How One Bowling Alley Made Millions Through COVID

0:00Hello, everyone. Welcome back to Acquisitions Anonymous. This is the internet's number one podcast on buying, selling, and operating small businesses. Today, we have a great one. I love this episode. This is in my hometown. This is a bowling alley, arcade, bar, entertainment venue in Charlotte that I have been to. And they included a picture of the logo in the listing. So we know which one it is. We can actually talk really specifically about the neighborhood, about the business dynamics, about the area dynamics. uh stick around till the end because i figure out a way to finance this deal and make it work uh with very attractive terms uh so without further ado we'll get right into it enjoy this episode of acquisitions anonymous one of the biggest risks in entrepreneurship through acquisition is buying a business with fragile systems, unclear demand, or a single owner who holds all the knowledge.

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1:33If you're exploring ETA and want to understand whether franchising fits your acquisition strategy, visit franzi.com. That's F-R-A-N-Z-Y.com. And thanks to them for sponsoring today's episode. All right, Heather, lead us in. Let's go bowling. Let's go bowling. Let's go. All right, we've got a fun one. And I actually know which one this is. It's not hard to find out. But this is a bowling alley, but not like your dad's bowling alley, like a cool bowling alley. Cool. So, and what I also like about this one is it has a project name. It is Project Kingpin. That just sounds amazing. Hey, what are you working on today?

2:16Just Project Kingpin. Yeah. So I'm going to read you guys the biz by sell listing first, and then I will get into the Project Kingpin teaser. So again, let me reiterate. Acquisites Anonymous. we do not sign NDAs. This is all publicly available information. So this is an exclusive Charlotte entertainment concept now available for purchase in Charlotte, North Carolina. This, I know which one this is. It's 10 minutes from my house. I've been there. So it is basically a bowling alley plus an arcade plus a bar, like kind of these modern bowling alleys. Looks like really, really nice machines, like vending machines, gaming machines.

2:52Yeah, it's got... Whoa. yeah it's got cool you know it's a fun vibe inside wow these are looks awesome actual photos which is funny they're actual photos uh the bartender is wearing a shirt with the logo of the place i did not have to sleuth like i'm not like you know in case you want proof i did not sign the nda is is the business listed by the owner you think i don't know it's it's there's no link to a broker there's no headshot so maybe maybe so it says a proven concept a rare opportunity. This business has$4.2 million in sales,$930K of EBITDA, was established in 2017, and they're asking$3.65 million for it.

3:37So a little under four times, 3.75 times or so. Large caveat, real estate not included in the asking price, real estate valued at just under $9 million. So we got a business worth 3.6 or asking 3.6 on real estate. Who knows what it's worth? We'll come back to that worth 9 million bucks. So the total package here is 12 and a half million on SD of about a million bucks. So that's like a eight cap if you're a real estate investor and you got to run the business. So I wouldn't call this passive, but it is a rare opportunity to acquire a high-performing experiential hospitality brand in one of the Southeast's most dynamic urban growth markets.

4:26I will give you that. With strong cash flow, a loyal customer base, and a unique concept that blends entertainment, food, and bev, the business is primed for scale. Buyers will see immediate value through steady profitability and brand equity plus exciting upside through untapped growth levers like events, corporate partnerships, and potential for new unit development, aka franchising or expansion. Real estate is also available, offering further control and long-term value. For strategic operators and investors alike, this is a turnkey opportunity to own a proven platform with real momentum. It says they have eight full-time employees and indicates key staff, part-time staff not included.

5:01So I imagine they got a lot of servers and cooks and things that may not be full-time. So eight full-time key staff. It comes with kitchen and bar equipment, AV equipment, bowling equipment, furniture and fixtures, ops equipment, and arcade equipment. The property is located in the heart of Loso, which is a very specific lower south end neighborhood here in Charlotte. It is, it's very obvious which one this is, is Queen Park Social. It's on the guy's shirt. It's across from Old Mecklenburg Brewery, which is one of the most prominent craft breweries in Charlotte. I've been there. You've been there?

5:31Okay, great. So you know where this is. Yep. Great spot, packed all weekend, every weekend. It's sort of this whole brewery district where there's probably five or six breweries and distilleries and this place, Queen Park Social, like all kind of packed into a two block area. There's that, there's like one of those modern pickleball places with like bar and court and stuff, rally pickleball, et cetera. It awful. So this is like a very hot real estate spot. So I would, I honestly believe this real estate might be worth 9 million bucks. It's on, it's a corner lot, like kind of right in the middle of the path of progress with all this cool stuff going on.

