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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.

May 25, 1993|RUTH STROUD | SPECIAL TO THE TIMES

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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