When a family has been in business for 75 years, leaving it behind isn’t always easy. “It’s in your blood,” said Ken Knott, a grandson of Walter and Cordelia Knott, founders of Knott’s Berry Farm in Buena Park. But the Knott family, which now numbers more than 50 members across the country, seems to have handled the sale of its family business with few bumps. In 1997, the family sold its landmark amusement park to Sandusky, Ohio-based Cedar Fair LP. The growing cost of expansion was a driving force behind the family’s reluctant decision to sell, Knott said. “It was probably the single largest concern at that time,” he said. While the business was profitable, the family felt it could no longer compete against the deep-pocket companies that dominate the amusement business, according to Michael Kiley of the Chamberlain Group in Irvine, who is a financial advisor to some family members.
The skyrocketing cost of new rides made expansion difficult, and Knott said the second-generation family members (the son and daughters of Walter and Cordelia) were hesitant to borrow to build new rides. And the younger family members didn’t have the means to take over the company. “The third generation had no way or capability of buying out the second generation,” Knott said. “We couldn’t have generated the dollars it would have taken, so it wouldn’t have worked. That’s how we made the decision that it was time to find a partner,sell or merge.” In a phone interview with the Business Journal, Knott, 63, explained how the family,along with its law firm and financial advisors,searched for a company they thought was a good fit with Knott’s. He said the family looked at inquiries from numerous potential buyers,including Walt Disney Co.,before settling on Cedar Fair. “They were more like a family like we had worked with all these years,” Knott said.
Dick Kinzel, Chief Executive of Cedar Fair, said the company felt “very fortunate” to acquire Knott’s. He said his company’s main concern at the time was the reputation and integrity of the family business. “It was a good business decision from a financial standpoint,” Kinzel said. “Their management team was a big asset.” As a result of the sale, the Knott family received about $150 million in Cedar Fair shares,about 12% of the total,and about $95 million in cash. The deal also gave the family a seat on Cedar Fair’s board. For the Knotts, their shares in Cedar Fair went up in the wake of the deal, going from around 20 to a high of around 25 in mid-1998. But since then, the stock has eroded or merely held steady. Last week, it was trading at 17, down slightly from the time of the Knott’s acquisition. Still, three years after the sale, Ken Knott,who ran the food service and marketing divisions of the park for about 30 years,said he thinks the family made the right decision, and believes most other family members do, too. “(Cedar Fair) has done an exceptional job,” Knott said. “The capital spent is paying dividends now.” Knott family members minimized their tax liability by accepting shares in lieu of cash for a portion of the transaction, he said. “I feel very fortunate that we’ve always had good financial advice that has helped us plan for the future,” said Virginia Knott Bender, daughter of Walter and Cordelia, at a recent shareholders meeting in Buena Park. Since the acquisition, Cedar Fair has sunk about $75 million into expanding Knott’s while still preserving the park’s original character.
The company added popular rides like Supreme Scream, Ghostrider and Perilous Plunge, and this year opened an adjacent water park, Soak City. The company also purchased the former Buena Park Hotel, remodeled it, and reopened it as the Radisson Resort at Knott’s Berry Farm,a total investment of about $28 million. The hotel includes Italian restaurant chain Cucina! Cucina!, based in Bellevue, Wash., which granted its first franchise operation to Knott’s. The company also acquired a water park in Chula Vista that now bears the Knott name. The Knott family stays involved in the park’s operation, both personally and professionally. When Cedar Fair’s annual meeting comes around, family members and Cedar Fair managers have dinner together. And before any meetings, the family gets together to discuss the issues at hand in order to present a unified voice at the meeting. “At my grandmother’s home, we always came in to her table at lunch and then went back to the park. And we met every Thursday morning,” Knott said. The family never attempted to separate business from family issues, he said. “It always comes back around to business,” Knott said. But Knott said the mix of family and business never affected family relationships. “Walter’s overall philosophy and the way he conducted himself did a lot to make that happen,” he said. “It made us a better family.”
Though Cedar Fair officials did not know the Knott family previously, Kinzel said the two groups now have an excellent relationship. He said his company has put just one of its own into Knott’s management mix after the acquisition: general manager Jack Falfas. “Even if they didn’t have a seat on the board,” he said, “I wouldn’t hesitate to call on them for advice.” Kinzel pointed to Virginia’s experience with the gift shop and restaurant as an example of an area in which the family’s input is still valuable to Cedar Fair. “We think the world of them,” Kinzel said. “And I’m not pulling fluff.” At a shareholders meeting in August, Kinzel told those in attendance that the “tradition that Knott’s started will be carried on as long as we own the park.”
Knott’s began in 1920 as a simple 20-acre farm with a roadside berry stand, That stand expanded when Walter Knott,ever on the lookout for a new opportunity,bought some hybrid berry plants from a neighbor. Knott started growing them and named the now-thriving berry for the neighbor. The new Boysenberry was born, creating growth for the family fruit stand. During the Great Depression, Cordelia Knott started serving up chicken dinners at a restaurant near the berry stand. The venture led to the start of the amusement park business when Walter Knott added the Calico Ghost Town to entertain visitors waiting to eat at the restaurant. The park continued to grow through the 1960s, even rivaling upstart Disneyland for visitors for a while. In the 1970s, the family added Knott’s Scary Farm,now wildly popular with the local crowd during October,as a way to bring visitors in between the summer and Christmas seasons. “It helped at that time of year to get us through to Christmas for cash-flow purposes,” Ken Knott said. In the 1980s, Camp Snoopy and the Boomerang roller coaster were added to the park. By the time of its sale to Cedar Fair, the park drew about 3.5 million annual visitors and had about $120 million in annual revenue. The privately held partnership was the only family-owned amusement park in the U.S. by then, but its market share had slipped in the 1990s from third to 12th. The park was having trouble keeping up with bigger players like Disneyland and Universal Studios in the competitive amusement park business. Despite the compatibility between the old management and new, nostalgia lingers. Knott said there was,and sometimes still is,a sense of loss among family members. “You become so involved with your employees,some have been with you 40 or 50 years,” he said. “You have a major sense of loss. I miss it even now. It comes and goes,especially when you get together and reminisce.” n