6:05It says the area is known for rapid residential growth and thriving nightlife. It offers ample parking with onsite spaces and nearby street options, benefits from strong visibility and cross traffic due to its proximity to popular entertainment at retail destinations. The surrounding neighborhood is anchored by a large and growing base of multifamily developments, contributing consistent year-round foot traffic. That is all true. Event sales upside. Focused outbound sales can activate substantial upside in a high margin underexploited revenue channel. Strengthen community and group loyalty. Gaps in management led to a loss of recurring bookings from sports team fan clubs and other groups.

6:39Oh, that is really interesting.

7:10offering investors a great opportunity. It is 18 ,000 square feet. So picture like it's probably, you know, six bowling lanes, a whole arcade area where you kind of load up money on a card and you tap it and play games. And then a full bar area, full kitchen, et cetera. Any questions so far? I have financials, which is cool. Oh, wow. So here's the general trajectory. it's wild to see these hospitality businesses through COVID. If you're with us on YouTube, you can see it on the screen share. I will blow it up. That's a lot of history. Yeah. Yeah, this business has been around since 2017. But I mean, I'm shocked when a teaser in particular, we got one, two, three, four, five, six, seven, eight.

7:58We have nine years worth of financials in the teaser. I mean, they don't bother hiding the name of the business. Why bother? yeah um so what's interesting is we all have a revenue breakdown so i'm going to give you the kind of revenue trajectory of this thing so it's founded in 2017 it does 3.3 of sales and 845k of EBITDA that year at a 25 margin it runs all the way up to 5.3 million in 2019 and 1.8 million of EBITDA. Then of course we have COVID. It still manages 2.6 million in sales and 645k even through COVID, which is saying something. So it does not lose money even in COVID. Amazing. Now it does say adjusted EBITDA, but who knows?

8:43Then right after COVID, it pops right back up. In 2022, it does 5.2 million. In 2023, it does 5.4 million and 1.9 million of EBITDA in both of those years. But then 2024, it drops to 4.2 million. And 2025, it drops to 3.5 million. And what's interesting is its margin compresses also, as that happened, from kind of in the high 30s on EBITDA margin to about a 22 and then a 27 % EBITDA margin. So this is a substantial revenue drop in the last kind of 24 months or so, which is sort of surprising to me given the location. I would think this is, they say it's because they're not booking as many sports team fan clubs.

9:27I think this is competition. Just knowing the area. Other things to do. Yeah. More things to do. Tons of stuff has opened up in this area. I mean, this area is just white hot. Charlotte is white hot. Like there's just a ton of options. And wasn't 21 and 22 probably a post-COVID boom where everybody was just so excited to be able to get out more that they, you know. Could be. And that actually continues through 23. 23 was their best year. That's true. Almost 5.5 million and 1.85 of EBITDA. The thing that just blows me away is whoever owns this has owned it for eight years and has, I can't do math this fast, but probably has 10 million bucks of aggregate EBITDA here.

10:10I mean, in a hospitality concept and is sitting on property worth 10 million bucks. So I don't, I don't think they own the real estate. I think it's not included in the sale price because they don't own it. Oh, I think they do. Why do you think that? Well, I looked it up and it's owned by an LLC called Mech City Social Real Estate LLC. And it was, it looks like it last changed hands in 2019. Interesting. I wonder if they bought it in 2019. I don't, I don't know. I mean, I didn't dig into the LLC. So Matt Livingston, whose name was on the listing, it's down at the bottom of this. He's a real estate agent.

10:52It's Thrift Commercial Real Estate. And if you look at their website, it's all like hot commercial property listings leasing in Charlotte. Predominantly. They're big here. Yeah. But it's just interesting. So you have a commercial real estate person who is marketing the business. For a second, I thought maybe this was like a chat GPT teaser. you know that the owner had done for himself but then when you got down to the thrift part i realized it wasn't but see that's mills that's what makes me think they do own the real estate because the real estate is most of the value here right and representing the transaction is a real estate broker so well i just wonder if they're not actually selling it you know what i mean it's it's listed with a value but let me see if i can search this address we can keep talking about other things while you look for it i'll give you a little bit more about it um what's interesting is they give us the revenue mix so it looks like it is of course this is like the worst char crime ever they give us revenue mix it's a pie chart with five slices and they're all five different shades of green so you can imagine five different shades of green like how many yeah shades are between them not many uh but attempting to zoom in here if you're on YouTube, they look like they're going to do about 25 % of revenue from food and non-alcoholic beverage sales, about 36 % from liquor, about 21 % from beer and wine sales, and about 13 % from games and retail, and 5 % from other.

