Classic Mode

Play Meter

Issue: 1978 June 15 - Vol 4 Num 11

LONDON: We have never broken it down that
way. We have the input to do it, but I have never
found the need to worry about what service per
machine costs down to the penny. When we get to
profitability of a particular machine, though, we do
try to put a weekly service cost to it. But it's done in
a more general sense. In other words, you have a
piece of equipment and you can find out what is
your minimum, what you must get out of this piece
of equipment. And with that we'll come up with a
cost of ten, twenty, thirty dollars a week. And the
labor is already apportioned in, but it's all done on
an individual basis. Also, our specific knowledge
enters into it; for instance, a pool table requires a
certain amount of labor, and we crank in so many
changes of cloth per year at a certain price. How
many service stops are we making at that location?
That's also a factor. And there are other
considerations; are collections made at this location
weekly or every two weeks? That way I come up
with minimums on my routes, and I follow that
through further with data processing to produce
productivity reports on every location. By putting
our minimum figures on every piece we have on the
route, we can get back in productivity reports on
how every machine in every location is doing. Then
if a location has six pieces of equipment in it, we can
add up those minimums, and compare it to the
actual six-week average we just generated, and we
can see if the average is over or under. If it's under,
we start looking for the weakness. It may be one
machine out of the six. And that tells us that the
spot is a trifle over-equipped. And we have to pull
t hat machine out. Now, I try to do that anywhere
from one to three times a year. That basically is
how we crank in labor costs.
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PLAY METER: Have you ever computed a rate of
return on your investment?
LONDON: I have all kinds of ratios that I generate
to let me know what I'm netting on what I've
invested.
PLAY METER: What's an acceptable rate of return
on working capital for you before taxes?
LONDON: If after everything, an operator's return
on everything was ten percent, then I should think
he should be happy. It's an acceptable figure,
considering the risks and the vagaries of the
business. But when you start getting two, three,
four percent, that's bad. But then again, you have
to consider what the operator's personal draw is.
Did he draw an excessive salary? If so, what would
it cost him in salary to replace himself. These are all
variables you have to take into account to
determine your return.
PLAY METER: By using these ratios, have you
had to eliminate locations?
LONDON: Yes, as painful as it is to give up
locations, we have done that. As a result of these
ratios and the profitability study I've made, I use
the data processing to produce the production
reports on the locations, and we will assign to the
sales department the responsibility of hitting as
many as twenty locations. We put these locations
PLAY METER, June, 1978
"That's what makes this machine different. It shoots back."
13
on minimums, we put them on rentals, and we give
them two weeks to find another operator. We lose
half to three-quarters of them that way. But if we
can't make any money in them, we feel that we just
can't operate there anymore. Now, you must bear
in mind that a certain amount of patience is
required. Is there a temporary reason why the
collections are down in that particular location?
Licensing time may come. If you're not making any
money on your equipment, chances are the location
owner isn't making any money either, and he may
not renew his license. He may sell the place. And
you get a new operator in there, and collections
may go up. They are all factors which may
determine if you keep a location or not. But once we
probe all the variables, and the guy has been doing
business this way for three years, and it's just not a
profitable location for us, then we give it up. It's
difficult to do, but necessary. Now, I should point
out that it's possible for a top location not to be
making any money. It's not just the low earners.
You could have a big money producer, but for
various reasons-concessions that were made,
commissions arrangements that are unprofitable,
or demands for specific very expensive machines-
we may not be pulling enough there. You see, you
have to add all that in to determine if a location is
profitable or not.
PLAY METER: Have you been able to find ways to
cut back on your costs?
LONDON: Yes, I have. With the increase in
inflation and now with a union to contend with, I
have been forced to become as efficient as possible.
Now we're doing more work with less employees
than we did five or eight years ago. I had a real
problem in this area. But, as I said, now I have been
forced to take a very close look at overhead. I have
had to eliminate employees. I have had to put in
radio equipment to monitor all the actions of all the
employees on all the routes to make sure they are
as productive as I can get them to be. In the
operating business the employees are very much on
their own, and certain habits will build up on
certain routes which will lead guys to believe that
they don't have to work seven-and-a-half or eight
hours a day. Many think they can goof off for two or
three hours at a time. And it's very hard for a route
owner or a manager to find this out, especially if it's
been in existence for many, many years. So I've
monitored all that. I've done time studies on every
location to determine whether my routemen are
spending the full amount of time. If it takes a guy an
hour to fill a cigarette machine, for instance, I know
something is wrong. Everyone has average times
for filling, and I monitor that.
PLA Y METER: You said that your employees are
now unionized; what percentage of your gross
income now goes to wages?
LONDON: Somewhere between 25 and 30 percent.
As for raises, which I assume is your next question,
continued on page 66
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14
PLAY METER,
June, 1978

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