If you've ever considered entering the world of entertainment and recreation through franchising, a Topgolf franchise might have caught your eye. This unique and trendy concept combines golf, dining, and entertainment in one place.
But before you dive into this exciting venture, you must answer the crucial question: How much does a Topgolf franchise cost?
In this article, we'll break down the expenses, potential returns, and everything else you need to know about starting your own Topgolf franchise.
As a Management and strategy consultant, my aim is to provide you with valuable insights into the Topgolf franchise. I will carefully dissect the costs and revenue streams, transforming this into something similar to a consulting case study for a deeper understanding.
Topgolf Callaway Brand
Callaway, officially known as Topgolf Callaway Brands Corp., is a prominent American global sports equipment manufacturer. Specializing in golf equipment such as clubs, balls, bags, gloves, and caps, the company also ventures into clothing through its subsidiary "Callaway Apparel" and golf shoes via "Cuater." Notably, in 2021, Callaway acquired Topgolf, adding a chain of golf-related amusement and event centers to its portfolio.
Topgolf Callaway Brands is listed on the New York Stock Exchange (Traded as NYSE: MODG). To access the latest financial results, check out the announcement for the third quarter of 2023 here.
Table of Contents
Understanding the Topgolf Franchise Concept
Before deep diving into the costs, let's understand the essence of a Topgolf franchise. Topgolf offers a unique and innovative blend of golf and entertainment.
Customers can enjoy golfing in a relaxed, social atmosphere, complemented by delicious food and beverages. The brand has gained immense popularity, making it an attractive franchise opportunity.
Topgolf's rapid expansion is a testament to its soaring popularity, not just within the United States, but on an international scale as well. The brand's widespread acclaim and the enthusiastic reception it continues to receive present enticing prospects for potential franchise owners.
However, beneath the surface of this promising opportunity lies a complex and multifaceted business case that warrants careful examination and discussion. The surge in new Topgolf franchises, both domestically and abroad, is indicative of the brand's remarkable appeal and the potential it holds for savvy entrepreneurs.
Yet, like any business venture, the decision to invest in a Topgolf franchise necessitates a thorough analysis of various factors. From financial considerations and market dynamics to competition and operational intricacies, this is a matter that demands a comprehensive exploration.
In the following sections, we will delve deeper into the Topgolf franchise landscape, shedding light on the opportunities it presents and the challenges that prospective franchise owners may encounter.
By the end of this discussion, you will have a well-rounded understanding of the Topgolf franchise as a business case, allowing you to make informed decisions in this exciting and dynamic industry.
Costs of a Topgolf Franchise
Long story short: embarking on the journey of opening a Topgolf franchise comes with a significant price tag, with costs potentially reaching a staggering $50 million, depending on the location.
While this may seem like an exorbitant sum, our goal is to break down these expenses comprehensively, enabling you to gain insight into the factors contributing to this substantial investment.
Here is an example cost breakdown:
Initial Franchise Fee
To become a Topgolf franchisee, you must pay an initial franchise fee. This fee grants you the right to operate under the Topgolf brand and access its established business model. The exact fee can vary, so it's essential to discuss this with Topgolf representatives.
You can find a franchise form to fill in the Topgolf official website
In addition to the initial fee, you'll be required to pay ongoing royalty fees to Topgolf. These fees contribute to ongoing support and resources from the franchisor.
Location and Construction Costs
Selecting the right location is crucial for your Topgolf franchise's success. Costs associated with securing a suitable site, leasing or purchasing property, and obtaining necessary permits can be substantial. Location plays a significant role in the overall investment.
A Topgolf facility requires a substantial amount of space for construction. Typically, a Topgolf facility encompasses a sprawling 65,000 square feet (approximately 6,000 square meters). This three-story establishment combines indoor and outdoor spaces and boasts an impressive array of features, including 102 hitting bays, bars, meeting facilities, restaurants, and ample seating capacity for over 300 customers.
It's evident that the expenses associated with securing the location and constructing such a facility will come with a substantial price tag.
Equipment and Technology
Equipping your Topgolf facility with the latest technology and golfing equipment is a key expense. This includes golf bays, balls, tracking systems, and entertainment gadgets. Ensuring that everything is in top-notch condition is essential for customer satisfaction.
Staffing Expenses
Running a Topgolf franchise requires a team of dedicated and skilled staff. You'll need to budget for hiring and training employees, including golf instructors, chefs, waitstaff, and maintenance personnel.
Marketing and Advertising
Promoting your Topgolf franchise is essential to attract customers. Marketing and advertising expenses encompass everything from digital campaigns to traditional advertising methods.
Licensing and Permits
Compliance with local regulations and licenses is a necessity. Costs associated with obtaining permits and licenses may vary depending on your location and the specific requirements.
Insurance Costs
Insurance is a fundamental aspect of any business. You'll need various types of coverage, including liability insurance, to protect your franchise from unforeseen events.
Operational Costs
Day-to-day operational costs, such as utilities, maintenance, and supplies, are ongoing expenses that should be factored into your budget.
Income Sources
Generating income from a Topgolf franchise involves a diverse range of revenue streams. While it's evident that patrons visit to enjoy a game of Topgolf while indulging in food and beverages, the scope of a Topgolf franchise extends beyond this.
