Franchise

Set to Open First Location at Sea

1.  In late November 2018, Sky Zone announced that it will be opening its first ever trampoline park at sea on the Carnival Panorama, which is Carnival Cruise Line’s newest ship. The Carnival Panorama is set to launch in December 2019.

2.  Carnival Panorama’s Sky Zone park will span more than 3,000 sq.ft. on decks six and seven and will feature a 12-lane trampoline court, as well as an adjacent recreational area with a climbing wall, balance/jousting beam, Sky Ladder climbing apparatus, and tug of war.

3.  Panorama’s Sky Zone will take the place of the IMAX theatre found on sister ships Carnival Vista and Carnival Horizon. The facility will also provide fitness classes, dodgeball, and basketball. Blacklight glow parties are scheduled for evenings.

4.  To mark the launch of the first Sky Zone at sea, Carnival entered a float in the 130th Rose Bowl Parade on January 1, 2019, in Pasadena, California. The floral replica of Carnival Panorama included a red and blue funnel, a water park, and a trampoline.

5.  Jeff Platt, president of Sky Zone, said, “As a Los Angeles-based company, being a part of the Rose Bowl Parade is a truly unique and unforgettable way to announce our first Sky Zone at sea, which will provide guests of all ages an opportunity to experience ‘wall to wall aerial action’ aboard the amazing new Carnival Panorama.”

Invites Federal Government Employees and Their Families to Enjoy a Free Jump Amid Government Shutdown

6.  In mid-January 2019, Sky Zone invited federal government employees and their immediate families to their local participating park for free fun and active play. Sky Zone made the offer as a way to provide some much-needed fun to those affected by the long government shutdown. To enjoy this offer, valid government identification was required.

7.  This benefit applied to the federal government employee, their spouse/partner, and/or immediate family members. Through January 31, each were eligible for a free 60-minute jump every Tuesday through Thursday at participating Sky Zone locations. Sky Zone socks were required, but not included in the offer; but guests can always bring back Sky Socks from previous visits to use again.

Newest Location

8.  In early April 2019, the owner of the Sky Zone that was set to open in Clifton Park Center mall in Albany, New York last fall announced that he can finally move forward with the new location’s opening. Franchise owner Rusty Saunders, who also owns a Sky Zone in Queensbury, New York, said that the Clifton Park location’s opening was delayed because DCG Development, which owns the mall, was waiting for Payless ShoeSource to move or close in order to fit the 25,000-square-foot trampoline park in the shopping center.

9.  Saunders had already closed the Sky Zone in Menands in September 2018 in preparation for the move to Clifton Park. According to Saunders, “It’s been kind of a slow process. We’re still trying to get a building permit, too. That’s been a challenge, but I think we’re almost there. Believe me I would have liked to have it open last fall, but now it’s probably mid-summer.”

Company History

10.  Sky Zone was founded in 2004 by Rick Platt in Las Vegas, Nevada. Platt built the trampoline courts to be used for a new sport, which featured professional athletes, rotating hoops, and mid-air acrobatics. After building the trampoline arena, Platt hired athletes but failed to generate any interest in his new sport.

11.  While Platt kept trying to get his new sport off the ground, local skateboarders asked if they could come into the trampoline arena and bounce around. Initially, Platt let the kids come in for free before the athletes practiced, but as interest grew and money got tight, Platt started charging $8 per person. Eventually, Platt opened the trampoline park to the public and shifted the focus of his business.

12.  In 2006, Platt’s son Jeff, who, at the time, was a student at Washington University in St. Louis, opened a second Sky Zone in Missouri. Jeff Platt’s Sky Zone was profitable within six weeks of opening. Around this time, Rick Platt left the company to Jeff after his wife became ill.

13.  Following his father’s departure, Jeff Platt took over as Sky Zone’s CEO; he is now the company’s president. Since franchising officially began in 2009, Sky Zone has opened locations across the United States, Canada, Mexico, Australia, India, Saudi Arabia, and the United Kingdom.

14.  In 2018, Sky Zone was acquired by CircusTrix, an American developer, operator, and franchisor of indoor trampoline and extreme recreation parks. In addition to Sky Zone, CircusTrix owns Rockin’ Jump, Ryze, HighHeaven, Skywalk, 2Infinity, and Gravitopia.

Entrepreneur’s Franchise 500

15.  Sky Zone ranked No. 195 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Sky Zone franchise costs, based on Item 7 of the company’s 2019 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Sky Zone’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  108
• Outlets at the End of the Year:  136
• Net Change:  +28

2017

• Outlets at the Start of the Year:  136
• Outlets at the End of the Year:  148
• Net Change:  +12

2018

• Outlets at the Start of the Year:  148
• Outlets at the End of the Year:  151
• Net Change:  +3

Company-Owned

2016

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  4
• Net Change:  +1

2017

• Outlets at the Start of the Year:  4
• Outlets at the End of the Year:  4
• Net Change:  0

2018

• Outlets at the Start of the Year:  4
• Outlets at the End of the Year:  8
• Net Change:  +4

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• The information contained in this Item 19 is based upon the financial performance of Sky Zone
  Indoor Trampoline Parks that are owned and operated by franchisees.

• The operations of the franchisees are similar to the operations that are contemplated by franchises described in the Franchise Disclosure Document. Certain material differences in the economic or market conditions known to or reasonably ascertainable by Sky Zone are more fully described below.

• However, no two Sky Zone Indoor Trampoline Parks are exactly alike and there are differences in certain aspects of the Sky Zone Indoor Trampoline Parks as more fully described below.

Part 1 – 2018 Revenue and Expense Averages (January 1, 2018 to December 31, 2018)

• Part 1 of this Item discloses revenue and expense information for certain franchisee-owned parks that were open from January 1, 2018 through December 31, 2018 (the “Measurement Period”). The results from a total of 103 (70%) of the 148 USA franchisee-owned parks that were open and operating over the Measurement Period are disclosed in Part 1 of this Item.

• To gather the data associated with Part 1, the franchisor provided a standard template to franchisees and requested that they complete it. Franchisees populated their own data and returned the completed templates to the franchisor. The franchisor aggregated this data to determine the average revenue and expense line items discussed below.

• The information provided is not a forecast, projection, or prediction of how your franchise will perform. These figures should not be relied upon as the actual or potential revenue that you will realize. It is likely that your revenue will differ from the information in this financial performance representation.

• These statements have not been audited, and may not be based on generally accepted accounting principles.

• A total of 45 of the 148 parks are not included below because they either (i) were not required to submit in accordance with their individual Franchise Agreements (8 parks); (ii) did not submit their respective historical information at the time the franchisor compiled this information for inclusion in this Item 19 (35 parks); or (iii) they were not open for the full year due to remodeling or relocating (2 parks).

• The franchisor also has excluded the data concerning five affiliate-owned parks that were open and operating as of December 31, 2018. All information included below is for franchisee-owned parks operating in the United States only.

• The franchisor has included averages for all 103 parks disclosed in this Item 19 (“All Parks”) in Part 1.

• Jumper capacity is often tied to the overall square footage of the park but, in certain cases, utilization of the space may enable variations in jumper capacity.

Average for All Parks (103 Parks)

Revenue