TOPGOLF ENTERTAINMENT GROUP (TEG) – Privately held “Up & Comer”

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Food/Entertainment/Leisure Segment

Topgolf Entertainment Group (TEG) – Previously Topgolf International, Inc.

We have previously described how the “restaurant/retailing” industry has evolved to where it is no longer adequate to provide “consistent” food in a “functional” setting with “courteous” service. Those elements have become a “given”. The more sophisticated, demanding and time stressed consumer is increasingly searching for an “experience” that satisfies a number of needs. Participation in the dining experience, by way of creating the meal, ala Blaze Pizza or MOD Pizza (as described in our previous “Up & Comer” articles, or enjoying the meal “show” such as Benihana still provides after all these years) are a couple of top of mind examples. Topgolf, as described below, is a clear leader in this regard with their combination of food, leisure, and entertainment.

TEG is a holding company with three divisions. The first two are golf/entertainment venues in the US and UK. The third, Topgolf Media, is focused on advanced digital media, strategic partnerships and sponsorships. Early in 2016, TEG acquired World Golf Tour (WGT), which is the leading web and mobile golf game with more than 14 million worldwide players.
Topgolf was first developed in 2000 by the Jolliffe brothers in the UK. The US licensee, WestRiver Group, was the lead investor for the US licensee who brought Topgolf to the US in 2005. Callaway Golf Company (NYSE:ELY) became an investor in 2006, as did Thomas Dundon in 2011. Most recently in February 2016, Providence Equity Partners made a significant minority investment in TEG.

Topgolf provides consumers a unique entertainment experience. This includes a multi-level golf driving range combined with food and beverage offerings. Within the driving range experience, computer chips are imbedded in the balls that allow players to track the accuracy and distance of their golf shots. Targets are provided on the range, with monitors at each bay allowing seven different competitive games to be played. Players can work on everything from chipping to their long drive. At most venues, bays are rented by the hour with unlimited balls provided, as well as a rack of men’s and women’s golf clubs in each bay. There is a Bay Host provided (analogous to wait staff) in each bay to deliver food and beverage to up to six players. Half the visitors to Topgolf venues describe themselves as non-golfers. Topgolf is truly a multi-purpose venue that combines golf, food and entertainment. Topgolf also provides interactive experiences to the community such as lessons, leagues, tournaments, KidZone parties and social and corporate events. Locations make an effort to involve themselves in the community through family and charity events, free golf for high school golf teams, discounts for police, fire and EMS personnel as well as active-duty military personnel and veterans. Each location actively uses social media, sometimes sharing with nearby units. The company considers leisure time competition to broadly include facilities such as bowling alleys and movie theatres.

Based in Dallas, Texas, Topgolf currently has 24 venues, including the three in the UK. A typical venue sits on about 10-15 acres of land with 102 bays. The bays are cooled in warm weather and heated in cool weather, providing up to an additional 20 degrees of warmth for the guest. Each venue employs approximately 450 people, and 150 of those are full-time positions. The majority of Topgolf food is made fresh daily. There is a large bar, booths for dining, a third floor outdoor lounge with live DJs and music on the weekends. Non-golf games, such as shuffleboard and Xbox Kinect, are available within a lower lounge. Approximately 450,000 visitors are projected for each venue annually.

Executive leadership includes Co-Chairman and CEO Erik Anderson, one of the concept’s earliest investors who was instrumental in bringing Topgolf to the US. He is President of WestRiver Group, which has remained one of the lead investors. Ken May joined Topgolf in August 2013 as COO and was appointed CEO in July 2014. Previously, he was CEO of FedEx Kinko’s and President of Krispy Kreme. CFO is William Davenport, previously Senior VP of Finance (for Chili’s and On the Border) at Brinker, previous to that VP of Finance for Neiman Marcus.

Our personal visit to a Topgolf location in Dallas left us tremendously impressed with the consumer appeal of their unique venue. If our objective is to identify “differentiated” retailers, Topgolf surely fits the bill.