Building investor %age

[Frightener]

Ok guys. Again, this is our first year. I found an old building, w/o going into detail, it's 9,000 square feet total. Inside of this is a still licensed kitchen / concession area and a small balcony on one side. Open floor plan.

The building owners are very interested, in fact, they want to sign papers tomorrow! However, the lady is like "AT A MINIMUM... we'll get 30%..." yada yada. Ok, this is off the top. A little history, they use to have a dance here and they always said 60/40. 60% for the band, 40% for them. However, they had to work the building, the door, concession etc.

Does this seem fair to you guys? Or is this way off of what's fair to us? We're investing $26k as of now. WITHOUT the loan that's in process. We're expecting a minimum of 2,000 and estimating 3,500. We can do well, but I just want to make sure this is something you pro's think would be fair.

The contract's written up, just needs printed and all that. CAN BE signed tomorrow, it's that done. But, if you guys say this is ridiculous, we'd like to know.

The building probably has at least 6,500 sq ft of usable space. 3 doors, a double attraction is possible.

What do you guys think?

ANY input is very much appreciated!

Thank you for taking time to read.

Dewayne

[KaoTic Entertainment]

Ok man even if you did 3.500 people for the entire
season thats 35.000 bucks . And thats just for admission .
Not counting if you do concessions or up buys as well. Are they
entitled to your concession profits or t shirt sales .

In my opinion its way to much they are asking you will not even bring in your loan ammount money.
Which is over 27.000 correct . Then you still have to factor in water .and food utilities and Materials .fog fake blood paint excetra
i would counter offer them at 10% .
and you work your own front cashier and front door .

Hope this helps beleive me you will be sorry if you partner with them on their terms.

[KaoTic Entertainment]

But we do wish you the best of luck at any rate

[SCfearfarm]

Maybe you should ask them to do 10% the first year, 15% year 2, and 20% year 3. Just explain that most of your costs are first year and as you grow and gain more attendance their percentage is higher and they will make more too. It also depends on how long you get the building and how much they are willing to do as far as when repairs to the building and keeping everything up to code etc.

[Frightener]

Must've not listed it all.

They want 30% at MINIMUM.
They do concessions. If we sell Tshirts or anything else, it's ours.
They pay for all utilities. Water and elect.

They have a lot of stuff in there and would take about 2 weeks to get it all out. not that big of a deal, but they want to store it somewhere. Which is why I'd say about 6,500 sq ft.


It sounds very high to me, BUT, it's the biggest building we have a shot at doing. It's easy to get to and in a very remote area.


Our gauranteed backup building is 2,800 tops. With about 25 parking spots on loc, 50 beside it and about 80 parking across the road. All of which we can probably use. The parking across the street is owned by our realtor's friend. She said he told her it wouldn't be a problem. He just bought it and doesn't have plans of selling the lot.

This backup place is $1,000 a month. It normally goes for much more than that. We pay utilities, and we pay the rent at end of season. If we end up needing 8 months, we just pay when we leave. We all know the owner and he's adventurous, and loves the idea.

Thanks for the wishes, btw.


Dewayne

[scary bill]

I'm no expert, but it seems awful high. I would look at the back-up. If you get the 3500 people, they get $10,500 for rent. How long do you get the building? Plus concessions are a big money maker, and they get them also. So if you get the building for 2 months, look at the alternate. It is $1000/mo. For 2 months $2000, with about half the space. A first year haunt you may want to go less sq ft and concentrate on better sets. Plus you get concessions.
It is your decision, but IMO they want to much.

[BrotherMysterio]

However, the lady is like "AT A MINIMUM... we'll get 30%..." yada yada. Ok, this is off the top. A little history, they use to have a dance here and they always said 60/40. 60% for the band, 40% for them. However, they had to work the building, the door, concession etc.

This sounds like a really lousy deal for you and a really great deal for them, from the get-go.

Maybe some more of those details are in order, cuz it sounds like you are about to pay these people $26K for the benefit of using their space. Do you rather mean you have invested $26K in operational expenses to build the Haunt as it is, and you are also looking at the fact that they will be taking an additional 30% to 40% off the top before you recoup your investment? I think there are some things that need to be made more clear here.

Either way, I see some red flags here.

To start with, the lady's frame of reference is running a rave or discotheque in the space before hand. There is a WORLD OF DIFFERENCE between a DJ or cheesy cover band coming in and blasting some tunes across a large dance floor or rave like environment with a few discotheque lights swirling in the background, vs. a pro Haunt Team like your own coming in and running a full out Haunted Attraction. One guy coming in and turning on a record player and shouting into a mic "hey, let's shake your booty!" is no where near the operational complexity - or cost - of running a successful Haunt.

