You know a company has had an impact on society if its copyrighted name has all but become the generic word for something -- think Kleenex, Xerox, Q-Tips ... or Putt-Putt.
Putt putt, the oft-used synonym for miniature golf, was popularized by a company that got its start nearly 60 years ago. I caught up with David Callahan, the CEO of Putt-Putt LLC, to learn more.
A brief history
Formed in 1954 in Fayetteville, N.C., Putt-Putt was created to offer a skill-based alternative to traditional mini-golf. The company's founder, Don Clayton, was tired of the "hit and giggle" nature of the game, and sought to create something that bore a closer resemblance to an actual sport. By relying less on props, Clayton crafted a version of mini-golf that was consistent and systematic, but still fun.
Everything from the green outdoor carpet, to its par-two format, to the word "putt putt," was eventually patented by the company. And with that, a fragmented, sometimes disjointed industry was commercialized.
The business side of things
Although Putt-Putt doesn't disclose its financials, Callahan told me that over the past six decades, "hundreds of millions" in revenue have been generated.
On a broader scale, IBISWorld reports the entire U.S. miniature golf marketplace pulls in about $300 million a year. While it's tough to gauge just how big Putt-Putt's stake is, the outlet reveals there are nearly 1,000 competitors in operation, and none have a "dominant" market share.
Given this, it's reasonable to think Putt-Putt generates anywhere from $3 million -- a 1% market share -- to $30 million -- a 10% market share -- in annual revenue. For my money, I'd bet on a figure in the middle range near $15 million, which, split between the company's 54 franchises, equates to an average of close to $300,000 per course. That's about the value Golf Range Magazine pinned on a couple successful operations a few years back.
A new concept
Still, risks remain, most notably from new forms of competition. IBISWorld, for one, says the mini-golf industry has shrunk by almost three percentage points per year since 2007. The rising popularity of mega-amusement parks -- think Six Flags (NYSE:SIX), Cedar Fair (NYSE:FUN), and SeaWorld (NYSE:SEAS) -- are a widely cited reason for the decline.
And as you might expect, there's now a premium on non-golf attractions for companies like Putt-Putt. Many of its franchises had added go-karts, arcade games, and batting cages over the years, but like mini-golf before the 1950s, nothing was standardized.
That's why Callahan introduced the idea of the Putt-Putt Fun Center (pictured above). Launched in 2010, it allows franchisees to manage a collection of attractions in addition to a Putt-Putt course. Callahan says the new concept is financially successful to this point. "Margins are good in this business if you manage your costs," he emphasizes.
The bottom line
Most importantly, though, Putt-Putt Fun Centers should allow the company to reach a much broader market. The entire domestic amusement park industry generates annual revenues of $13 billion, according to Businessweek. That's about 40 times larger than mini-golf, meaning Callahan's operation now has access to roughly 40 times as many customers as it once did.
"Putt-Putt is to miniature golf what Kleenex is to tissue," the CEO told me. And at the end of the day, that's the biggest thing Putt-Putt has going for it. If it wants to make waves among the Six Flags and Cedar Fairs of the world, it will have to leverage its brand awareness to the ninth degree.
Jake Mann has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.