Acquiring Minds: "$2 Million of Fun: Big Margins in Play Centers"
Host: Will Smith
Guest: Daniel Batista, Owner of Candyland Downey
Date: August 28, 2025
Episode Overview
This episode explores a distinctive success story in the world of business acquisitions: Daniel Batista’s purchase of Candyland Downey, an indoor children’s play center making a remarkable 50% net margin on nearly $2M in annual revenue. Host Will Smith and Daniel dive deep into the details, challenging assumptions about “boring” businesses, dissecting a high-performing single-location operation, and considering the broader lessons for acquisition entrepreneurs. Daniel shares his non-linear career journey, his search philosophy, detailed business mechanics, and his forward path toward multi-unit growth.
Guest Background: Daniel Batista
- Raised in Los Angeles by Cuban immigrants; early exposure to the entertainment industry.
- Education: Undergrad at Berkeley (Haas), MBA from Kellogg.
- Career: Finance at Universal and Paramount, digital media startups, co-founded a company with actress Zoe Saldana, COO at Exile Content.
- Transitioned to acquisition entrepreneurship after reevaluating the future of the entertainment industry amidst industry-wide disruption.
- Inspired by his wife and a return to ETA (Entrepreneurship Through Acquisition) ideas first encountered in business school.
Quote [07:31]:
“I was always a little bit off the beaten path from the get-go, but made my way back down LA... landed a job at Universal Television... worked in studios for about eight years.”
— Daniel Batista
Search Process & Criteria
Initial Search
- Geographic preference: LA County, ideally within a one hour drive
- Target SDE: $750K minimum, ideally $1M+
- Initially industry-agnostic (per Sam Rosati’s advice), but realized an emotional connection was vital
- Shifted focus to “fun” and family-oriented businesses: indoor playgrounds, arcades, trampoline parks, and tour operators
- Used broker-led search via Biz Buy Sell, built relationships with local brokers
Quote [18:45]:
“When you looked at, quote, boring businesses, they bored you. It’s in the name.”
— Will Smith
Narrowing Down
- Inspired by previous Acquiring Minds guest Shel Zhang ("buy something that's fun")
- Chose sectors with both growing market (11% CAGR in family entertainment post-COVID, $11B US market) and personal excitement (as a new parent)
Discovery and Evaluation: Candyland Downey
Finding the Deal
- Found via Biz Buy Sell
- Single location, 10,000 sq ft in Downey, CA (part of LA County)
- Consistently $1.9M yearly revenue, $900K SDE, 50% EBITDA margin
- Clean financials: Tax returns matched P&Ls; passed third-party diligence
Quote [41:36]:
“You just—50% net margins are just unheard of.”
— Will Smith
Unique Model
- Candyland is a licensing, not franchising, model
- One-time $100,000 license fee, no recurring royalties
- Founder's approach: Opened locations in predominantly Hispanic areas, leveraging demographic trends and growth
Quote [38:42]:
“This whole business is predicated on people having kids... by placing these in predominantly Hispanic neighborhoods... he's guaranteeing, he's like future-proofing the business.”
— Daniel Batista
Business Operations: How Candyland Makes Money
Customer Experience
- Large play structure, modular maze, ball pit, arcade, café, and party rooms
- 10,000 sq ft in a shopping mall with abundant parking
Revenue Streams (YTD breakdown, [49:00])
- Admissions: 72% (1-hour and 2-hour passes; “unlimited” available for members)
- Café: 15% (snacks, drinks, coffee, nachos)
- Parties: 7% (room rentals with potential for upsell on add-ons like character visits)
- Memberships: 5% (under-promoted; growth opportunity)
- Arcade: Split with vendor, transitioning to owner-operated machines for greater margin
High Margins Explained ([42:15])
- Highly fixed cost structure: Lease, payroll, insurance
- Once fixed costs are covered, each additional admission is nearly pure profit
- Little variable cost; minimal capex required outside initial build-out
- Outlier performance: Not all play centers reach these margins, but 35-40% is attainable
Capacity & Growth
- Even at $2M revenue, unexploited capacity remains via marketing and new arcade
- Potential to enhance parties and memberships, increase ticket prices, and expand digital marketing (leveraging wife’s agency experience)
- Location is in a mall: Benefits from high traffic and easy parking
“If I can add just a few hundred grand to the top line, it's pretty meaningful because of the gross margin on that.”
