A multi-court basketball fieldhouse is doing such brisk business in Fishers, its owners have decided to franchise the operation.
Scott Burton, CEO of The Fieldhouse, said deals have already been signed with franchisees in Merrillville and in Naperville, Ill. The local firm hopes to have up to seven franchise locations open this year, and is in discussions with groups in Atlanta, Austin, Chicago, Dallas and Kansas City. Negotiations are also taking place with potential franchisees in Minneapolis, Orlando, San Diego, Tampa, Toledo and even London, England.
"We have a formula that works very well, and we think it can be replicated with great success in other markets," Burton said.
Burton opened The Fieldhouse in 2004. Burton, along with Mark Tamm, a director at The Fieldhouse, and Fort Wayne businessman Todd Hensley, launched U.S. Basketball Fieldhouses LLC to franchise the concept. They anticipate franchisees' opening 10 to 12 basketball venues per year beginning in 2009.
USBF is charging a $125,000 franchise fee plus 2 percent of revenue. The franchise fee seems high, franchising experts said, but the 2-percent royalty is below the norm. McDonald's, for instance, charges a $45,000 franchise fee, but collects 12.5 percent of a franchisee's revenue.
Burton said it cost about $3 million for his 53,000-square-foot building--which houses six regulation-size basketball courts--and the land it sits on.
The initial capital outlay might be daunting for operators, said Kevin Murphy, a San Francisco-based attorney and franchise expert.
"It won't be easy to find investors in a basketball facility with that kind of capital," Murphy said. "The total investment for a McDonald's franchise, by comparison, is between $506,000 and $1.6 million."
Burton believes he has a formula that will help fieldhouse franchisees reach profitability quickly. He said his operation has been profitable from the outset while making payments on the 15-year loan for the building and land. Burton expects to have the loan paid off in 10 years.
Burton, a former attorney with Barnes & Thornburg, said he has achieved about 15-percent annual growth in the four years The Fieldhouse has been open. Burton declined to reveal annual revenue.
Those familiar with Burton and his partners praised their experience operating basketball venues.
Burton, who has seven sons, said he learned much of what does and doesn't work in a basketball facility while attending his children's games. Burton is the majority owner of The Fieldhouse in Fishers.
Hensley operates Spiece Fieldhouse in Fort Wayne and is an officer with the U.S. Specialty Sports Association, one of the nation's largest organizers of youth basketball leagues and all-star tournaments.
Comments from visiting team members and coaches got Burton thinking about the franchise concept.
"Visitors kept saying, 'We'd love to have something like this in our city,'" Burton said.
In addition to the hardwood courts, The Fieldhouse in Fishers includes a mezzanine level, concession areas, locker rooms and training areas.
Key to The Fieldhouse's success is an interior layout that maximizes capacity and creates efficient traffic flow for players, coaches and fans, Burton said. The Fieldhouse is designed specifically for basketball and does not accommodate any other sport.
The Fieldhouse recently hosted a weekend youth tournament featuring 95 teams from six states. Burton boasted that The Fieldhouse hosted 72 games on a single Saturday.
With registration for youth tournaments normally ranging from $300 to $700 per team, The Fieldhouse would appear to be a solid financial scorer.
The Fieldhouse also conducts adult leagues, but youth basketball is its big moneymaker.
Burton also said he will show franchisees how to pick proper locations. Since the facility caters to travel tournaments, easy highway access and visibility are key, he said. Burton's facility is off Interstate 69 near 116th Street.
"There's a lot more to running the facility than saying, "Build it and they will come," Burton said. "That makes a great movie, but not a great business model."
There's one other crucial element to franchisees' success.
Burton said by operating a Fieldhouse franchise, facility operators can tap into what he hopes becomes a powerful regional and national youth basketball network.
Each franchise will run numerous local leagues and will, in turn, direct their league teams to tournaments at other Fieldhouse franchisees. Hensley's involvement in USSSA will no doubt be crucial to that initiative.
Burton said it will be up to each franchisee to network with local league program directors, coaches, schools and parent groups.
Murphy, the San Francisco attorney who works with thousands of franchising operations nationwide, said he's never heard of another operation like this one.
"They're pioneering new territory," he said. "Marketing will be key to its success, and they'll need to rally the franchisees around a unique brand and image. But given the country's growing appetite for youth sports, this could be a good time to try this."
Americans are indeed hungry for youth sports.
The growth in Amateur Athletic Union and other all-star leagues and travel tournament participation has been well-documented over the last 15 years. According to the Washington, D.C.-based Sporting Goods Manufacturers Association, there's been a 26-percent increase in youth basketball participation over the last decade, with the increase in girls' participation more than 35 percent. According to industry sources, 20 million children nationwide play basketball in at least one league.
"The explosion of club basketball took off in the wake of the Michael Jordan era in the mid 1990s," said David Morton, president of locally based Sunrise Sports Groups. "In general, kids now start specializing in a specific sport at a much earlier age, and that has given rise to these sports-specific facilities."
In certain sports, school-sanctioned leagues are eschewed in favor of club or travel teams, Morton said. "Basketball and soccer are two of the primary sports where there's been growth in the club movement."
Operating a basketball facility, though, is far from a slam dunk. Several facilities in the Indianapolis area--as well as other cities--have failed in the last decade. Burton said failure often has to do with location, layout and lack of community connections.
Some industry experts think the market is becoming saturated.
"In the markets they're looking at, there are already some good facilities," Morton said.
Burton believes Fieldhouse franchisees will stand out.
"We think we're creating the gold standard when it comes to basketball," Burton said. "If sports facilities are automobiles, we want to be a Mercedes."