The Haunt Business - Financials - Does It WORK?

[shawng]

Hey HW Forum Members,

This is going to be a slightly involved post, but i hope you can take a bit of time to read it and comment or send me feedback.

First a bit about my situation: I do a small but detailed / $$ haunt with a spare house i have here in the city im in (Guelph, Ontario, Canada). I have about $60,000 into props and such. I do it for free, because its my hobby and i enjoy it. The venue is small, takes about 6 to 7 minutes to walk through, so again, i dont charge. I have been however looking at the possibility of opening an actual pro haunt where i can charge for admission. I run a very successful business which allows me to afford this hobby, but again, if i can do something i enjoy and make decent money doing it on the side, then i would be open to that. Because its free, i get 1000-1200 people per night coming through the haunt (we only have it open for 2 or 3 nights in Oct), good numbers, but its right in the middle of the city and its free!

I have discussed this in length with my fellow haunters here in the great white north, and we can basically count the number of decent proffesional haunts in our Province (read: state) on one hand. A good haunt is VERY rare here, but there is a growing demand (the haunts in niagara falls open year round arent included as they are very "tourist" oriented, outdated and not very detailed, but more on that later).

The deduction i have come up with focuses strictly on real estate costs and carrying costs for either owning or renting. Dont take offense to this, but the majority of the US real estate market as you know has gone to $hit, and the price to buy or rent is fairly low in many markets. In addition there is a massive amount of empty buildings, abandoned supermarkets, warehouses etc in the USA, where that is virtually non-existent in Canada (at least in any area within a 4 hour drive of me)

I also attribute this reason to why i dont hear of any decent number of major haunts in California, because, again, real estate prices and rental prices (leaving universal studios and knotts scary farm out of this)

Because of the above, When i crunch my numbers for running a haunt, the biggest expense by far is either the mortgage cost, or rent cost. I should also add these scenarious ive been working is for either A) owning a building, which i will occupy year round and only open in October, or b) renting a buildng year round, so i dont have to setup and take down, and only opening in october.

As an example, my local real estate market looks like this, and keep in mind my city and the citys around me are medium sized 100K-500K people, the major city Toronto is 1 hour away. Real estate and rent there is even more costly then described below.

-The current property i own is 1.3 acres, and has a very old 1500 sq ft house and shop i do the haunt in, value, $700,000 (about the same in USD)

-In this area, a small farm with an old house and enough room to build a 5000-8000 sq ft buiilding for a huant, STARTS at $600,000, and is likely closer to $1M.

-Renting here is not cheap either, industrial space is on average $5-$6 per square foot, per year, plus TMI (taxes, maint, insurance), which can be anohter $3-$4 per square foot. So to rent, say a 5000 sq ft space for a year would cost $50,000 per year.

So, the way i work it out, whether i own a building valued at $500,000-$600,000 or rent a 6000 sq ft space, im paying about $50,000 a year in total (mortgage or rent, taxes, insurance etc) and in the case of buying i need $200-$300K (thousand) for a downpayment and renovations and props etc.

Now, given that haunted houses are usually open Friday, Saturday and Sunday in October (im not talking about the crazy large ones like the Darkness or Netherworld) but your average pro haunt, thats what, 12 days per year in total? Assuming a ticket price of $15, because again, this would be for a haunt thats 5000-6000 sq ft, i would need 3340 people through in a season just to break even, at a total of 12 days thats 278 visitors per night, every night, paying. To make a decent profit, say $50,000 a season, i would need 500 people per night, every night.

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SO.................... now that you know my situation, and what the average pro haunt situation would be here in Southern Ontario, i want some input. I know that there are more factors to consider, such as marketing methods and costs, cost of aquiring customers etc, but lets keep it simple for now:

1. Is a season profit of around $50,000 unreasonable to expect for a 5000-6000sq ft haunt? I KNOW haunting wont likely make you rich, but it has to be worthwhile to go pro and risk capital.

2. Am i correct in my assumptions that the profit differences between a haunt here, and the average haunt in the usa, is set apart by the real estate prices or rent?

Some personal questions for haunt owners, please feel free to PM me directly, i will not share any of this data with the members of the board or anywhere else online/published.