A very serious question you get to ask yourself here is, "do your potential new 'partners' understand this distinction?"

Also, your operating costs are worlds apart as well, between your haunting and their "hotdogging". A hotdog out the door, with wiener, bun, napkin, and condiments, is, what, $0.09? The same one that just sold for $2? How about popcorn or fountain drinks? That's something like a 90% markup or more in many cases. Almost pure profit. If they are running concessions, are they expecting to keep that profit? Even if they don't, do they automatically scoop that up with their 30% to 40% off the top?

Also, is this a permanent location, or are you contracting to set up your haunt there each year, while they run it as a rave for the rest of the year? If the latter, then you just lost whatever advantage you thought you had with having a permanent location. Otherwise, where would you store it? Where would you house your year-round workshop to work on the haunt in the off season?

Can you imagine having a good run, doing well financially and just breaking even, and thinking to yourself "wow, that was great! Now, I'll come in next week and start working on those changes I wanted to make, and we'll start setting some other things up," only to have her walk up to you and say, "hey, that was great, when can you be out of here? We have a rave for New Years we need to set up for."



Also, just to put some dollar signs to your numbers, minimally and at our most conservative estimation - assuming a $15 ticket for a two element haunt as you suggest (which seems a standard starting point for an average size show) - you are looking at ($15 x 2000 tickets) - 30% commission for your "partners" = $21K sub-gross. Remember, that's not "net". Gross is total ticket sales. Net is what's left over after expenses have come off the top. You haven't even considered expenses yet, and you're already $9K behind. Whether she even sold one hotdog, or even bothered showing up at all, she just walked off with a minimum (based on your numbers) of $9K. (Nice work if you can get it.)

So, now you're looking at $21K of actual gross. Well, you are already $5K in the hole in terms of recouping your initial $26K investment.

So, next comes the operating expenses, which are what are normally taken off the top. So, to wit . . .

• What about utilities?
• What about actors?
• What about crew?
• What about security?
• What about incidentals?
• What about supplies (fog juice, so on)?
• What about bringing the haunt up to code?
• What about the costs of jumping thru hoops to make the building inspector happy?
• What about the costs of jumping thru hoops to make the Fire Marshal happy, such as having a fire truck out front each night?
  . . . not to mention . . .
• WHAT ABOUT MARKETING!?!?! (That can be $10K at least right there!)

Remember, we haven't even listed the cost of one wall panel, strobe light, or pneumatic clown pop-up. We haven't talked about one goodie from TransWorld. Those are all strictly costs of running a basic haunt and making all the right people happy.

At this point, conservatively speaking, you are operating at a loss. This is why usually the only thing that should be coming off of the top in this is expenses for everything, and then you do your split. That's how most partnerships that I see seem to operate.

Now, what if you do clear 3500 tickets, and your "investing partners" get the more likely 40% they'll push for?

($15 x 3500 tickets) - 40% commission for your "partners" = $31.5K sub-gross; $31.5K sub-gross - $26K initial investment = $5.5K

So at least you have a little leftover after your initial investment . . . or do you? Remember, you still have to account for all those costs.

So, best case scenario, you make an almost guaranteed $0 profit this year.

Your "investing partners"?

They walk away with $9000 to $21000 without lifting a finger.

Now, all that said, if they are the landlords, and their participation in this venture is just that, then the deal is whatever it is, take it or leave it. If you can renegotiate, great, but usually whatever you work out with the landlords is what you work out.

If, however, they are talking like they are going to be business partners with you, this doesn't sound very equitable. You do all the work, they take most of the profit - 30% or more off the top - just leaving you to make bank after expenses and operating costs, and all they have to do is work a few nights in October selling hotdogs. You're working your assets off year 'round for peanuts, and they cash in every October.

Also, who actually owns the haunt? Are all the properties yours, or do they have equity in it? That might be an important question if you decide things aren't working out and you want to take your show somewhere else.

Also, "double attraction"!?! Are we sure? An ideal space for one element ("haunt", "maze", "house", "attraction", whatever) is approximately 4000sq'. You can go down to 3200sq', maybe, but that's tight, and might be pushing it. Especially for only one or two elements. Anything smaller and people will start wondering, "why did I just drive an hour and pay $20 to get in here? So I could pay $3 for a cold hot dog?" (You definitely want to over-deliver while still not breaking the bank, especially since this initial word of mouth will help build up attendance for your attraction for next year.)

And remember, if this is in a remote location as you mention, then people will definitely be driving, so this Haunt better over deliver and be worth the trip. If they pass two or three other haunts along the way (not an uncommon occurrence here in TX) then they might be having second thoughts before they get to your location.

