SURVEY HIGHLIGHTS • A total of 504 establishments returned survey questionnaires, of which 354 provided complete details. This report includes information only from the complete returns. • Composite results for the entire survey show a net loss of 0.4 per cent (before taxes) for the typical establishment.' • Total income of the typical bowling establishment in 1961 was $194,021 of which $144,933 represented receipts from bowling. • Almost exactly half of the participants reported a profit for the year. • The typical profit before income taxes for the profitable establishment was 5.3 per cent of total receipts of $204,455. • The typical loss for the unprofitable establishment was 7.4 per cent of total receipts of $188,281. • Summer bowling accounted for a little more than 10 per cent of all income. • Reflecting merchandising ability, profitable establishments had more income from sources other than bowling than did unprofitable establishments. • The difference between profit and loss almost invariably was in the areas of pay-roll and occupancy expenses. Regardless of location, size or total income, significant variations in the amount of income absorbed by these expense items were directly reflected in operating results. • Non-metropolitan operations reflected a small profit on an over-all basis; but transacted only about half the volume of metropolitan2 area establishments. • The typical establishment in the East Central Region reported the greatest profit (2.9 per cent) while the largest typical loss (7.0 per cent) was reported in the Southwest Region. • Thirty-two lane establishments took in nearly four times as much income as did 12 lane houses. 'The word "typical" does not mean average, but median. A median figure is arrived at by arranging all amounts in a particular group in order of size and taking the amount exactly half way down the column. Thus, half the figures in a given item of income or expense are higher than the median, and half are lower. Medians tend to give equal weight to each establishment and thus avoid possible distortions created in averaging extremes of size, either large or small. For purposes of this report, metropolitan establishments are those located within a Standard Metropolitan Statistical Area as defined in 1961 by the U. S. Bureau of the Budget. There are 215 such areas in the U. S. which meet the following population requirements: first, one city with a population of 50,000 or more or two adjoining cities with a combined population of at least 50,000, with the smaller having a population of not less than 15,000; second, two or more adjacent counties, each with a city of 50,000 or more inhabitants (or twin cities as indicated above) and the cities are within at least 20 miles of each other. The Federal Government's definition also states that where adjacent cities or countries are classified as "Metropolitan”, there must be a definite showing that they are part of the same economic or market area. COST OF DOING BUSINESS IN THE BOWLING INDUSTRY by B. V. PRESTON, Associate Director H OW DOES MY business compare with other bowling establishments? Are my expenses in line? Are establishments in this part of the country doing as well as those in the North or South? Does a metropolitan location tend to be more or less profit able than a non-metropolitan one? These are some of the questions that this study, sponsored by the Bowling Proprietors' Association of America, Inc. and conducted by the Marketing Services Company, Division of Dun & Bradstreet, Inc. was designed to answer. Introduction By way of background, questionnaires were mailed to all member establishments last year of which more than 500 responded. For purposes of consistency, however, the study is limited to the 354 establishments which provided complete details. On the basis of comparative size and volume as well as geographical location, it is our belief that survey findings reflect a represent ative cross section of BPAA's membership. Throughout this report, space has been left on the various tables so that an individual proprietor can compare his own percentages with the survey figures for the different items of income and expense. Before doing so however, it would be well to read the section on "Explanation of Terms", so that the meaning of each item is clear. It should also be borne in mind that the figures presented are, in effect, a typical picture (as defined in the section on "Survey Highlights") and do not represent the results of any one establishment, as all individual figures have been held in strict confidence. EXPLANATION OF TERMS USED IN TABLES TOTAL INCOME FROM ALL SOURCES—This represents the income for the year from bowling, shoe and locker rentals, the income from billiards, amusement devices, vending machines and leased facilities, plus the total of all merchandise sales. The winter season is defined as September through May, summer season, June through August. BOWLING INCOME-Total income derived from bowling charges only. GROSS MARGIN-The difference between the amount received for the merchandise sold and the cost of the merchandise. OWNERS' SALARIES-The compensation of the proprietor, partners or officers. If a fixed salary was not charged, the amount drawn was entered. EMPLOYEES' WAGES-Gross payroll of all employees, including managers. This includes the amounts withheld for income taxes. Also includes all pay. roll taxes. PINSETTING COSTS-Rental for the pinsetting equipment or depreciation for the year, if owned. No other charges are included in this item. OCCUPANCY EXPENSE-Includes rent, utilities, and building expense rep. resented by property taxes, property Insurance, building depreciation, interest on mortgages, cost of alterations or leasehold improvements charged off during the year and building maintenance and repairs. DEPRECIATION OF FIXTURES & EQUIPMENT-The amount charged off during the year to depreciation