3. What is your yearly cost for your rent or mortgage? In the case of owning, how much did you pay for your building and how big is it? For the case of rent, how big is it?

4. How many people on average do you have come through in a season? How many nights are you open?

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Basically im trying to decide if its worth doing this, or just keeping it free and fun

Shawn

[craigsrobotics]

This is why...

why I posed the question some time back about any interest in financial planning experts and/or accounting & business planning, tax impacts and incentives, etc in our industry....would you or anyone else sit down with an accountant, financial planner, etc to hash out the finances' pros and cons, tax compliance, etc?

[shawng]

Well, again this thread is about the basic finances and revenue, leaving taxes out of this, its not a complex business, i dont think a financial planner or accountant are needed to figure out if you will be profitable based on the cost of mortgage vs the revenue that could be generated based on expected attendance.

[Boni]

$700,000 for a 1.3 acre property with 1500 sq foot house is very high. Granted, I am in Northern Indiana and no where near any big cities, but 1.3 acres and an old 1500 sq foot house would cost about $100,000.

[Kelly Anderson]

Just curious if staying right in the location you are already in is an option??

Start adding additional operation nights. If your only open a few nights over october, then add another weekend or two and see how your attendence is. If your numbers are still worthwhile being open for those additional nights, maybe its time to start thinking about selling tickets.

Hand out questionares to your guest to see how well they liked your haunt and if they would have payed money to see it. If so, maybe ask what a reasonable ticket price would be. Might not get the most honest answers but you'll have something to go off of.

.....just a thought...

[Don_OfThe_Dead]

Don't forget advertising. If you want to have a for profit haunt you can never underestimate the value of advertising. Social media, TV, radio, print, comp tickets/discounts- all of these add to getting you the number of customers you need through the doors so you can make a profit.

[shawng]

Kelly: No, staying is not an option, i have already sold the property under contract closing in November. A questionaire might be good, but i already have the vast majority of people wondering why its free, they are very surprised, so i assume that means they would be willing to pay for it.

Don: Yes, of course, its certainly the most important part.


But again... i hate to keep bringing this up, but one of the main reasons for this post was to compare rental prices and real estate prices where haunts are common, compared to here. Since, as far as my budget an calculations are concernred, thats where the highest, most profit reducing costs are. I welcome as much input as possible

[Kelly Anderson]

Just to throw it out there, there are so many variables or pros and cons to leasing vs. owning. I’m sure I didn’t just tell you something that you didn’t already know.

Each haunt Im sure will have its own experience due to many factors including but not limited to its general market, location, ticket sales, price per ticket, number of different ways to make a profit at your venue, and obviously marketing plays a huge factor in the final outcome.

One haunt (to keep it simple) might just lease a location for a few months, come in, set up, up and running for a few weeks, and tear down and out of there. Based on there expenses vs. there end of season profit, this might be the best option for them and might perhaps be very profitable. Having to be paying on a building all year long might just suck up what profit they had therefore would not be a good business decision for that haunt.

However, the next haunt might have the high number of tickets sales and getting enough per ticket to warrant paying on a location year round (whether renting or owning). Obviously the capital at the end of each season would have to be there to make this worth it.

When it comes to long term leasing vs. owning, one would likely think that in the long run it would be cheaper to own. And depending on the situation, it likely could be. If you had an extremely successful haunt in that area prior to purchasing property, I would say one would feel pretty confident in taking the next step towards permanent location (a location owned by the haunt). If one doesn’t know the area and don’t have the high stats to justify purchasing a permanent location, renting/leasing is probably the better way to go to start off with. And whether making money or not, the flexibility to switch locations for what ever the reason, still remains an option. The way I see it, if you’re making money you got options. If your not, you could be up @#it creek awfully fast.

Our haunt, we own the building. It’s great being able to build all year round. And our patrons always know where the haunt will be from one year to the next. We don’t have any loans out on the property so sure we save there, but the maintenance and bringing certain things up to code still remains. And that costs money too.

I too would like to see some posts on about what haunts are paying for rent, lease, or if they own. But it still boils down to how the income (whatever it is) is spent throughout all aspects of the owning and operating the haunt before you can determine whether it is more profitable to own vs. rent/lease.

Might get more replies asking if haunts like owning a location vs. renting. But I know for us, you can’t beat owning a location! Interesting thread though!!

