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TopGolf Entertainment Group CEO takes swing at expansion (4/15/16)

By Korri Kezar

In the first four months of 2016, TopGolf Entertainment Group has announced a major acquisition, sold a sizable minority stake and restructured.

The Dallas entertainment company, which operates 24 golf venues in the U.S. and United Kingdom, announced in January its acquisition of World Golf Tour, a San Francisco-based online and mobile golf game that it says will help expand its digital offerings. Terms of the deal were not disclosed.

In conjunction with the buy, TopGolf formed holding company TopGolf Entertainment Group, headed by co-chairman and CEO Erik Anderson. Anderson is also the founder and president of Washington investment firm WestRiver Capital, one of TopGolf’s major investors.

TEG oversees three divisions: TopGolf, which will operate the company’s U.S. and U.K. centers and continue to be headed by CEO Ken May; TopGolf International, which will oversee the company’s global expansion and be led by Neil Allen; and TopGolf Media, which will spearhead digital media, strategic partnerships and sponsorships for the company and be headed by WGT co-founder and CEO YuChiang Cheng.

“Working with the customers and creating content is a different business than running a physical (TopGolf) site,” Anderson said of the company’s decision to restructure. “The folks at TopGolf Media get to take the brand outside of the four walls and continue those experience, and that’s a different skill set.”

In February, TEG sold an undisclosed stake to Rhode Island private equity firm Providence Equity Partners, the company’s fourth major investor. In addition to WestRiver, other stakeholders include former Santander Consumer USA Holdings CEO Tom Dundon and California’s Callaway Golf Co. (NYSE: ELY).

In the midst of the shuffle, newly appointed Anderson is guiding the company toward national and international expansion. This year, TopGolf is expected to open eight venues and break ground on another 10 in the U.S. It is also in conversations to build facilities outside its U.S. and U.K. footprint.

He told us more about TopGolf’s latest deals and what lies ahead:

Why did you choose to partner with Providence Equity? We went out and talked to quite a few (private equity groups). Providence emerged as a good fit because they really understand the idea of what we’re trying to do, which is have this physical presence and attach it to a digital footprint, building a brand and experiences that go outside the four walls.

Why did TopGolf decide to build a digital presence and acquire World Golf Tour? We have deep engagement with our customers. They’re here for hours, because we’re a stay-and-play brand. And with such a large customer base, it became clear that we could continue to bring other interesting entertainment and social elements to them. To be in touch and consistent with your customers, you really have to have a mobile and digital presence, so we decided we were going to build that and build lifestyle content around that. When we found out WGT was available (for acquisition), they were a perfect fit. They have a large golf audience – 12 million to 14 million customers. They have a great digital platform and an understanding of creating content around their game. The team there has deep experience with sports and gaming properties.

What types of sites do you look for when building a TopGolf? We look for a dense business population because people like to come here for business events. We’re looking for a demographic that’s a little upscale. We’re a mass market, but we probably skew toward a little higher income range. And you’ll often see Costco stores or big theaters near us. It’s not a secret: You go where there’s enough people, and people who would enjoy spending money on entertainment.

How important are groups and corporate events to your business? Events make up between 30 and 40 percent of our business, and they run the gamut of corporate events that are entire buyouts of the facility to four- and six-bay events. We can also add content for events. For example, if you’re a car company hosting an event, we can put pictures of your cars up on the screens in the facility.

How does TopGolf bring in customers over other entertainment options? People like being outside hitting golf balls. It’s very social, and you’re not watching, you’re doing. If you’re here, you can watch a sports game, talk to your friends, engage in social media, listen to music and play TopGolf. We’re noticing people are sometimes putting six people right in the bay at the same time, so it’s a great value proposition. And they’re having fun, creating their own environment.

Who is your average customer? We’re about 60 percent men and 30 percent women, and about half golfers and half nongolfers. Millennials are our core demographic, between the ages of 18 and 34.

How much of your business is done in food and beverage? It’s big – around half of the business. Quality and creative food and drinks are a huge part of the social experience and being with friends. We’re always improving the menu or thinking about new things.

ERIK ANDERSON : Co-chairman and CEO of TopGolf Entertainment Group
Hometown: Spokane, Washington
Education: Bachelor’s degree in management engineering from Claremont McKenna College; bachelor’s and master’s degrees in industrial engineering from Stanford University
Other jobs: Founder and president of West River Capital
Boards and organizations: Founder, chairman and CEO of America’s Foundation for Chess; director for Avista Corp. (NYSE: AVA) and Singularity University
Hobbies: Spending time with his children, water skiing, chess
Golf handicap: 14

http://www.bizjournals.com/dallas/print-edition/2016/04/15/topgolf-ceo-takes-swing-at-expansion.html