12:30And this is the aggregate over the eight years of history that we have. So if you add up kind of liquor and beer and wine, cause you know, I think that's roughly all the same, that's going to be 57 of sales. And then you got food at 25 and then the other entertainment stuff at another 20 or so. So that's kind of a rough breakdown. So this is a bar, right? Which is good. Cause that's probably the good margin stuff. The food is probably less good margin. Um, and then the games is probably close to a hundred percent margin, which is nice right so that's probably what's driving the profitability of this you've got 18 of the business at 100 margin right so that if you got 18 net margin there it is right there right a huge portion of it is the games so i want to understand kind of the flow through by segment so i'm guessing food is zero margin to negative games are close to 100 and liquor is single digits, you know, 10 % margins, I would think after all is said and done.

13:33And that's probably how you end up with, you know, a business with 20 % net margins. That's been remarkably resilient. Mills, do you find anything out about the property? It's not for sale. It's not for sale. Well, it's not on their website. All real estate is always for sale. Yeah. Right. So it's not, it's not under their listings on their website. It could be that, yeah, it could be that maybe they've already sold the building or that I honestly think that the existing owner of the building, the landlord of the building, is probably keeping it. And I don't think it's related to the business owner.

14:11Interesting. It says, limited owner involvement. Proficient management team can enable new owners to remain strategically involved without being operationally embedded. So we don't actually know. So, you know, the counterpoint to that is they've had management issues in the past where the business drops by, what, you know, a million to$2 million top line. So that's a great point, Mills, because they say in the teaser, all the management will stay. You don't have to be that involved. And then they throw them right under the bus and go, management sucks. And they've dropped the ball. We've had management transitions.

14:47So which is it? Yeah. Yeah. For a business of this size, I think you have to be pretty hands on. And what's interesting about bowling centers is there's kind of two types anymore. There's the old school that have the league still. And, you know, the food's not that good. And the ambiance is not that good. And then there's this type. And I think I've seen buyers looking for the old school types to upgrade them to this type. So it feels like, you know, there's not as much opportunity to improve things because that's already what you're getting here. and they talk about scaling, but they don't talk about like utilization.

15:23So how much more can you grow? I guess you could get back up to the 2023 level, but is there, is there much more than that? Can you, can you grow? It's hard to know. My sense, just kind of knowing the area this is in this, the guys who own the real estate and the guys who own the business, the business remember has put up 10 million bucks of aggregate EBITDA over eight years. Amazing. The real estate has gone from a backwater to worth probably$9 million over about the same time period. So there have been close to$20 million of value creation here in the dirt and the business. And whatever the business happens to be worth, it's probably not worth nothing either.

16:03My sense, though, is I wouldn't want to be the one coming in to buy this business because I think most of the value has been created. And I'm not sure this is the highest and best use of that parcel. anymore. Given how long the neighborhood has gotten. That's my concern is that like you're seven years in, maybe they had a five-year lease and they, you know, extended for another five or released it for another five. But that's the tricky part of this. Yeah. So if it's, if you're trying to get an SBA loan, the SBA is absolutely going to require you to get, have a 10-year lease, you know, five-year remaining term with a five-year option so that you can stay in this facility for at least 10 years, which is the term of the SBA loan.

16:50And they didn't say SBA pre-qualified. And they usually say it if they want you to go that direction. And so I think maybe that could be what the issue is here, is that there's not 10 years left to go on this lease. And there's a risk to buying the business with less than that to be able to stay here. Heather, SBA aside, I'm not buying this business without 10 years left on the lease. I mean, no one is. This is a local business. This business loses its lease. It's over. You need a 10-year lease to buy this business. What's crazy is they're asking almost four times cash flow for this business. I don't even think the lease probably has that much left on it, given Mills' back-the-envolute math.

17:38Yeah, somebody bought it in 2019. So, you know, that's probably the time at which this new lease was created. And it probably doesn't have much left on it. Maybe it's to 2029. Yeah. Yeah. Tough. The other interesting thing in this space is that Lucky Strike, or it was Bolero, but they've rebranded to Lucky Strike. They're a publicly traded consolidator in this space. and like when I started searching for bowling alleys in Charlotte like there's Lucky Strike you know Pine Bowl Lucky Strike Uptown like they have they have it covered uh in terms of the more old school kind of traditional type bowling leagues um but I love when there is a public market comp when you're looking at a business because you can go in and say okay how big is the TAM?