[Jim Warfield]

How Much Is Your Time Worth?

Should be question number one.
This haunt business sure seems very time consuming from personal experience and other second-hand stories.
Many people have never worked as long and hard in their entire lives doing anything as people building and running haunts will do.
A burning desire to entertain, scare, haunt, own or achieve helps propel us through the negative reality of figuring hourly "pay" when the hours seem unending.
Learning to tolerate a complaining, carping, nasty public is something many people can not ever do, or do well enough to succeed on that higher level of seeming to please the customers.
My story is simple. I bought the neatest old haunted, haunted house ever found anywhere for almost "nothing" (which was more $ than I had) and have done the huge majority of the work here, built most of my displays.
I could justify buying a tool but I couldn't make it if I had a crew to pay.
Alot of dumpster-diving and nail pulling followed.
Never throw anything away until you are Sure you can't use it (or sell it to someone else!)
These tenets might prove rather foreign to a desk-bound businessman, but I made it work with what I had, which has never been all that much by common standards.

[shawng]

Thank you both for those posts, I welcome more feedback.

[HauntedMemphis]

The answer really comes down to... it's all over the place.

Real estate markets are very different in every local market. A property that costs 200k here in Memphis could easliy be 1M in California or New York.

As far as renting vs owning, from everything I've heard, most haunts start out renting seasonally, and then grow from there, usually buying a property after they are a few years in and know what to expect for income. A lot of haunts manage to get leased properties at huge discounts or even for free, because they are associated with charities, or draw people to malls or strip malls, benefiting other stores.

Property is a major consideration of costs, but I'd expect it to end up being a far smaller piece of the pie than you expect. (Read: All the other parts will be expensive...marketing, actors, permits, getting things up to code, etc)

[rwrussom]

Well shawn, I have been watching this thread with great interest in hope of some experienced haunter throwing out a few pearls. No such luck yet, so I will toss you my limited experience.

We are on the central coast of Cali. and the property costs, both rent and purchase, parallel what you quoted. The income needs are very much the same also. While there are many successful haunts in Calif, I know of only one that is permanently housed year round, The Haunted Hotel in San Diego. I would have to say this is due primarily to the same venue cost burdern you are looking at.

For our little operation, we came out of nowhere starting from scratch. We are the same size as you are talking about. Last year was our first year in a community with about 50K people within a 5-10 minute drive and 300K within 45 minutes. Two other operations opened for the first time that year and we ate them up. We had a free building and do not have to move till after this season. That being said, we did not cover the initial start up costs. We came close, and we started with nothing in terms of a show. This year we will certainly do well, but then we will be in the same situation as you in November.

Going forward with a reasonable growth (only time will tell if my estimate holds up), we would be hard put to cover expenses if we have to pay market rate for space in 2011. By my estimate, we will need to the 5th operational year to pay an appropriate rent and make a paycheck similar to what you are looking at. That does not mean it cant happen, it just requires a lot of work, negotiation, luck, and timing. For our area, the most sensible choice when and if the time comes to own is raw land. Build a cheap warehouse and expand as $ allows.

You have one strong advantage over where we started, an ongoing operation to build on. That public awareness is priceless.

The real key here are the expected start up numbers and growth rate. Those are the pearls I was hoping to see. Many have asked, but very few answer.

It really would be fun to hear the stories of the growth of some operations. The type of story that gives insite into how a successful haunt business develops. Im sure the reluctance is all about keeping the barriers to competition up.

[Kelly Anderson]

Just found a couple of old threads about first year attendence or just attendence in general. Might not be the pearl you were looking for but either way might be usfull. LOL



http://hauntworld.com/haunted_house_...umbers+turnout

http://hauntworld.com/haunted_house_...ear+attendence

[rwrussom]

Thanks Kelly,

I forgot about those. There was some good info in the second one for sure. PM conversations have also provided good and generous insite from those who would rather not post there business information in a public forum.

[shawng]

rwrussom: that post was quite helpful, im glad you provided some detailed numbers and insight, i only hope more of this information can be provided by others. Again, as my first post described, California is likely in the same situation as me because of real estate costs, and what you are describing seems to back that up, whereas real estate in the midwest etc is vastly lower cost.