While the golf industry in the United States enjoyed tremendous growth in the 1990s and early 2000s as it rode the success of superstar Tiger Woods, participation in the sport has declined in recent years. According to a study by the National Golf Foundation, the number of golfers has dropped from 30 million in 2005 to 24.7 million in 2014 (1). While the economic recession certainly played a role in this decline, a shift in consumer behavior is also responsible as today’s consumers demand more value out of their golfing experience than offered by the traditional golf infrastructure.
A Topgolf driving range leverages technology to create a game out of the experience. Its golf balls contain microchips that can track the precise outcome of a player’s shot, allowing golfers to keep score and compete against one another as they aim for targets much like a game of darts. While the driving range is a key piece of Topgolf’s business model, the company differentiates itself from the incumbent driving ranges and golf courses by positioning itself as “a global sports entertainment community creating the best times of your life” (company website). Topgolf has been able to fight the overall downward trend of the golf industry by effectively aligning its operating model with its business model.
While the size and specs of Topgolf facilities vary slightly by location, a facility will typically include pool tables, shuffleboard, flat screen TVs, bar tables, couches, fireplaces, private event rooms, a rooftop terrace bar, and of course a 3-story driving range (5). While wait time for driving range bays can sometimes be as long as 3-4 hours, Topgolf is able to create and abstract value from customers who are waiting in line (much like Benihana’s) through these various other entertainment outlets. This strategy seems to be paying off as over 60% of its customers are not prior golfers (4).
In order to deliver on its claim to offer its customers an end-to-end experience as opposed to merely a place to hit golf balls, Topgolf must ensure it is hiring the right people. In order to accomplish this goal, Topgolf utilizes a unique hiring process that encourages candidates to show their creativity, passion, and ability to entertain. Applicants are asked to brainstorm ideas for events, come up with unique business plans, or even sing and dance on the spot (4). Employees at a Topgolf facility are constantly interacting with customers in order to create an entertainment community, making its people a key ingredient in the business model.
Food & Drink
95% of all food at a Topgolf is made in-house from scratch. Each kitchen is led by an experienced executive chef who coordinates with corporate to determine a menu. Even the hiring process for the executive chefs aligns with the business model, as Topgolf hosts a Chopped-style competition in order to screen candidates (2). As a result of a focused effort on its operating processes within the kitchen, 60% of Topgolf’s revenue now comes from food and beverages (4).
Topgolf’s decision to engage in strategic partnerships to fuel growth has allowed the company to benefit from economies of scale. For example, Topgolf commonly works with the same 3 companies when opening a new location:
- real estate investment trust EPR to secure financing for new properties (3)
- Aria Group Architects as architect with specialties in entertainment, restaurant, and hospitality (3)
- ARCO/Murray National Construction Co. as general contractor (3)
While the high fixed costs associated with this business already serve as a barrier to entry, these strategic partnerships give Topgolf an even greater advantage over potential new-comers to the market. Through these partnerships Topgolf has been able to create a streamlined design template that can be used for its new openings. However, in order to continue to align on its promise to deliver the best experience to the customer, Topgolf also engages with local partners to customize the look and feel of each location to match the culture of the local market (3).