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The 130-Day Year

That’s how much time amusement park operator Cedar Fair has to earn its annual revenue, which for the CFO translates into a sharp focus on operations.
David McCannNovember 30, 2012

Imagine you’re the CFO of a publicly traded, $1 billion company that makes all of its money in about 130 days of the year. Even within that short span, in no two months do financial results resemble each other. And you won’t be able to tell whether your $100 million annual capital budget has been well spent until the year is over.

Welcome to the world of Brian Witherow, finance chief at Cedar Fair, which owns and operates 11 amusement parks, six water parks, and five hotels. It’s largely a summer business, except for some Halloween-themed events in October.

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The short season, as well as the nature of the business, dictates that Witherow focus more on operations than anything else. Generally, if a new ride, say, isn’t popular, there’s nothing much to be done about it until the following year. So Witherow spends at least half of his time on operations, which includes working with the company’s chief operating officer and other operations staff to predict what will work and iron out execution plans.

“While I didn’t come up through operations, it’s very important in a business that’s so seasonal,” says Witherow, who’s been with Cedar Fair since 1995 and was promoted to CFO early this year. “You have to throw yourself into it and be in lock step with the operations guys, or else you’re going to miss your opportunity. There’s not another July until next year.”

Witherow and his finance team frequently get ideas while enjoying Cedar Point, a park on the Lake Erie shore in Sandusky, Ohio, that has been named by Amusement Today as the best amusement park in the world for each of the past 15 years.

It doesn’t hurt that company headquarters sits smack in the middle of Cedar Point. “It’s easy and enjoyable to throw yourself into the operations, whether you’re with the family or maybe killing an hour after a stressful morning meeting,” Witherow says.

It was on a jaunt through the park three years ago that Witherow noticed the lines at food stations had grown unacceptably long. “People might wait an hour and a half to ride a roller coaster, but they have little patience waiting in line for a soft pretzel or a Pepsi,” he says. “I just saw money going out the door as people bailed on those lines.”

A key culprit was the old-fashioned cash registers and stand-alone card readers that were used at the park. There were fewer of the latter than the former, so cashiers often had to wait for a reader to be freed up in order to help a customer paying by card.

Witherow decided to spend a chunk of his annual capital budget on a modern point-of-sale (POS) system allowing customers to swipe cards at the register. “We don’t publicly disclose [the revenue impact of the POS], but there was a very solid return the first year, both financially and from a guest-service standpoint.” The system also links to an inventory system, which has greatly reduced shrinkage.

But Cedar Fair’s operations aren’t wholly in the park. An important operational tweak, put in place for this year, was a new e-commerce system allowing customers to buy tickets, parking and food vouchers, season passes, and hotel rooms.

The company had previously developed an e-commerce platform in-house that it thought was sufficient, in that it drove about 20% of the company’s revenue. But upon taking a closer look at the platforms in use by other amusement-park operators such as Six Flags, Walt Disney, Anheuser-Busch, and Universal Studios, Witherow decided Cedar Fair could do better with a platform from an outside e-commerce vendor.

“We spent a lot of time in the past year working with operations and IT folks to improve the interfacing with our guests,” he says. And it’s paid off: e-commerce revenue is up 35% in 2012.

Also within the past year, Witherow and Cedar Point’s CEO and COO, who are also new in their roles, have undertaken an exhaustive review of all major capital allocations since 2007. The goal was to get a better idea of what worked, what didn’t, and why.

There could hardly be a more important project than that. A $100 million capital budget may sound like a lot for a billion-dollar company, but a major roller coaster, like one that opened last year at Cedar Fair’s park in Ontario, Canada, may cost $25 million.

“At that price, it needs to be not just a good ride, but a great ride,” Witherow notes. “It’s got to pay for itself in a short amount of time. But some rides we’ve opened in the past have just been OK. They may have gotten decent reaction from the market but didn’t drive incremental attendance. So we’re looking at those and asking, ‘Was the ride’s appeal too narrowly focused? Did it twist people upside down too much, or something like that? Let’s not make that mistake again.’ The capital budget has to go across 11 properties.”

What the C-level team found was that for the most part, better returns come from what Witherow calls “concentrated” use of capital. Simply put, the six-year capital-spending review suggested that in cases where there were plans to spend, say, $10 million on one project and $3 million on another, the best result has come when the company decided to forget the second project and spend $13 million to boost the quality of the first.

Not every park can get a new ride every year, but Cedar Fair still tries to do something new, like open a new show or have a year-long anniversary promotion. Those are accounted for as operating rather than capital expenses.

Other operationally minded finance chiefs that CFO has spoken with recently are at privately held companies, where financial reporting and compliance presumably take up less time. But Witherow squeezes all of his pure finance activities into less than half of his work time in order to have the proper degree of focus on operations. “It’s just the nature of the business,” he says.

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