Business of Keeping Kids Fit Is Shaping Up : Growth: Discovery Zone is a national chain of physical fitness play centers for children. A Simi Valley franchiser says his business is off to a healthy start.


On a quiet Saturday morning at the Discovery Zone in Simi Valley, a 4-foot-tall robot with big bug eyes, a painted-on grin and three bobbing antennae was being pursued by a pack of preschool-age kids.

"Go ahead. Make my day," he said in macho Clint Eastwood tones after one little girl pushed a yellow button on his chest.

"I'm smarter than the average bear," he chortled in the voice of Yogi Bear after another child pressed a red button.

Z-Bop, the $15,000 remote-controlled mascot, is just one of the features that draws youngsters and parents to Discovery Zone's indoor playground. It is the first of three that owner Ed Frank plans to open in Ventura County.

Frank's Simi Valley store, tucked away in a shopping center next to HomeBase, has been open a little more than a year.

On this Saturday, 14 birthday parties are scheduled for later in the day. "That's light," he said. Typically, from 45 to 70 birthday parties take place per week, with most of those occurring on the weekend.

The store is one of more than 60 company-owned and franchised stores opened by Discovery Zone Inc., headquartered in Chicago, that opened four years ago. Discovery Zone now intends an initial public stock offering that could raise $39 million.

The Simi Valley franchise, like the others in the chain, emphasizes physical fitness for kids, and includes a play area called the "Mega Zone" composed of a series of tubular tunnels, slides, rope ladders, bins filled with multicolored balls, mountains with climbing ropes dangling off them, rings ramps, obstacle courses and air-filled trampolines. There is a separate "Mini Zone" with scaled-down equipment for children under 3.

All areas are large enough for worried or adventurous parents to crawl in after their energetic offspring--although a good set of kneepads is available at the rental counter for 99 cents. The premises also include several party rooms, a snack bar and a few coin games.

Frank draws a distinction between Discovery Zone and Chuck E. Cheese, a chain of indoor pizza and entertainment centers for children. "We're similar, but Chuck E. Cheese deals a lot with tokens and games. Our main focus is fitness for kids."

So the Discovery Zone is set up for physical fitness, Frank said, with signs on the equipment suggesting the number of repetitions and amount of time children ought to take to complete a sequence of activities.

Providing a safe, clean environment for parents and children to play together is a major goal of Discovery Zone, Frank said. "We're not day care. We're not just a place to drop the kids off and run," he said.

Parents are allowed in for free when accompanied by a child under 12, Frank said. The charge for up to two hours of play at the Simi Valley store is $5.49 per child, with lower prices offered for multiple-visit passes.

"We love this place," said Patti Friedman, who was visiting the Discovery Zone with her two daughters and her husband. "It gives the kids a chance to get rid of some energy, and I have fun, too." Friedman, who was sporting a pair of kneepads, said she crawls through the tunnels along with her kids. "They ought to build one of these for adults."

Janet Waitkus paid a repeat visit to the Discovery Zone on Mother's Day with her 3-year-old son, Matthew. Although she wished the tunnels were a bit larger to accommodate long-legged adults with bad backs, she was pleased to find an indoor place to play with her child. "I love it that they've done this for parents and kids. When we were little, we didn't have things like this," she said.

The average ages of children who come here is between 3 and 8, Frank said.

Frank, 34, formerly a vice president of finance with First Interstate Bank, became disenchanted with banking and decided to go into business for himself. After looking into dry cleaning and fast-food enterprises, he read a Wall Street Journal article about Discovery Zone and flew to company headquarters in 1990 to check it out for himself.

Smitten with the concept, he bought the rights to open three stores in Ventura County instead. (Other Southern California Discovery Zone locations include Hacienda Heights, Chino, Oceanside and Anaheim Hills.)

But opening such a business isn't for those with shallow pockets. The cost of opening a new Discovery Zone Fun Center is between $500,000 and $800,000, depending on size, location and equipment purchased. Frank said he spent "in excess of $500,000" to open his Simi Valley store and is spending roughly the same amount on his next store, which will be in Oxnard.

Frank said his revenues for his first year were "significantly in excess of $700,000," and his revenues for the first 90 days of this year were 14% ahead of 1992. Frank said he's recouped his franchise fee on the first location and is "in the black." Opening one store at a time has helped him conserve his resources, he said.

The Discovery Zone parent company hasn't been so fortunate. The company posted a net loss of $5.7 million in 1992, on revenue of about $9 million. According to the company, the 1992 losses are due to the company's expansion efforts, including new equipment purchases and added personnel, as well as the cost of restructuring under new management and moving its headquarters.

Discovery Zone had a fairly humble birth in 1989 when Ron Matsch, a fitness center owner in Kansas City, teamed with Al Fong, a gymnastics coach concerned that children in his classes were sadly out of shape. Matsch said he wanted to come up with an idea that would be fun and stimulating for children, pry them away from TV sets and encourage physical fitness and interaction between kids and parents.

With the help of 40 cans of Tinker Toys, Matsch put together his FunCenter prototype, which, with a few changes, has remained fairly constant, he said. The first store opened in Lenexa, Kan., and the business began to grow from there, primarily through franchises. Matsch and his two partners sold the company in 1992 to a group of investors. But Matsch continues to work for the company as executive vice president of research and development.

At the end of March, there were nine company-owned and 55 franchised Discovery Zone FunCenters, including 11 in California. By the end of 1993, the company expects to have about 90 company-owned stores and 120 franchises in 31 states, Puerto Rico and the United Kingdom.

Growth is inevitable, Matsch said. "There's lots of opportunity. Kids love to be active, and parents are kids at heart and love to be active with their kids as well." Demographics, the growing number of children under 12, also will work in Discovery Zone's favor, he said.

But the competition is heating up, and some of the players are significant. In addition to Chuck E. Cheese, which has 300 company-owned and franchised stores, McDonalds Corp. has entered the picture. The fast-food giant, which has about 4,500 mini-exercise sites called Playlands associated with its restaurants, started opening indoor play areas called Leaps & Bounds in 1991.

Leaps & Bounds offer play areas with child fitness equipment and place an emphasis on parents playing with children. McDonalds expects 30 such locations to be open by 1994.

Discovery Zone has some ambitious expansion plans of its own. Blockbuster Entertainment Corp., the big distributor of home video rentals, has agreed to purchase about 20% of the company and to open 50 Discovery FunCenters by 1995.

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