Management Firm Streamlines AMF’s equipment Operations

Vending Times Magazine

AMF Bowling Centers Find Greater Efficiency In Amusement And Vending Operations Through Alliance With Pelican Communications.  MECHANICSVILLE, VA – With an inventory of nearly 10,000 amusement and vending machines in 340 U.S. locations, AMF Bowling Centers qualifies as one of America’s largest operators. Chuck McAulay, AMF director of in-center entertainment, said that while coin-op equipment contributes a relatively small percentage of AMF’s total gross sales, they nevertheless comprise a higher percentage of AMF’s operating cashflow.

McAulay — a one-man department at AMF headquarters — is also in charge of the company’s Xtreme Bowling program, which adds exotic lighting and sound effects to certain lanes in order to appeal to younger players. How does McAulay manage this vast coin machine empire?

As of Nov. 1, 2006, Pelican Communications (Danville, CA) assumed responsibility for overseeing almost all amusement and vending operations in all 340 AMF sites. Pelican in turn works through a strong network of subcontractors. These local and regional operators install, service, rotate, and collect the machines under Pelican’s and McAulay’s close and constant supervision.

“We are six months into our fiscal year and all our numbers are good” McAulay said in January. “Bowling and F&B revenues are both strong; games are also doing well. We are very happy with Pelican’s performance.”

Pelican is a national amusement and vending management company. Its other key accounts include 175 Greyhound bus terminals, 359 Costco Wholesale stores, WorldMark Resorts, Godfather’s Pizza, Round Table Pizza, and 520 restaurants of the Metromedia Restaurant Group (Bennigan’s Grill & Tavern, Steak ‘n’ Ale, Ponderosa and Bonanza).

Pelican’s staff of 22 includes 10 national and regional managers supervising more than 350 affiliated vending, amusement and pay telephone operating companies in 45 states, who are under contract providing service to Pelican’s client locations.

Currently, Pelican’s AMF structure includes contracts that are divided among nearly 200 operators nationwide.

A single AMF location may have as many as seven different operators: one for video, one for cranes, one for snack venders, one for ice cream vending machines, one for beverage machines, one for a photo booth, one for bulk, etc.

For the convenience of location store managers, Pelican now maintains a single 800 number that managers can call for service on any type of coin-operated machine in the location. Pelican staff then route the call to the appropriate operator.

AMF president Fred Hipp, McAulay, and AMF’s field management are all pleased with Pelican’s performance, McAulay said. He cited improved equipment inventories, based on “a really good formula for equipment selection and rotation,” and prompt, expert service. As a result, he said, improvements in AMF’s coin-op revenues are already evident.

McAulay described Pelican president Richard Scherer as “a solid professional” whose company proved its managerial expertise, service and technical skills by taking on several of AMF’s most challenging individual stores, prior to assuming responsibility for AMF’s nationwide route operations last year.

Pelican executives say their client locations “have a genuine need for someone to oversee this area of their business, as they neither have the time, personnel or expertise to perform this task.”

With the AMF account, said Scherer, “We changed operators in 200 locations. A great deal of negotiation and contracting took place with the new and remaining operators to change equipment as well. My team visited nearly 300 locations during the transition as we assumed responsibility for overall management. And we’ll see them all again before the end of the second quarter of 2007.”

The AMF team approved the earnings targets set for Pelican, the split of the national cashbox with Pelican, and Pelican’s overall operating strategy and approach. ““We told them where we wanted to take our coin-op business, and they felt they could meet our targets,” McAulay said. “We felt if they managed their vendors well, there was room to improve and make the numbers.”

McAulay retains overall responsibility for AMF amusement and vending operations, and said he exchanges emails and speaks on the phone “many times each day” to Pelican vice-president of national accounts Sean Hanna, who works from an Atlanta office. McAulay also visits AMF stores in person, both with and without Pelican managers at his side, throughout the year.

All three entities — AMF, Pelican, and local contract operators — share in the cashbox. AMF does not know what percentage split Pelican maintains with its local operators, said McAulay. So long as Pelican performs as promised, he said, Pelican’s arrangements with its subcontractors are Pelican’s business.

During last year’s negotiations with Pelican to take over responsibility for the entire AMF route, McAulay explained, “I said to Pelican that we’ll look at percentages carefully, but at the end of the day we look at what goes in the bank. It’s the old story — a smaller percentage of something big is often better than 100% of something small.”

He added: “We knew Pelican would bring in attractions that would bring in more customer traffic. It means compromising on the split but I see it as a win-win. I know it’s a cliché but it’s true, and I’ve always lived by it. When I was managing our subcontract operators directly, I did my best to give them the margins they needed to provide us with superior equipment and service because I know that ultimately comes back to us in the cashbox.”

Approximately half of AMF’s centers have dedicated game rooms. The size, location, and individual configurations of these game rooms vary considerably from store to store. In those AMF stores that have no game room, amusement machines are located on the concourse adjacent to the bowling lanes and elsewhere in the center.

Only a dozen or so AMF game rooms have redemption counters that support up to 10 ticket dispensing games. “Ticket redemption is not a huge part of our business because of space requirements,” said McAulay. But he views both ticket-vending and prize-vending equipment as “a big attraction for kids and birthday parties, which represent significant business for us.”

Accordingly, AMF leans chiefly on high-end merchandisers and cranes, which have a small footprint and require no attendant. Future plans aren’t set but may call for an expansion of ticket redemption into more AMF centers, largely supported by automated combination ticket takers and prize venders, such as Benchmark’s standalone Tickets To Prizes machine.

