After several successful exits from booming franchises in the home services industry, Matt Phillips is more than ready to take the esports industry by storm.
His plan? Apply the tried-and-true recurring revenue model and build a generous, compassionate community on top of that. Read on to find out exactly what that means.
I have much more experience in franchising than I do in esports. Before this, my only participation in esports was through my kids. I just enjoyed watching them play Fortnite, Valorant, and Overwatch.
We could sit down together, and I could talk to them because I was in their world, and that’s where I learned about the games.
I wanted to be a professional soldier like my father. And right after high school, I joined the army. I served for four years, and in that time, I realized business excited me.
I’m dating myself, but my first video game was definitely Pong. My parents wouldn't let me have a video game console, so my fondest memories were going to the neighbor’s house down the street to play Nintendo. We played Super Mario Brothers
Mario Brothers and Tecmo Bowl—those kinds of things. We had arcades back then, and at the arcade, my favorite game was Spy Hunter. In that game, you drove as a spy--kind of like James Bond or --and you had to dodge oil slicks and there were all these bad guys chasing you. And you were trying to hit them with the oil slicks and smoke screens to keep them off you.
I probably spent thousands of dollars in quarters on that game as a kid.
The business side of things really started because I was trying to teach my kids about entrepreneurship.
I do have a college degree, but when it came to building my own businesses, I realized that I needed more life experience than I did formal education. And I wanted my kids to know that they have that option too—they don’t have to get great grades or go to college if they find what they want to do.
So, I started learning more about the esports industry thinking that would be an interesting way to give them the tools they’d need to go into business—learning about financials, hiring people, how to keep the lights on, etc. Then I found a way we could contribute in a big way through youth esports leagues.
I didn't really think a lot of kids would be interested in leaving their bedrooms and going to play in an arena until we just started putting out a few social media posts.
The next thing we knew, we had a hundred kids coming to be a part of what we were building. There are all these kids out there that are craving social interaction, and parents looking for an outlet for their kids.
That's when I realized it was not only a viable business but sustainable.
It's been really sticky, and the kids have really enjoyed it. Early on, I was always worried month to month, if the kids were going to stay and continue their memberships. There was a little bit of concern that they’d think, “Okay, they did it. It's pretty cool, but I can do this at home.”
But, a year and a half later, we've got the same kids who started with us, and we only have a 5% churn rate of kids leaving. So, we've been able to really grow the business and, and get to capacity relatively quickly, which was something that you crave in a recurring revenue model.
And we try to mix it up, we do summer camps, boot camps, and parents' night out. We’ve really made it a fun, community where the kids want to come to hang out and relax because this is where their friends are.
In the franchising world, think of the typical sandwich shop—like Jimmy John's or Subway. As a franchisee of one of those brands, you're going to do $250,000 a year in sales, and you're going to generate $70,000 in net profit off your store. Right?
So, to grow, you just open more of them. If you want to, you want to make $750,000 a year in profit, you open 10 locations.
The Valhallan model is very similar--it's very manageable. You only need to hire one to two coaches for your arena. You don't have a ton of overhead, a ton of electricity, internet, etc. You need 20 to 25 computers.
We're really positioning Valhallan as a smaller, more intimate training arena.
Just like if you were going to play baseball or basketball and you needed a place to go and train with a coach to learn the game better or to be mentored just like a baseball hitting facility or a pitching facility, that's smaller, more intimate, and that does like private lessons.
We want to know every one of our members—who they are, what they're about, how we can impact their lives, how they can impact ours, and try to make a difference.
So that’s how Valhallan is different for players, but we’re not stopping there. We’re also the best option for franchise owners.
We’re lowering our royalty fees to 6% from 8% to make owning a Valhallan arena more cost-effective. So our franchisees can make more money. Because when we have happy franchisees that are making money, then they're going to be ambassadors for your brand.
I have a sappy emotional response to that. Of course, I want our franchisees to make money, but I really want them to be able to impact kids and their communities.
When kids are doing something that they enjoy doing, like gaming, their minds are completely open to all kinds of other things. We can teach life skills, communication, and teamwork—things that a lot of kids get in traditional sports. They may not have been taught that either by their father or by a coach or, or somebody like that.
Autism is really big in my heart. At our facility, there are about 20 kids on the spectrum. And they thrive in the esports world because they love playing the game, they can totally be themselves, and nobody judges them for it.
So, if they talk differently or, they're monotone and they don't have inflection--nobody cares, and nobody makes fun of them like they do at school. It's a safe environment where they can just really laugh and be themselves.
I hope that other arenas will embrace kids on the spectrum and kids with disabilities because I think that there's a tremendous opportunity for them to get a lot of help that they aren't able to get from school or from other resources.
It’s not just autism. Being part of this community has really helped me understand inclusion as well. We have kids of all races, we have gay kids, we have straight kids, we have kids on the spectrum, and kids with Tourette’s. Spending time with these kids, picking their brains about stuff, and having them picking my brain about stuff--you just realize how important it is that everyone's included and that people aren't left out, for any reason. Because they’re all human and we’re all equal.
Matt Phillips got his start in esports as a way to teach business and math to his 15-year-old son, who is diagnosed with Autism/Asperger's.
He has been in franchising for 22 years, a brand president with 4 brands, and has taken them all to a successful exit. He lives with his wife, Cheryl, and three kids. When he’s not building incredible brands, you can find him outdoors—fishing, hiking, and spending time with his family.