It may seem intimidating to sell an entertainment complex. Perhaps you have looked up the process and have become overwhelmed by the number of complexities that are involved. The good news is the sales process does not have to be challenging for you (the owner). This guide discusses how to sell an arcade, food, and entertainment complex with insights into how a business broker can help ensure a smooth and successful process.
About Arcade, Food, and Entertainment Complexes: What are The Industry Numbers?
This industry includes complexes that offer arcades and other forms of family-style entertainment (go-kart racing, mini golf, etc.). It does not include casinos, billiard rooms, and other entertainment complexes geared primarily toward adults. Here is the most recent industry data, provided by Business Reference Guide:
- There are approximately 8,700 arcade, food, and entertainment complexes in the U.S.
- There was a 1.6% annual growth for the arcade, food, and entertainment industry from 2018 to 2023
- The arcade, food, and entertainment industry generates $4.5 billion in annual revenue
- The annual profit for the arcade, food, and entertainment industry is $503.8 million
- Experts predict a sizable increase in annual growth (1.3%) from 2023 to 2028
The Dave and Buster’s franchise takes up a large portion of the market share. However, there are many successful complexes as well that are not affiliated with a franchise. The location is considered by many experts to be the most important factor for the success of arcade, food, and entertainment complexes.
Tips from a Business Broker: How Do I Determine My Company’s Worth?
Before you take any action, you should first determine the value of your complex. A professional valuation helps you determine your goals. If you already have your exit strategy planned, then the valuation helps you determine if your goals are attainable in the current market. In some cases, it may be best to wait before listing your business and make efforts to improve its valuation in the interim.
Although we strongly suggest working with a business broker to determine your company’s value. You can get a general sense of your arcade, food, and entertainment complex’s value by using rule of thumb data. First, you must determine your company’s seller’s discretionary earnings (SDE), earnings before interest, taxes, depreciation, amortization (EBITDA), and net sales. You can then multiply this financial information with these industry rules of thumb:
- Arcade, food, and entertainment complexes sold for approximately 1.70 times the Seller’s Discretionary Earnings (SDE)
- Arcade, food, and entertainment complexes sold for approximately 0.51 times the annual net sales
- Arcade, food, and entertainment complexes sold for approximately 1.61 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
Specifically for this industry, your location matters more than anything. Complexes in populated areas with high demand for entertainment saw much more generous sales numbers than those in rural areas.
How Do I Sell My Arcade, Food, and Entertainment Complex?
There are many obligations that you may come across during your sale. This includes passing legal, financial, and operational hurdles along the way. In general, you can expect a five-stage process when you sell your arcade, food, and entertainment complex. Here are the five steps:
- Plan your strategy
- Prepare your documents
- Marketing with confidentiality
- Allow the seller to complete due diligence
- Close the sale
Below is a close look at each stage. Keep in mind, your process may look different based on your specific situation and exit strategy. For this reason, we recommend working closely with a business broker who can assist you through the sales process.
As mentioned, there are many complexities involved with the sale of an arcade, food, and entertainment complex. This can feel overwhelming. However, you can simplify the process and improve your chance of a successful experience by planning properly. During the planning stage, you should:
- Determine the value of your business
- Establish your financial goals for the sale
- Establish your non-financial sales goals
- Plan all other aspects of your exit strategy
- Discuss your plans with your business partners
- Begin collecting all documents you will need during due diligence (see below)
During this stage, you will need to prepare documents, discuss the marketing process with your business broker, fulfill all legal obligations before the sale, and notify your business partners that you intend to sell (if applicable). Preparation is essential as it helps ensure a fast and successful due diligence process.
Confidentiality is the focus of marketing when you sell your arcade, food, and entertainment complex. You want to find a buyer discreetly; public news of your sale could impact business operations, cause fear among employees, and lead to less business due to uncertainty surrounding your complex. The good news is an experienced business broker can sell your complex for fair market value in a confidential manner.
The due diligence stage gives the buyer an opportunity to confirm all financial information about the business before they officially sign the purchase agreement. If they find any inconsistencies, then they may try to renegotiate. It is important to work through the process quickly to avoid the buyer backing out of the deal for unforeseen reasons. For instance, a buyer may decide to cancel the deal if they are getting divorced. Of course, there are many situations (both personal and professional) that could impact a deal, so you want to move to closing as quickly as you can, while still ensuring a transparent due diligence process.
The closing process should ideally be a simple and straightforward final step. However, this is often not the case, so you will want to ensure you are properly prepared. Your attorney and the buyer’s attorney may attend closing so they can review the purchase agreement and other information. Your broker may also attend to ensure all goes well. You will also need to bring certain documents with you, such as a copy of the purchase agreement, insurance policy, lease, etc.
Contact Our Experienced Business Brokerage Today
Helping business owners plan and execute their exit strategy is our passion here at Sigma Mergers and Acquisitions. You can get started or learn more about the process by contacting us today. You may also schedule a consultation with us and receive a free, no-obligation business valuation as well.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!