Six Flags (SIX 3.06%) is in the middle of a turnaround effort that aims to shed the theme park operator's reputation as a low-rent destination. Crowds have been culled by raising ticket prices and putting an end to heavy discounts, amenities have been improved, and the environment has been made more attractive to families. If the plan works, Six Flags could be a great long-term investment.

But there's a lot that could go wrong, and there's almost no room for error. While Six Flags stock could be interesting for those willing to take some risk, there are a few reasons for less-daring investors to stay away. Here are three to consider.

1. Premiumization could backfire

For years, Six Flags' modus operandi was to increase attendance levels at its parks at all costs. That strategy was successful in the sense that attendance was indeed sky-high, but throngs of guests who got in free or with severely discounted tickets were unlikely to spend a lot of money. Worse, they clogged up lines and made the experience worse for everyone.

Six Flags is now doing the opposite. Gone are the days of free and discounted tickets. Ticket prices have been raised, leading to a big drop in attendance but a vast improvement in per-guest spending. While attendance plunged 25% year over year in the first nine months of 2022, per-guest spending jumped 22%. Six Flags has improved its parks, cut way down on wait times for everything, and positioned itself as a safe, fun destination for families.

The big question is whether this strategy will ultimately lead to higher revenue and profit. Total revenue sank 9% year over year in the first nine months of 2022, and net income was down 23%. Six Flags' attendance has fallen below what the company views as an optimal level, and per-guest spending will need to continue to rise considerably to make up for it. That's far from a guarantee.

In-park spending per guest was $27.27 in the first nine months of 2022, so there's a ton of room for improvement if Six Flags can successfully draw in the types of high-spending guests it's going after. But that will require Six Flags to shed its reputation of being a cheap, crowded, and hectic destination. Because the company has a lot of debt and is facing a difficult economic environment, it's a race against time to make it all work.

2. A mountain of debt

Six Flags has little cash on its balance sheet and roughly $2.4 billion in debt. Interest payments over the past 12 months totaled $146 million. The company earned net income of $94 million over that time, so interest is a significant expense that greatly reduces the company's profitability.

The good news is that Six Flags has no meaningful debt maturities until 2024. The bad news is that, depending on the trajectory of interest rates, it's likely that refinancing that debt will result in higher interest payments. Six Flags generates positive free cash flow, but not enough to meaningfully pay down this debt.

Debt makes a company fragile. That fragility doesn't matter much when times are good, but it can become a big problem if the environment deteriorates. It's not so much that Six Flags' debt is a big risk on its own. It's a big risk when combined with the fact that a recession is a real possibility next year.

3. Recessions and theme parks don't mix

The theme park business is dependent on the health of consumer spending. Six Flags' premiumization strategy could help the company weather an economic storm a bit better than in the past, given that its attendance base is shifting toward more affluent guests. But a recession will almost certainly take a bite out of revenue and profit.

We can look back to 2009 to get a sense of how Six Flags performs when the economy is in trouble. Revenue tumbled 11% that year, driven by a 6% drop in attendance and a 5% decline in per-guest spending. Companies, schools, and other organizations cut back on group outings, hurting sales. Six Flags filed for bankruptcy in that year, unable to overcome a balance sheet loaded with debt. The company had $2.4 billion of debt at the time of its bankruptcy filing, about the same amount that it has now.

It's unlikely that a potential recession in 2023 would be as severe as the global financial crisis, and Six Flags is in better shape overall now than it was back then. The company is profitable and generating cash flow, neither of which was the case in 2009. But if that cash flow dries up next year, Six Flags will be in trouble.