18:29How many locations do they have? What is their revenue? What's their revenue per store? What's their net margin? I mean, like the amount of data that you have at your fingertips is just like captivating because you can do a lot of due diligence on the industry as a whole, especially something like this where, okay, maybe Bolero and Lucky Strike don't have arcade games to the same extent or the bar to the same extent as this or some revenue mix, but there's still a lot that you can garner from that data oh yeah i mean this is i mean having been to both like lucky strike's a good comp here okay yeah definitely which they do it looks like they do about a billion dollars a year in revenue uh you know lucky strike does uh the parent well lucky strike is they they are like amf bowling i mean they're yes they're like what's interesting is old school bad ones and the new sexy ones they have both in the portfolio lucky strike owns the professional bowling league which is like the ultimate play you know that you're the venue and you own the professional league that's amazing yeah these guys are the bowling market lucky strike is um and i would say like there is not a lucky strike across the street from this place i don't know that there will be what there is is a rally pickleball you know sexy pickleball there is a whole bunch of distilleries and like there's just a lot going on so i just i think personally in order to do well with this like it's probably and also this is a restaurant and kind of as an entertainment venue it's eight years like not trying to pass judgment on this place any place is getting a little long in the tooth right after eight years it probably needs some refresh capex you know just to compete because all the stuff around it is three years old you know and new and fresh and going in so that that's what i mean about like i think a lot of the like the first phase of this parcel and this business are kind of extracted.

20:25And I think there very well may be another phase of this parcel and this business, but I don't think it looks like the eight years in the rear view. So maybe it's not the staff's fault that they lost those relationships. Maybe they just went to a better venue. Yeah. Maybe we don't throw the staff under the bus. Yeah. Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions. Because when you're buying a business, the best financing isn't one size fits all. There's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things.

21:01That's why my company, Viso Business Capital, works with over 30 different lenders to find you the best funding in less time and with less friction so you can focus on the deal. Sign up for a free live Q &A session on SBA loans at visocap.net, then click Zoom sign up in the top right corner. That's visocap.net and click Zoom sign up. One other interesting thing on the publicly traded side, Lucky Strike has lost money. They've reported negative net income for three out of the last four years. Yeah. Now, it seems like this business weathered COVID well and they've rebounded really well in terms of, you know, maybe there's some management issues and maybe the owner was not completely attuned to what was going on until maybe it was too late or something like that.

21:51Or maybe that's just like the convenient thing to say and there were other things happening. But the business, I will say in those financials, they specifically said 2025 estimate, not 2025 year to date. So right now it looks like the business is going to be off by about 20 % year over year. I mean, that's pretty substantial. Their revenue is going down by$750 ,000 and their EBITDA is going to stay the same, projected. And this is a little bit old because that was 2025 estimates. And we're obviously recording this in 2026. That's three straight years of decline. And guess what banks feel about declines?

22:34Not warm and fuzzy feelings, right? You don't love it? You don't love it? But we can turn around, Heather. Yeah, sure. sure. It's going to be fine. Yeah. So you're not going to be able to get financing for this. I mean, I think there's probably a lease term problem and there's certainly a revenue decline problem just that we can see right off the top. So, and they didn't offer seller financing, but I think that's the only way anything like this trades. I bet they can't. I mean, I think this owner is totally stuck in a pickle where they have multiple years left on their lease. they have a falling knife and they can't sell it and can't continue.

23:13Maybe they can, maybe maintaining it for the next few years and trying to just see out the end of your lease term. But this is one of those things where like, Bill, you know this area better than me and Heather, but they probably got in before it was really cool and they got in at an attractive lease rate and maybe they had one option pre-negotiated. But you help gentrify an area by being a cool business and the landlord holds all the cards at renewal. And now it's like, Hey, look, we've got, you know, we're across from old Mac and there's a lot going on in this area. And there's people who are willing to pay more, maybe a national brand who can take a building this big bowling or not.

23:50The one thing I think this has going for it is the infrastructure for bowling. And now it's not, you know, it's not like an in-ground swimming pool inside the building or something, but this would be very hard from a capex standpoint for a purchaser to move somewhere else so like we we you know acknowledge that but it would also be really difficult for the landlord to put something else into the space without a lot of tenant tenant improvement allowance it so just kind of back the envelope right so this business it is still making a little under a million bucks a year 973 thousand of EBITDA, adjusted EBITDA.

