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Wednesday, Feb 21, 2024

A Need for K1 Speed

Go-Kart Operator Grows in the Fast Lane With Franchise, Development Deals on Tap

Since its founding in 2003, K1 Speed has played host to more than 8 million people looking to turn their racing dreams into reality.

The Irvine-based indoor go-kart operator, with almost 60 family entertainment center locations to its name and annual revenue now estimated by the Business Journal to top $120 million, is bracing for future growth as interest in the company balloons alongside interest in the sport, with shows like Netflix’s “Formula 1: Drive to Survive” driving global interest for racing.

Such demand is resulting in a surge in franchisee inquiries for K1 Speed, whose electric-powered go-kart tracks and on-site amenities serve customers ranging from individuals to birthday parties and large and corporate get-togethers.

Last year, the company added 11 new centers to its portfolio—a record number of openings—with franchisees representing nearly half of the new openings.

It expects to set a new record of 14 openings this year, with a majority of those owned by franchisees.

Typical locations bring in between $2 million and $4 million annually, with potential profit margins of 25% to 35%, according to company franchise marketing materials.

Startup costs for a franchise range from $1.8 million to $3 million, according to the company.

Founders Remain

David and Susan Danglard launched K1 Speed in Carlsbad in 2003 and moved its headquarters to Irvine in 2006, as it began to expand its foothold in the corporate groups segment.

“We’re immensely proud of where the past 20 years has taken us, and also incredibly excited about what the future holds for K1,” David Danglard, the company’s CEO, said.

In 2019, the company got its most recently reported outside investment, from Phoenix’s Outlier LLC, an investment group that also backs indoor entertainment center chain Pump It Up.

That deal, when K1 Speed counted a little more than 40 locations, made Outlier the largest shareholder in the company outside the founders, according to reports at the time.

Owns & Leases

K1 frequently serves as a venue for parties and special events for businesses and consumers alike.

The company’s corporate headquarters on Von Karman Avenue, a few blocks from the Diamond Jamboree shopping center, also includes the company’s first local racing center, which runs 90,000 square feet and is the company’s largest. The company leases the spot.

“From there, it exploded,” company spokesperson Ryan Jurnecka said.

Its second OC outpost is in Anaheim and runs 58,000 square feet. It leases that location, which is off the 91 freeway on La Palma Avenue.

Typical tracks run closer to 65,000 square feet.

The target demographic for its facilities ranges from ages 18 to 35 with any kind of racing experience. Races start at $27.95 for a single race and can go up to $64.95 for three rounds with an annual membership.

Real Estate Push

New openings mean new concepts for K1 Speed, as it looks to rev up its menu of offerings.

The firm this year will get into ground-up development for new facilities, and will also introduce elevated features like multi-level tracks.

A focus on the Midwest is a key area for growth going forward, according to Jurnecka.

“We’re looking to provide a more affordable and accessible racing experience to the masses,” Jurnecka told the Business Journal.

Its first build-to-suit center is expected to open this year, in Lee’s Summit, Mo. It is planning two additional custom facilities for this year and the next.

The company has historically expanded by purchasing or leasing underutilized warehouses and converting them into go-kart centers, though acquisitions have also played a role.

“We value the importance of owning our own centers,” Jurnecka added.

The founders plan to continue renting used facilities along with building its newer custom centers despite rising prices from landlords. Executives said that if the property doesn’t fit the company’s desired price range, the team may wait or move on to find a better match.

Last year, the firm added two facilities in Nevada and Corona through its acquisition of Pole Position Raceway. Both are in the process of renovations, with private investor Will Power, the 2022 IndyCar champion, backing the Las Vegas location.

A typical K1 speedway includes professionally designed racing tracks, all-electric go-karts, off-track entertainment and a Paddock Lounge café. Racing-themed art and décor are also on display at the locations.

New concepts on tap for the company include the first outdoor speedway in Winchester in Riverside County. The project marks the company’s first departure from its standard indoor build and is expected to open in the spring.

“We’re leaning into the competition side of karting,” Jurnecka said. “The outdoor center is a natural progression for taking it more seriously.”

K1 features monthly race series open to the public and also creates racing leagues for customers. Though many treat the leagues as a hobby or weekend activity, K1 hopes prospective professional racers will use the leagues as a launching pad.

International Entertainment

K1’s expansion will also drive overseas.

The company in 2016 started an international franchise program that has led to 12 openings outside of the country, and it plans to open three more this year in France and Puerto Rico.

Its first out-of-country partner was Mexico, which now counts five­ locations. The partnership’s success has prompted the Mexico franchise owner to open its first national outpost in New Orleans in January.

The racing operator also has locations in China and the Dominican Republic.

Italy and Panama represent future markets for the company.

“With the addition of over a dozen new K1 Speed centers around the world in 2023, it’s safe to say our company is not slowing down any time soon,” CEO Danglard said.

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