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How some suppliers are ruining many FEC businesses

by Randy White

I first wrote about what I saw as an alarming trend on my blog back in November 2010—suppliers marketing themselves to prospective buyers of their equipment as also being qualified consultants and facility designers. I just returned from an audit of a play café that is experiencing cash flow challenges in its first year of operation. Usually the first year is not the challenge; it’s the sophomore year that becomes the challenge. Quite honestly, I am angered by what I found, as the soft-contained-play supplier was the consultant and design advisor for the project and was paid for those services in addition to its equipment sales. This was the second troubled facility that we have audited where this particular supplier served as the consultant and designer. Fortunately, I think the play café we just visited can be turned around. The earlier facility had so many serious mix, design and other issues due to the supplier’s advice and design that it eventually closed.

So here’s some of what we found at the play café. 95% of the money spent on play equipment ended up going to the supplier. Does that surprise you? It shouldn’t. There is a definite bias for the supplier to want to maximize his sales. Worse, the soft-contained-play equipment (SCP) failed to address the primary market for play cafes, children from infant to around age 3. The design of the SCP unit was not age appropriate for that age group (SCP by its very nature is not). Did the supplier tell our client that? Heck no. Did the supplier tell the client that they should get a competitive bid from another supplier? Heck no. Did the supplier tell our client the amount of space and money spent on the SCP unit should have been far less and more space and money should be have been devoted to age appropriate play equipment from other suppliers that would appeal to the younger age children? Heck no.

Then our client used a kitchen supplier to design their kitchen. Here the problem was that the supplier did not understand the nature of a play café business in terms of its food production and labor cost challenges. So instead of designing a display kitchen where all the food production is out front at the counter (such as you see at a Subway) so at slow times it only takes one person to operate the foodservice, almost all the food production was designed to be back in the kitchen area out of sight, requiring a minimum staffing of two people to be properly operated. Secondly, the kitchen supplier undersized the pizza and sandwich make-station for peak lunchtime business, so food production is slower than it should be.

Then there was Coca-Cola Company. Their representative advised our client to not have fountain sodas but rather only bottled drinks. Does it surprise you Coca-Cola makes a greater profit on bottles versus fountain syrup and that our client hardly makes any profit on selling soda by the bottle? Our client was suspicious enough of this advice that they did design for a possible future soda dispenser and they are now moving forward with the change.

It is scary how many family entertainment center startup entrepreneurs we see who fall for the sales pitch from suppliers that they can help design the project. Worse yet are the suppliers who claim they can help with feasibility. “Oh yes, your project is feasible [as that way I can sell you equipment].”

The smaller project entrepreneurs are the ones who seem to fall prey most often to these types of pitches from suppliers. They are trying to open their businesses on limited budgets, so anything that comes for free or a reduced cost is very appealing. This is what is known as penny-wise and pound-foolish.

The recent recession has seemed to accelerate the number of suppliers who are claiming they have expertise as consultants and designers for entertainment centers. Business has slowed down for many suppliers, as fewer FECs are being built in the U.S. Apparently as a way to try to generate sales, many suppliers are now claiming they can help their prospects by also designing their projects, either saving them money by offering the advise ‘for free’ as part of their services, or charging for it to generate addition income.

Suppliers are experts in the specific equipment they sell. That does not translate into being experts on what the feasibility, mix or design of an FEC should be, or even if the FEC is feasible. There are a number of very ethical suppliers and sales people who will tell you they don’t have the expertise, but others are hungry for sales, so they put their self-interests ahead of their buyers. Rarely is the failure of an FEC attributed to any particular attraction, so the supplier makes the sale and doesn’t get any black marks if the advise was off the mark. Only the FEC owner suffers.

You only get what you pay for. Free or even fee-based advise and designs from a supplier will only get you very biased advise, or at the least advise that lacks expertise, that if followed, could get you in deep doo-doo. You shouldn’t use a supplier as a consultant or designer any more than you should hire a consultant or designer who also sells equipment or gets commissions or kickbacks from suppliers they recommend.

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