24:29So we get into it and see. So you might be able to run it out unless revenue is just totally crashing. But to the point about the lease rate mills, so let's take the broker at his word that this property is worth$9 million. I don't know, if you own this property, I don't know what kind of cap rate you're going to demand, but let's say it's 8%. percent yeah so that means your yield is like the the rent here has got to be 720 grand i don't know what it is now burdened into the pnl but i mean that's what 60 grand a month in rent yeah i mean absolutely that's a lot i mean this business has 973 of ebitda let's let's just say their their lease is at half of market rate right now so it's going to go from 350 to 700 so you're going to have another 350 of rent expense coming into it so you're going to go from three or from 975 to 600 of EBITDA upon lease re-rate it's still not terrible i mean it's making money if especially if you own the building man you're just printing like you've got this cover land play the building's appreciating but like the issue is if you're adjusted if your actual adjusted ebit doc gets down to 500 000 or 600 000 you can't pay 3.6 million dollars for it no no i i think you can pay and also we haven't like the capex if you got to refresh this thing it might need half a million bucks of refresh you know so like you got to take that out of the purchase price too yeah can you pay a million bucks for it probably right um but you got what i would do is kind of the classic restaurant playbook which is you close it you put a new coat of paint on it and then you reopen it with a different name but it's not that different because this business like the location is the killer thing here and either they're walking across the street to go do it, or they're typing by keyword, bowling or arcade or like, Queen Park Social is probably not the key thing.

26:44You reopen it as low-so social and it's sexier and cooler and maybe you put a pickleball court in the parking lot and it's new. That's probably the play here, but you're going to need some landlord support to do that. And some seller support if you can't pay for it. If the landlord is supporting you, guess what? You are paying for it. They're just amortizing it over a certain period of your lease. And then the lease will rewrite higher again. Yes. At the end. I mean, this is just so interesting because God bless the entrepreneur. I mean, this guy has made 10 million bucks in eight years in a hospitality concept through COVID.

27:25Through COVID. Yes. That is wild. Like this guy deserves the platinum medal of restauranteuring. I mean, incredible. operational success here, never had a negative year, never had a year less than$645 ,000 of EBITDA, which was the COVID year. I mean, pick the neighborhood perfectly. Like this guy crushed it. I just don't know that I want to be the next guy. Also, I mean, look at this. They own all the bowling and the arcade equipment. I mean, there could be the balance sheet could have, you know, a million dollars worth of, now they're depreciated if they're seven years old and maybe they've done some refreshes, but that's pretty significant.

28:07I think that a lot of people, when they're starting this, they go, oh, that's going to be a lot more money off the rip. I'll finance my arcade games or my pinball machines or whatever. They're mostly all digital now. And all of a sudden, yeah, it's a lot less capital off the door to start, but you're losing a lot of margin. So they do make that point, and I think they're very right about it. That's an asset for For sure. It is. They don't list FF &E, but there is definitely real assets on this balance sheet. So interesting. All right. Heather, you're not giving me a loan to buy this thing, right?

28:43You're not going to get a loan because of the revenue decline. Not even an SBA loan. No one's going to do that. So it's like in the bank size, this is a turnaround. Like what you're talking about is just kind of writing it down or, you know, letting it ride flat and you could still make money at the right valuation. But even a bank won't go for that. They want to see flat or modest growth. They do not want to see declines. And this is the kind of industry where you need to have restaurant or bowling experience or both preferably because this is not something that a newbie should come in and try to run an industry like this period, but especially one where they've been having declining revenue for three years.

29:24But Heather, I have tons of experience going to restaurants. And I bowled before. And I have bowled over 200 once. That's not true.

29:37But Mills, if you had to do this deal, how are you doing it? Would you do this deal? Oh, man. I don't think so. I mean, I would much rather be the landlord who it looks like paid less than$2 million for the building in the last 10 years. I think my issue with this is you're penalized by being late to the trend. I like for the same reason that we've looked at pickleball stuff and it's like, gosh, it just seems like you're so maybe there's a few more years and maybe there is some durability to the, you know, to the nostalgia of it and the ambiance and the skill and the competition and all. I just would be like trying to figure out what's the next thing rather than being late to this.

30:16Now, bowling's been around forever. I don't think it's ever going to go to zero. I just think that I would much rather be the guy who collects$10 million of EBITDA over the last eight years and is then trying to figure out what to do with it. Yeah, you've got to hand it to the entrepreneur. All right, here's how I think I can make this work. This should be real estate anonymous. This is the wrong podcast for this business. You kind of hinted at it, Mills. You'd rather be the landlord. The building, you got to buy both or nothing. There's no version of this where I buy just the business. I have to buy both.