Minimum wage increase, payroll costs rising, operational inefficiencies, and staffing challenges – these are just some of the issues facing the Trampoline Park segment. Keeping businesses sustainable, while still retaining a competitive share in the market is a definite challenge for the segment, but the biggest issue tends to be higher staffing costs.
There are currently regulations in place affecting minimum wage increases in most states. In the graphic below, it is clear that payroll cost is significantly increasing. In fact, payroll cost in some states is increasing by 50% which already sounds like a huge increase. Putting it in more concrete terms, on average, that amounts to $170-$180K in additional costs…and that is not even taking into consideration all of the other costs associated with running a successful trampoline park. Shrinking profits are becoming of a reality, especially if there is no technological infrastructure in place to spot inefficiencies.
These shrinking profits is an added burden to the already less efficient staffing operation. On average, locations with inefficient staffing are overspending $70K. Magnify that loss with the additional labor costs because of regulations, and you begin to see there are larger problems that need to be addressed.
We have discussed in the earlier blogs, the issues related to marketing, customer retention and acquisition, and some of the more customer-facing challenges trampoline parks face. However, there is an operational side to running this business that cannot be ignored, especially as wages continue to rise. Without identifying operational and staffing efficiencies, most of the businesses will start losing money and will become toxic assets. The valuation of the business will decline resulting in a non-viable business.
The first outcome of these labor costs is that locations with inefficient operations will begin to incur deep losses, and potentially shut down. The rosier outcome is that locations that implement slightly better labor operations will barely survive at break even levels.
So how do you pay your staff wages without incurring huge losses? Is it all doom and gloom from here?
Of course not. While there is no silver bullet, but there are some measures you can put into place to ensure that your business is operating efficiently. The earlier point about having a technological infrastructure in place becomes more salient, because that is how you reliably predict your labor needs and use that as your starting point.
Rivette’s predictive and AI algorithms not only help improve operational efficiency but also help your trampoline park improve or maintain its profitability. Using your own analytics and data, Rivette can help you identify areas for improvement, and help you maintain your labor costs without shrinking profits.