Not satisfied with having built one of the busiest, and most profitable, escape rooms in North America, called the Real Escape, the Winnipeg husband and wife team of Adam and Megan Schmidt have invented a new entertainment experience that could become the next big thing. They call it active gaming.
After two and half years in development and about $2 million of investment, the Schmidts opened the first active gaming room, called Activate, in January in a tidy Westwood shopping centre across Portage Avenue from the Real Escape Room.
It draws from 1,500 to 2,000 people a week compared to the average escape room traffic flow of a few hundred.
Next month, construction on the next Activate location will start in Burlington, Ont. It’s the first of five the Schmidts plan to build in the Greater Toronto Area and 10 across the country in the next two years.
At the same time, they have entered into a licensing agreement with Breakout Games of Lexington, Ky., one of the largest escape room operators in the U.S. (if not the largest), who plan to open 10 Activate locations in the next two to three years throughout the U.S.
"Real Escape was doing so well that we started to think about expanding it across the country, but by then there were so many other escape rooms and ours are so elaborate," said Adam Schmidt, 35. "We figured it would take us about a year and a half to actually reproduce it. So we decided to create a company that we could expand quickly across the country. We came up with this model."
The 11-room, 14,000-square-foot Activate space includes a number of different games that have multiple levels of intensity, and multiple games per room. In some rooms players work up a sweat jumping on or over boldly lit floor tiles and smack wall-mounted buttons in digitally programmed gaming challenges while a retro-80s music soundtrack blasts in the background. Other rooms include balls and targets and word games.
Players try to score points and compete with players past or present. High scores win rewards, including lifetime discounts.
Schmidt believes the Real Escape, which opened in November 2014, was the first escape room in Winnipeg. There are now about a dozen in the city and likely more than 200 across the country. Schmidt discovered he had a creative knack for the concept and he and his wife Megan — he is a former commercial pilot and she is a former physiotherapist, both from Kitchener-Waterloo — are driven entrepreneurs.
Because the escape room business is new, no one really knows what it will look like even in five years, but one thing that’s true is that players do not typically replay the same escape room experience more than once.
On the other hand, Activate’s digitally controlled games are so challenging and have so many levels of complexity that players can keep coming back. The Schmidts has a staff of 60 in Winnipeg, including a manufacturing division that makes the physical components and a growing number of software designers who transform the Activate games with a few keystrokes.
When escape rooms need to change things up, new sets need to be built.
"We have a good idea how people think in a gaming respect," said Adam Schmidt.
"The active part and the replayable part of Activate is new to us. We had to think of a whole new model and how it would work."
Laura Hawkins is the founder of Enigma Escapes, which has three locations in Winnipeg, and Gamemasters, which designs, builds and installs games for escape rooms around the world. She is thrilled with the Schmidts’ success.
"Adam and Megan are awesome operators. They are so savvy. Real Escape is one of the very best in Winnipeg. I am very happy and excited for them and really excited about another Winnipeg company growing something new in the U.S.," she said.
At about $1 million per location, building additional Activate sites is about twice as expensive as average sized escape rooms. The Schmidts have funded the developments with the profits from Real Escape and while they do not have money lined up for the growth they envision, they are determined to see Activate grow quickly.
"The deal with the American group was primarily set up, from a financial perspective, to really expand this company fast so that we are the leaders of this new industry," Schmidt said.
Activate’s American partners, Breakout Games, has 44 escape rooms in the U.S. mostly the eastern half of the country.
Jeremiah Sizemore, Breakout’s CEO, said he and some of his partners flew to Winnipeg in February, only a month after Activate opened, and soon after started talking to the Schmidts about a potential partnership.
"We think it is complementary for sure (to the escape room business). There are similar skill-sets, the same markets, the same opportunities," he said.
"There are lots of similarities to make it a good fit for our team. And it certainly has scalability."
Schmidt said business at Real Escape has dropped a little from its peak but has steadied at a good rate. Breakout Games has plenty of consumer data to work with from its 44 locations but Sizemore said no one knows what the escape room will look like in five or 10 years.
"It’s the million dollar question in the escape room industry," Sizemore said. "There is so little history. We are all kind of guessing to some degree. But so far the industry has been a little more sustainable than we might even have expected. But the concerns are valid (about what the future might look like)."
Activate is not so much a hedge against a slowdown in escape rooms as it is an exciting, experiential fun activity.
"As always the market response will really determine the success," Sizemore said.
"We have a team that can grow this quickly. We’re excited to introduce this to the U.S. and see how customers respond to it and see if they have as much fun as we think they will."
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.