McAulay, Scherer, and Hanna pay extremely close attention to the AMF equipment mix. “As the industry continues to evolve,” said McAulay, “we see a continued evolution away from video games and toward redemption and merchandising. We are experimenting with interactive novelties such as boxing games and other niches such as digital imaging booths.”

The size of AMF’s video component may be smaller than it was a decade ago, but McAulay said certain types of video remain a crucial part of the mix. Two-player, deluxe sitdown video drivers such as Raw Thrills The Fast and the Furious and F&F SuperBikes, as well as shooting games like Namco’s Time Crisis series and Sega’s House of the Dead 4, are “doing very well for us,” he said. Some countertop videos are also operated in AMF’s lounges.

Scherer said Pelican mandates that certain “basics” go into every AMF location including certain dual drivers, a couple of cranes and merchandisers, and certain bulk venders, plus basketball games where space allows. At the same time, Pelican’s target mix varies from store to store according to space available, local customer demographics, past earnings of that particular location, and other factors.

In addition, while Pelican provides clear guidance to its subcontract operators in terms of the targeted equipment mix, Scherer and McAulay also leave room for independent judgment and individual choices on the part of local operators. “We give operators choices of certain types or categories of equipment and let them choose the specific brand or model so we’re not dictating the entire inventory,” said Scherer. “The result is that no two AMF Bowling Centers are precisely identical in terms of their equipment offerings.”

Most AMF centers have a lounge and are typically equipped with a jukebox. Most are CD machines; however, in the fall of 2005 Pelican began experimenting with TouchTunes boxes as the sole music source in two Bay Area, California AMF stores.

Putting a top-grade jukebox into a bowling center lounge is a “tough call” because traffic can be light in some lounges during the week, McAulay said. But early results of the TouchTunes jukebox on the concourse are good, he reported. McAulay says the company is considering expanding the number of downloading jukeboxes across the chain.

AMF owns and operates more than 300 time-play pool tables – an element that Pelican is changing. “We’re testing the replacement of some time play tables with tables that offer a choice of modes, like the Valley-Dynamo Metro,” said Scherer. “We think a lot of these moves are long overdue for AMF. So there is a significant opportunity to improve revenues.”

In some centers, the American Poolplayers Association runs league promotions on AMF’s behalf. This alliance may expand in the future since AMF and Pelican run no pool leagues or tournaments themselves.

Similarly, while some AMF centers include a limited number of dart machines, neither AMF nor Pelican run dart leagues in the chain, McAulay said. He and Pelican’s team are exploring the possibility of working with the American Darters Association to bring a strong dart league program into the chain.

“There is simply a natural tie-in between bowling and pool, just as there is a natural tie-in between bowling and darts,” said McAulay. “We see a nice opportunity to tie that all together into a uniform program through Pelican, APA, and ADA.”

AMF, founded in 1900, invented the bowling industry’s first mechanized pin-spotter. The company now employs about 10,000 people across its 340 U.S. centers, plus 9 in Mexico. AMF president Fred Hipp, a restaurant and hospitality industry professional who was previously with California Pizza Kitchen, came aboard in March of 2004.

Bowling remains AMF’s core attraction with a healthy mix of league and open (casual) play nationwide. “Open play is growing in most of the country,” said McAulay, although league play remains a mainstay in several regions such as upstate New York.

Food and beverage sales comprise AMF’s second-largest revenue source. The company is developing a lane service program that has wait staff taking orders and bringing food to bowlers at their lanes, an initiative that is helping to drive higher F&B revenues.

Game rooms have been a niche for AMF centers for more than a decade. The company owned its own games at first, but began transitioning to operator partnerships in the late 1990s. By the time McAulay came aboard AMF in the fall of 2001, 90% of AMF games were operator-owned.

AMF centers include 650 Pepsi cold drink venders under an exclusive deal with Pepsico, and 525 snack machines. A handful of cigarette machines continue to operate here and there.

A sister company, Qubica-AMF, manufactures and sells products ranging from hi-tech scoring systems to turn-key bowling centers to the bowling industry. Its most famous coin-op game products are two small-ball, arcade bowling units called Route 66 and AMF Thunder Bowl.

Born in Scotland, Chuck McAulay moved to Canada in the 1970s where he first worked as a nightclub disc jockey, then began designing sound and light systems for nightclubs. Eventually he served as director of marketing for Canada’s Burger King restaurants, and later for Canada’s Blockbuster video rental store chain.

McAulay moved to Virginia in 2001, where his first assignment with AMF was amusements manager. At first he oversaw 120 operators. “It was absolutely crazy,” he says today, with obvious amusement at the memory. McAulay also supervised AMF’s food and beverage operations for a time.

Prior to AMF’s alliance with Pelican, McAulay sought to simplify AMF’s amusement business by drastically reducing the company’s operator base. From 2001 to 2004, he slashed the number of amusement and vending companies in the AMF stable from 120 to just 30.

“My rationale was two-fold,” he explained. “With more business assigned to fewer operators, you get economies of scale. It also was easier for me to manage as a one-man office with other responsibilities.”

In 2005, AMF contracted with Pelican to handle two tough amusements markets: Seattle and Oregon. “After several months, Pelican achieved a very good performance through their relationships with their vendors and their extensive knowledge of industry,” said McAulay.

AMF subsequently expanded Pelican’s territory to include Sacramento and several other centers. By the time the parties began negotiating the nationwide management agreement, Pelican was already managing amusements and vending in 10 AMF districts.

McAulay and Scherer both speak of a relationship based on strong mutual respect and personal admiration. For all the emphasis on money and machines, said McAulay, it remains a people-oriented business.