Escape Hunt Q&A: New UK sites, US franchises and getting back to pre-COVID demand (LON:ESC)

Escape Hunt

Escape Hunt plc (LON:ESC) Chief Executive Officer Richard Harpham caught up with DirectorsTalk for an exclusive interview to discuss their recent fundraise, new UK sites, US franchise business, downloadable games and what investors can expect for the rest of the year.

Q1: First off, congratulations on raising £4 million on Friday, can you tell us what the proceeds will be used for?

A1: Firstly, as a company, hugely grateful to our investors both institutional and personal who supported us in the raise so very very grateful to be recapitalised.

Pre-COVID, as you can imagine, Escape Hunt were trading extremely well in our sites in the UK so our returns profile was great, we were driving very significant like-for-likes. That underlying trading performance combined with what will almost likely be a softening of the property market post-COVID, perhaps means unsurprisingly that the lion shares of capital we have raised is going to go into opening more sites in the UK. So, around £2.5 million will see us open 5-6 new sites in the UK over the next 12 months or so.

Aside from that, we are going to put around £700,000 into working capital, again as you can imagine there is some working capital impact post-COVID which we’re going to need to catch up so around £700,000 into working capital.

The rest will go into operational improvements on the backend such that we can scale more efficiently and leverage our existing cost base.

Q2: Can you tell us more about the short-term and long-term pipeline for new owner-operated sites?

A2: Again, just prior to being lockdown in March we were expected to open two new sites, one in Basingstoke and one in Norwich, in the UK so those sites by now would’ve been trading for a couple of months. I think excitedly, we’ve got back on-sites and we’re back in builds already in those units but they will be the next to open so the first ones you will see in the relatively near future.

Further down the line, we are in extremely advanced heads of terms on a number of other sites, one of which is in Cheltenham, a couple in and around London and you’ll start to see some news as we look to sign those sites and get on site to build.

Q3: You talk about the significant opportunity to grow the franchise business in the US and Canada, how do you expect to address this market?

A3: We signed a deal at the backend of last year with a really interesting company and a company I think fits our business needs perfectly.

So, we signed a deal with Proprietors Capital Holdings who are going to act as our area representative, for want of a better word as a Master Franchise for that territory. As a company, they fit our needs really well, on the one hand they are a private equity business so they’re capitalised, they’re able to fund the great and talented head office, they will establish their own training centres, their own best in class location for prospects. Aside from that private equity angle, they also have a business that sells and resells franchises where they are very well versed, they have got a lot of experience in growing businesses quite significantly.

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So, for us, where we need both those elements, I think they seem like a very good fit so we’re excited to see how that opportunity develops in the coming months.

Q4: Something else that sounds very exciting is the development of downloadable games, can you tell us more about that?

A4: I guess there were some very obvious negatives to being lockdown in COVID and having sites closed but if there’s a positive, it’s that it allows you the headspace to rethink your product offer.

So, through the lockdown, we have developed a suite of play at home downloadable games which really tap into our core DNA so they are still very much in and around finding clues, solving puzzles etc. They are fun, family entertainment, they are absolutely hitting our core audience where families and friends are playing together, modern world sometimes now over Zoom.

It’s given us an opportunity to expand further outside of our physical rooms and they’ve been extremely well received to date. Actually, I think there’s going to be a little more from us in this space as we look forwards and we actually look to develop this as its own revenue stream, as an underlying part of our core business.

So, we’re already in test for some virtual remote play escape rooms, if you like, so that’s where our games masters will physically be in our games rooms but partners will dial in and control the game master around the room etc. So, it’s just broadening our product offer which fortunately has been very successful so far.

Q5: What can investors expect from Escape Hunt for the rest of the year?

A5: As you might imagine, key focus right now is to bring our team and our customers back safely to our venues so as we’re allowed to re-open in a small number of weeks we will be of course building back momentum and looking to get ourselves back to that level of demand we had pre-COVID.

So, there’ll be a lot of work in and around adapting to this new world although fortunately, as a business, we shouldn’t be as affected by some of the social distances measures as many others because we’re very low dense, we don’t have hundreds of people coming through the venues etc. Nonetheless, they’ll be some adaption and a lot of our focus will be on building that demand back up to pre-COVID levels, as you would imagine.

I think aside from that, as mentioned, opening Basingstoke and Norwich in the very short term, it’ll be exciting for us with new UK sites to follow.

Again, as we touched on , the other really key area of focus for us is our franchise business which will see us look to support our existing franchisees as they emerge from COVID as well whilst also really starting to drive some momentum in that US part of the business that we’ve just discussed.

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