Think of a Topgolf franchise as more than just an entertainment venue; it can also be considered a high-end sports bar and a versatile event center.
Many organizations utilize Topgolf facilities for team-building events, bringing their employees together for bonding activities. Additionally, companies often leverage these venues for activities such as design thinking workshops or pitching ideas to their clients, followed by a relaxed atmosphere for drinks and perhaps some Topgolf action.
Generating additional revenue is also attainable by hosting events such as birthday parties and bachelor parties, as many individuals prefer Topgolf as an ideal venue for these special occasions.
Furthermore, the opportunity to boost income extends to Topgolf merchandise, including items like caps and shirts that can be sold to enthusiasts and visitors, adding an extra dimension to the revenue potential of your Topgolf franchise.
Topgolf Average US Venue Revenue Breakdown (2019)
Events: 34%
Food and Beverage: 33%
Gameplay: 29%
Other (merch, etc.): 4%
Potential Return on Investment (ROI)
According to Joe Pompliano's reports, the majority of Topgolf venues in the US (75%) boast over 100 bays, with construction costs ranging from $30 to $40 million. These venues subsequently yield annual revenues ranging from $20 to $28 million, with a focus on achieving a cash-on-cash return of 50% to 60% and an estimated payback period of just 2.5 years.
Undoubtedly, this appears to be a promising investment opportunity. However, it's essential to exercise some caution, as this projection seems to me overly optimistic.
Nevertheless, even if we consider a more conservative payback period of 5 years, Topgolf still presents itself as an attractive investment option. The only notable drawback appears to be the substantial initial investment cost.
Topgolf offers robust support to franchisees, including guidance in site selection, training programs, and ongoing assistance. Their corporate team is dedicated to helping investors succeed.
Topgolf also provides comprehensive training programs for franchisees and their staff. Proper training ensures that your franchise operates smoothly and maintains the brand's high standards.
You can read the following Articles for more information about Topgolf Venues:
Tips for a Successful Topgolf Franchise
In the world of business, challenges are inevitable. Expect to contend with competition, shifting market dynamics, and the necessity to adjust to evolving customer preferences. However, within these challenges lie opportunities that you can leverage to your advantage.
Brand Recognition
Benefit from the established brand recognition and customer loyalty that Topgolf enjoys. A strong brand can help drive customers to your franchise.
Competition and Market Research
Conduct thorough research on your local market and competitors. Understanding your competition's strengths and weaknesses can help you position your Topgolf franchise effectively.
Target Audience
Identify your target audience and tailor your services and marketing efforts to meet their preferences. Knowing your customers is key to success.
Sustainability and Green Initiatives
In the current landscape, Environmental, Social, and Corporate Governance (ESG) is a prominent and pertinent subject. Sustainability is a factor that should be on the radar of every company, requiring careful consideration.
Consider implementing sustainability practices and green initiatives. These can attract environmentally conscious customers and reduce operational costs.
Seasonal Variations
Recognize that Topgolf may experience seasonal fluctuations. Plan accordingly to maximize revenue during peak seasons and manage expenses during slower periods.
Success in the Topgolf franchise business requires dedication, hard work, and attention to detail. Provide excellent customer service and maintain the highest standards of quality.
Conclusion
Owning a Topgolf franchise can be an exciting and profitable venture if you are willing to make the necessary investment.
In this article, we've covered the various aspects of the costs associated with opening a Topgolf franchise, from the initial fee to ongoing expenses. While the investment can be substantial, the brand's popularity, support from Topgolf corporate, and potential for a solid return on investment make it an enticing opportunity.
Remember to conduct thorough research, explore financing options, and carefully review the franchise agreement before taking the plunge. Topgolf's unique blend of golf, entertainment, and dining has captured the hearts of many, and with the right location and dedication, your Topgolf franchise could become a sought-after destination in your community.
If you're ready to embark on this exciting journey and have the financial means to invest in a Topgolf franchise, the sky's the limit. As you plan and execute your business strategy, always keep the focus on providing exceptional customer experiences, and success will surely follow.
I know that this investment cost is exceptionally steep, making it feasible for only a select few to even consider. Nevertheless, I hope this article has provided valuable insights to help you on your entrepreneurial path.
If you're interested in this subject, I highly recommend watching a valuable video by Patrick Findaro:
FAQs
What is the total investment required to open a Topgolf franchise?
The total investment can vary, but it typically ranges from $20 million to $30 million, including all initial costs and fees. At some expensive locations, it can cost up to $50 million.
Are there financing options available for Topgolf franchisees?
Yes, Topgolf provides assistance in securing financing, and you can explore options like bank loans or investors.
What kind of ongoing support can I expect from Topgolf corporate?
Topgolf offers extensive support, including site selection guidance, training programs, and marketing assistance.
Can I own multiple Topgolf franchises?
Yes, Topgolf allows qualified franchisees to own multiple locations, subject to approval.
Is there a minimum net worth requirement to become a Topgolf franchisee?
Topgolf typically requires franchisees to have a minimum net worth of $20 million. At the Topgolf International website the requirements are listed like down below:
Ability and willingness to open 5+ Topgolf venues
Strong financial backing (access to $150M+ in capital)
Experience in entertainment, F&B, and/or hospitality
Success in bringing other USA/UK brands to your territory
Experience with large scale commercial real estate development
Strong local market knowledge and connections