on the lanes, house bowling balls and all fixtures and equipment except the pinsetting equipment. MAINTENANCE OF FIXTURES & EQUIPMENT-The amount spent maintaining and repairing the lanes and all fixtures and equipment, including the pinsetting equipment. This does not include inside labor, which is part of Employees' Wages. It does include equipment maintenance supplies, parts and outside labor. SUPPLIES-Includes bowling pins, score sheets, towels, cleaning and office supplies, glassware, silverware and napkins. It does not include supplies used to maintain equipment. ADVERTISING & PROMOTION—Amount spent for newspaper and other ads, cost of matchbooks or other give-aways, premiums and trophies. LICENSE FEES AND TAXES—Includes federal, state and local license fees and taxes other than income, payroll and property taxes. INSURANCE-Includes the cost of all insurance carried on the business except property insurance. ALL OTHER EXPENSES-All expenses not listed under one of the other categories. These would include telephone, telegraph, law and accounting fees, donations and dues. TOTAL EXPENSE-The sum of all the individual expense items. Table 1-National Figures (Composite of All Reporting Establishments) The composite experience of all 354 bowling establishments in this survey is shown on Table I. The figures represent the operating ratios of the typi cal establishment. On a total income of $194,021 in 1961, a net loss of .4 per cent was sustained. The largest single expense item was employees payroll at 22.7 per cent of total income. Owners' compensation amounted to 8.7 per cent, bringing total payroll to 31.4 per cent of income. On an over-all basis, winter season bowling accounted for 64.2 per cent of income, while summer season provided only 10.7 per cent. Income from bar, food and bowling accessory sales represented about one-fifth of the total. As is to be expected, occupancy ex. pense absorbed a relatively large proportion (17.9 per cent) of income, divided 14.1 per cent for rent or prop. erty taxes, insurance, etc. with the balance in utility expense. Table II-Profitable vs. Unprofitable Establishments Of the establishments participating in the study, there were more-by a very small margin-operating at a loss than at a profit. The establishments enjoying a profit had a typical profit of for the unprofitable establishment. The most significant difference was the expense involved in employees payroll; the profitable firms spent 4.6 per cent less of their income on payrolls and also paid 0.2 per cent less in owners' salaries. These items, plus lower occupancy costs, made the difference between profit and loss. The profitable establishments also derived a greater share of their total income from non-bowling sources, 25.1 per cent against 19.8 per cent, and derived a better gross margin on such sales. This fact indicates that mer. chandising and operating diversifica. tion are playing a more important part in the successful bowling business. Table III-Location— Metropolitan vs. Non-Metropolitan Establishments Nearly twice as many establishments located in metropolitan trading areas participated in the study as did nonmetropolitan ones, 216 against 132, and the typical city firm, with more lanes, transacted almost twice the volume. The non-metropolitan houses, however, realized a net profit of 0.1 per cent on the smaller volume against a loss of 1.0 per cent for the city establishments. A much larger percentage of total income was spent by establishments in metropolitan areas on employee payroll than was the case of the non-metropolitan establishments, which also had a lower pinsetting cost. Expressed in percentages, amounts paid owners in salaries were quite similar, but in terms of dollars, owners of metropolitan establishments received almost twice as much salary as did the owners of the non-metropolitan houses. The city establishments realized a much larger share of their income from non-bowling sources, that is, bar, food and bowling accessories. While the gross margin on such sales was better than the national figure, wages involved in providing these services were also larger than the national showing and had an adverse effect on final net profit. There was very little difference between metropolitan and non-metropolitan establishments in the percentage of income derived from summer bowling, but the city firms reflect a notably larger return from billiards, amusement devices and vending machines. Table IV-Operating Results Profits were realized by the typical establishment in five of the nine BPAA Regions. The profit ranged from 0.1 per cent in the Northeast Region to 2.9 per cent in the East Central Region. On the The Southwest Region, which had the largest typical income, also sustained the largest loss. Yet in the Pacific Coast Region, where income was very nearly the same, the typical net profit was 1.0 per cent. A clue may lie in the fact that nearly 40 per cent of the income of the profitable Pacific Coast Region establishments was represented by non-bowling revenue while in the Southwest Region only 11.8 per cent of total income was derived from those sources. Employees payroll expense involved in providing these services naturally absorbed a larger percentage of income, but the gross margin was also larger. Establishments in Southern Regions tended to derive a greater percentage of their bowling income from the sum mer season than do their Northern counterparts. Establishments in the Eastern and West Central Regions had the smallest percentage of income from summer bowling. Still they had the best profit showing. Reflecting control of wages during this, for them, slack season, their payroll expense figures are among the lowest on a regional basis. In those Regions reporting unprofitable operations, occupancy and pinsetting costs generally accounted for a larger percentage of income than in the profitable Regions. |