If you are serving concessions, where are your patrons going to eat said concessions? In the Haunt? In line? Most likely, they are going to have to have some sort of proper food area. Well, that just ate into your 6.5Ksq' of functional square footage you mentioned. What about actor areas, operations areas, behind the scenes or backstage type areas? That just ate into your available square footage even more.

Selling t-shirts and swag? Great money maker, but you just ate up more square footage.

Where is everyone going to stand in line? Outside in the cold? Outside in the heat? In the North it gets frigid cold. Here in TX, it's hot and muggy. What exactly was the point of getting such a big building if everyone can't be inside? Ergo, you'll need to factor waiting lines into the use of the available square footage. And remember, two elements = two queue lines.

So, if you can't effectively do two elements in your haunt, and you are stuck to just doing one this season (not having adequate room for the other one), then you only have the one element. And unless you can get more than 10 minutes out of it, you are looking at $10 a ticket instead of $15.

($10 x 2000 tickets) - 30% to 40% commission for your "partners" = $12K to $14K sub-gross; $12K to $14K sub-gross - $26K initial investment = $12K to $14K in the hole.

And, again, your "partners" walk away with $6000 to $8000 without lifting a finger.

(btw, did we consider what happens if next October gets rained out . . .)

[Dark Scares]

In my opinion it is pretty high especially if they are getting concessions.

[Frightener]

Thanks guys. I literally woke up an hour ago and instantly thought "WTF??" She's too greedy. I mean, the building is in rough shape. It has leaks. There's NO WAY they can turn that building into a dance ..or anything again w/o spending thousands fixing the leaks.

The building hasn't been occupied by more than ghosts and fleamarket left overs for at least 5 years or more. It is huge, but yeah, after sleeping on it, I'm more pissed than anything.

Thanks for the input guys, a great response so far.

I got all week to finish thoughts on it. I'll run more numbers and see.



Thanks again,


Dewayne


So if we get them to deal with 30% of PROFITs, allowing us to pull most / all of our investment, what do you think then? Deal maker or no? I'm only wanting to retrieve $15,000 of the $20 of savings, and pay the first year's payment of the loan. If possible. I'm not really expecting to make profit until year 2 or 3. EVERYTHING is ours. I have 2 pneumatic props, 8 fog machines, a snow machine, 9 static props, tons of body parts, 40 masks etc... all of this is mine. No one owns a bloody thing but me! (pun intended) and yes, we're buying a LOT more stuff :P

The remote part, lets put it this way. It's in the middle of a town that's like 400 people. If you drive literally 8 minutes west, you hit 5,600 people. Drive 9 minutes south, 75,000 people. Go back to the haunt / building, drive 14 minutes north, 29,000 people. Another 15 minutes you pass another 45-50k people. (these are a lot of small towns accumulative) The way the towns are, make them all circles. But them together you got a space in between, right? Well, that's where this place is, smack dab in the gray area between all the towns. But a very short distance to any real population. You have to see the map to understand how it's laid out.

Just reread your big post Brothermysterio. Thanks for all the insight. It's very helpful. Around here, most haunts start at 1,000sq foot. They're the bologna n gravy haunts, if you will. But, they still get the lines! I was thinking 2 , 2,500 sq ft haunts. So do you recommend us doing one large one?

[BrotherMysterio]

I got all week to finish thoughts on it. I'll run more numbers and see.

Well, definitely consider the numbers I gave you. Those were merely "broad brushstroke" numbers and already you were in the hole a considerable amount, while she walks away with a guaranteed profit every single time, no matter how you run the numbers.

Also, where is the money coming from to renovate the place, and how is that going to eat into your production time? You want to be building no later than June or July at least! Much earlier if you can manage. You need the building inspectors and fire marshals doing their thing early on, so you don't have any last minute surprises. How exactly do you explain that your haunt won't be ready for the building inspector to insure safety cuz the entire building needs to be renovated to be brought up to code. I can't imagine that a leaky roof, for instance, would meet code to start with, or be safe for that matter.

Also, I don't necessarily think that the lady was being greedy (tho she may very well be). I just think she is was woefully misguided in understanding just exactly what the business model was that you guys were considering. Be careful not to vilify her because of her ignorance. If she was sincere, on the up and up, and had wished to operate above board, this could prove to be a valuable learning opportunity for her, and a good business opportunity as well.

Consider her original arrangement: she had a large, empty building with a light amount of decor and theatrical lighting, with the DJ's turntable on one end of this empty building, and her concessions area on the other side. She's busy working in the kitchen, cranking out hotdogs and whatnot. He's on the other side, standing there, running a CD player or some vinyl, saying "shake your booty!" every 10 minutes or so. Exactly how much harder was his job than hers?

