Texas Drag Strip

Financial summary brief description of a Texas Drag Strip.
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The Business A 32-year-old, 10,000-spectator drag-racing track, set in a midsize Texas city -- to which it draws fans and contestants from as far as 300 miles away. Sanctioned by the National Hot Rod Association, the drag way typically operates nine months of the year and derives 78% of its revenues from ticket sales and race fees, the remainder coming from concessions, advertising, and sponsorships. The seller -- a former world-record-setting racer whose hands-on management has been integral to the track's success -- suffered a heart attack last year and wants to retire.

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Financial Summary
1990 1991 1992*

Gross revenues $386,000 $275,000 $310,000

Recast earnings $205,000 $95,000 $141,000

before interest, taxes,

depreciation, and owner

compensation *projected

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Price $500,000

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Outlook Drag racing -- technically, an acceleration contest between two vehicles, from a standing start over a measured distance -- is still increasing in participation and spectatorship and remains primarily a mom-and-pop, all-cash business. A former site of the world finals, this track today is one of 42 in the country to host a divisional Winston Drag Racing Series, which is one level below the national professional tour and brings in about half the facility's annual revenues. And the track hosts amateur, community-minded events such as "Race a Cop" contests, for which it receives extensive local TV, radio, and newspaper coverage. All that could add up to a projected 45% profit -- more than double what most healthy tracks expect.

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Price Rationale High risk, high reward; that's how most experts describe the drag-strip business. Fat margins and relatively big multiples appear to be the norm for tracks that succeed. Valuations range widely from site to site, depending on such factors as surrounding population density, the number and caliber of events, and venue amenities, but drag-way vets say 7 to 12.5 times earnings would not be out of line for a facility of this vintage and type. This seller is asking just 3.5.

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Pros A phenomenal -- if, say insiders, hard to believe -- profit margin.

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Cons Industry types say the skills of the operator are the keys to every drag strip's fate. The current owner's a pro. Looks like the next one had better be, too. -- Alessandra Bianchi

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Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Charles Hocker & Associates, 214-458-2727. n

Last updated: Jul 1, 1992




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