— Daniel Batista [47:11]
CapEx & Maintenance ([53:11])
- Maintenance capex is low: Around $5k/year on new equipment
- Play structure is modular; incremental repairs or upgrades possible
- Arcade build-out cost-effective: 15 machines at $1k/machine, sourced directly from manufacturers
- Additions/new features (like Ninja obstacle courses) planned for future enhancement
Staffing & Labor ([58:14])
- 12 part-time front-line staff (mostly high schoolers/young adults), 2 full-time managers, 1 assistant manager
- Not challenging to hire; high turnover easily managed
- Main risk: Rising minimum wage in California
- Owner’s operational role transitions from hands-on in transition period to strategic and half-time work
Insurance & Liability ([62:09])
- Robust insurance and customer waivers required; no major claims history
- Asset sale led to slightly higher insurance rates, but manageable in business model
Acquisition Deal Structure ([64:43])
- Purchase price: $3.45M (3.7x SDE)
- 80% SBA loan, 5% seller note, 15% equity
- Daniel raised ~$500K from friends, family, industry execs, and classmates (for ~20% equity)
- Multiple bidders; seller was highly selective, looking for a buyer to fit collaborative brand owner circle
Multi-Unit Growth Strategy ([68:53])
- Revenue ceiling at single location necessitates growth via new units
- Plans for second location: 12–18 month timeline anticipated, still has SBA expansion loan capacity
- Potential to acquire or open additional family entertainment centers
- Raised excess capital on initial deal for opening new location and risk cushion
- De novo locations cost ~$1.2–$1.5M; landlord TI (tenant improvement) incentives can offset this cost
- Mall-based strategy: Malls combining smaller retail spaces to build larger play centers, benefiting from “mall saver” trend
Quote [71:15]:
“Malls love these models... anything that’s more experiential actually does really well for these malls, bringing more foot traffic in.”
— Daniel Batista
Personal Economics & Operator Perspective ([76:38])
- Daniel pays himself “market” searcher/operator salary (historically $150K, possibly $175K now), capped while investors’ capital is outstanding
- Supplementing income with consulting; after payback, Daniel’s returns rise significantly through pro rata equity distributions
- Learning: His cross-functional, cross-industry background was a huge asset to successful operating transition
Quote [80:04]:
“I do think there's a lot of value in having worked in a variety of functional areas during your career... I think that's serving me well. Now I'm kind of a bit of a Swiss army knife and able to wear a lot of different hats.”
— Daniel Batista
Notable Quotes & Memorable Moments
- “You just—50% net margins are just unheard of.” — Will Smith [41:36]
- “I'm just going to focus on things I think are interesting and fun... get out of bed every morning and want to work on that business.” — Daniel Batista [19:09]
- “This whole business is predicated on people having kids. The whole business is like people having kids.” — Daniel Batista [38:42]
- “Mall-based indoor playgrounds... have become mall savers.” — Daniel Batista [71:15]
- “Imagine somebody who all they did was FP&A for 15 years... I think they'd be at a disadvantage. ...In my case, I hit all the key functional areas.” — Daniel Batista [80:04]
Key Timestamps
- Daniel's background and path to acquisition entrepreneurship: [06:53]–[15:11]
- Search process, criteria, and why fun matters: [16:04]–[19:51]
- Finding and evaluating Candyland: [24:33]–[33:54]
- Business operations and customer journey: [33:54]–[38:42]
- Performance, financials, and high margins: [39:59]–[44:46]
- Growth opportunities and new revenue streams: [47:02]–[49:00]
- Details on deal structure, funding, and SBA process: [64:43]–[66:47]
- Growth strategy, de novo locations, and mall partnerships: [68:53]–[74:37]
- Personal income, operator salary, and experience lessons: [76:38]–[82:01]
Final Takeaways
- The acquisition of an indoor play center can far surpass expectations for revenue and margins—though such opportunities are rare outliers.
- Fit and personal excitement can and should influence your acquisition search, even at the cost of slower, narrower deal flow.
- Highly fixed cost businesses with strong demographic tailwinds can produce extraordinary margins when paired with effective operations.
- Strong operator diversity of experience (finance, operations, marketing) pays off in running such a business post-acquisition.
- Growth in retail locations is capped; multi-unit expansion is necessary for scaling and is supported by mall owners eager for experiential anchors.
For more details, Daniel recommends working with an SBA loan broker and building strong relationships with sellers. Connect with Daniel or learn more about Candyland Downey via LinkedIn (linked in show notes).