Also, the 40% "off the top" part is a total misnomer. In the original DJ/concessions scenario, there was no "off the top", cuz there was no "overhead". Apart from utilities, and paying a small amount of staff, what overhead was there? A bunch of ravers show up and dance for 5 hours in an otherwise empty building? Where's the cost in that? That's the total polar opposite of what a Haunt is.

So in that scenario, a 40/60 split makes sense. In this haunt scenario, it doesn't. Not by a long shot.

What would make sense is something like this. You invested $26K for your stuff, right? And she owns the building, right? Then she gets to invest her own $26K or such in renovating the building, independent of you. It is her building, afterall, not yours, and you shouldn't be responsible for her property, nor should you be expected to fix it up for her either.

Then the two of you run the Haunt together, with her and her team running concessions and basic operations, such as ticket taking, selling swag, parking lot security, and all that; and you and your team running the Haunt operations, such as actor management, inside haunt security, cast and crew operations, all the usual stuff.

You would also want to stipulate that you assume and maintain full artistic discretion, and that no one on her team, including her, can start dictating production parameters or changes to the show. All decisions pass thru you. (Of course, she shouldn't have a problem with this if you take a non-offensive, scary-not-gory approach. Iow, no dead baby corpses hanging from the walls, or torture p0rn.)

After that, once you have your gross for the season, all expenses come off the top FIRST, then you divide the net, and anyway you work it is fine, be it 30/70, 40/60, or even 50/50. I think that even 50/50 would be fair, cuz she would have as much of an investment in this Haunt's success as you; you with your goodies, and her with the roof over your heads. This would also be a much more fair and partnership-driven split, and would reflect the true division of labor involved.

Or, you could work it separately, with her handling and keeping concession and swag monies, and you handling and keeping ticket receipts. Ergo, food/swag represents her profits, and tickets represent your profits. That way there are no feelings of dipping into each other's pocket. Of course, that only works if she makes money. If she doesn't net as much as you, then she might want to boost her earnings with "rent". It would be best to probably treat it all on the same books and be in this thing together.

The remote part, lets put it this way. It's in the middle of a town that's like 400 people. If you drive literally 8 minutes west, you hit 5,600 people. Drive 9 minutes south, 75,000 people. Go back to the haunt / building, drive 14 minutes north, 29,000 people. Another 15 minutes you pass another 45-50k people. (these are a lot of small towns accumulative) The way the towns are, make them all circles. But them together you got a space in between, right? Well, that's where this place is, smack dab in the gray area between all the towns. But a very short distance to any real population. You have to see the map to understand how it's laid out.

No, actually, that makes a lot of sense. So, basically you wouldn't be remote; just not in the midst of a densely populated area, even tho you have several population centers all around you. That would make for an ideal location. It would be cool if this could work out for you, just not the way the lady had it first set up. What I outlined above would be a better start.

Just reread your big post Brothermysterio. Thanks for all the insight. It's very helpful. Around here, most haunts start at 1,000sq foot. They're the bologna n gravy haunts, if you will. But, they still get the lines! I was thinking 2 , 2,500 sq ft haunts. So do you recommend us doing one large one?

Well, if that's the case, you are doubly blessed, and have a lot working to your advantage. As far as recommending doing a large one vs. two small ones, well, by definition, for your area, you would be doing a large haunt . . . two, in fact. Also, if you could work in some triangular grid, then you would be packing a lot more haunt into the same amount of space, which would carry things even further. In fact, if most haunts are working at 1000sq', I wouldn't push it to 4000sq', cuz that would probably be too long for most of your patrons, at least at first. Take advantage of the smaller economies of scale for your area and just do one that's a bit larger, such as your aforementioned 2500sq' vs. the more common 1000sq'.

Another possibility for doing two elements while not doing two actual elements is to look at a triangular mirror maze. No staff, no props, no nothing, except just the walls and mirror panels, and yet it can prove to be a very hot item. Incidentally, while mirror mazes look infinite (which is their appeal), you would be surprised at how small they can be. The one Rocky Point used for a few seasons was only 500sq', and yet you'd think you just walked into an infinite dimension, like something out of World of Warcraft or something. One guy in England is the acknowledged master of triangular mirror mazes, and he's done scenarios like Arthurian Legend, with finding Excalibur and the Holy Grail and whatnot.

Not bad for a 500sq' element with no staff or props, save a sword in a stone and a gold goblet, both behind some two-way glass with a light on a timer.

If not something like that, then consider other simpler add-ons that fit your theme and that don't require a full haunt staff to run. A full haunt may be more than enough to chew on for the first season, but if simple add-ons can round out the picture, like carnival games or a monster photo booth, then that's something to consider.

Chris