Doug Honey knows his way around a miniature golf course.
The founder of Trancas Capital LLC in Aliso Viejo has family entertainment centers in his blood. Think miniature golf, go-karts and video arcades.
Honey got his start working for Camelot Park, run by his uncles Bill and Ron Rameson. In 1988, he, an uncle and cousin started what now is Palace Entertainment Holdings Inc. in Newport Beach, owner of Boomers, Raging Waters and SpeedZone.
Palace, owned by New York’s MidOcean Partners, counts yearly sales of about $160 million and is the largest operator of family entertainment centers.
While at Palace, Honey oversaw the buying of nine companies and raised $400 million in debt and other financing.
Honey, Palace’s chief financial officer, cashed out his stake in 2003 to start Trancas Capital, a buyer and operator of amusement parks across the country with yearly sales of $25 million.
“It’s always challenging to start a new business,” Honey said. “But it’s a lot of fun, and I love that part of it.”
Trancas’ operations include Camelot Park in Bakersfield, Fiddlesticks in Scottsdale, Funtasticks in Tucson, Zuma Fun Center in Texas and Malibu Grand Prix in Tampa, Fla.
The parks see about 2 million visitors a year and employ about 1,000 people, according to Honey. Trancas runs the parks through a subsidiary, Zuma Fun Centers.
Trancas, named after the Malibu street Honey grew up on, has gone from a one-man show to a 14-person operation with a satellite office on the East Coast. Some other former Palace executives now help run Trancas.
Gary Fitzpatrick, Palace’s former general counsel, is chief operating officer and general counsel. Ron Elchert, Palace’s onetime vice president of finance, is the chief financial officer.
Trancas now ranks second to Palace in family entertainment centers. The two don’t compete since none of their parks are in the same areas.
Trancas usually buys parks outside California, where Palace has a foothold.
There are about 3,000 independently owned family entertainment centers around the U.S., Honey said. He wants to tap into as many as he can.
Earlier this month, Trancas bought Cool Crest Family Fun Center in Independence, Mo., for an undisclosed sum.
The purchase brought Trancas’ parks to 15. A deal to buy two parks in Ohio is in the works, according to Honey.
“We’re constantly trying to buy more parks,” he said. “It’s just a matter of finding the ones that are available.”
Trancas doesn’t make big changes to the parks it buys, Honey said.
“In general, the parks that we buy are in good shape,” he said. “As a typical rule, we don’t rebrand any of our parks. As our portfolio gets bigger, that’s something we may do.”
The company does look to cut costs by combining administration and some operations. The rollup strategy is similar to what Palace did.
Trancas looks for parks that are visible from freeways, open year-round and in populated areas. All of the company’s parks have miniature golf, go-karts, batting cages, bumper boats, video arcades and restaurants.
The parks make money, according to Honey.
“We spend a lot to keep the parks in good operating condition,” he said. “But we generate good revenues as well, so it is a profitable business.”
The goal is to buy five more parks this year, Honey said. That could cost $50 million to $100 million, he said.
The company’s initial investors were family and friends, according to Honey. As the company expands, it uses cash from its operations to fund acquisitions, he said.
Trancas also has financing with banks and other lenders, Honey said.
It can take 90 to 120 days to find and buy a park, according to Honey. A good chunk of that time comes from scouting, he said.
Sometimes the company gets calls from park owners who are looking to sell. Trancas initiates a majority of the company’s buys, Honey said.
Convincing a park owner to sell is often times the company’s biggest challenge.
“Sometimes park owners who are looking to sell will call us because people know we’re looking to buy properties,” Honey said. “A vast majority of the deals we’ve done weren’t initially for sale and the biggest challenge was convincing these owners to sell.”
