By Eric Peterson | Jun 28, 2015
Salt Lake City
Refurbished Arcade Games and Vending Machines
Salt Lake City
Founded by brothers Jeff and Kurt Ostler, Razzle Werks (dba OK Manufacturing and Gumball Depot) was shipping thousands of spiral gumball machines a month by the late 1990s. The company's specialty: kinetic machines that delivered a gumball or other candy or trinket in entertaining fashion. It later moved into redemption games that deliver prizes.
The company supplied custom-branded machines of all shapes and sizes to big national chains like Blockbuster, Gap, and Old Navy and peaked at 70 employees.
But a few missteps led to an attempted sale, followed by a liquidation plan, before Olson and two longtime employees -- Steve Halliday and Jerry Duke -- bought the company in 2013.
"I've always believed the concept was something that was marketable and we were ignoring the market," says Olson, who joined Razzle Werks by way of the aerospace industry in 2005.
So the company has doubled down on the strategy that was so successful in decades past and targeted national chains with gumball machines and parts. Charlotte Russe, a women's clothing retailer with more than 500 stores, is a new customer.
The strategy is simple: offer a distraction so parents can shop. "They'd rather keep the kids doing something while mom and dad buy stuff," says Olson.
Many machines are loss leaders of sorts. "For Old Navy and Gap, they's only charging 25 cents for a Superball and that's about what it costs them," says Olson. "It doesn't make them money."
The redemption games fell by the wayside before Olson bought the company with Halliday and Duke, but they've just been relaunched with Treasure Cove, featuring a crane to excavate goodies, and more are in the works.
But first, Razzle Werks needs to refill its warehouse. "When we took over the company, they had run all of the inventory down. Inventory was at nothing," says Olson. "We've been taking all of the income and putting it into inventory."
Monthly revenue -- which hit $1 million in the late 1990s -- had dwindled to $40,000 at the time of the sale. Olson has guided them back north of six figures with a goal of hitting $200,000 a month with 25 employees. "We're getting there," he says. "I'm very optimistic."
But it will be at a different location. The Utah Transit Authority bought the company's 65,000-square-foot building in 2013 and Razzle Werks consolidated into 12,000 leased square feet in the back with its vacuum oven. The company is two years into a three-year lease.
He sees Utah as an ideal place to rebuild the operation. "We're in an area that supports manufacturing. I grew up in Southern California and that's not a good place to manufacture right now."
Olson says his political representatives "are very accessible. In larger communities that's not necessarily true."
Challenges: Restructuring the company while streamlining and documenting processes. "A lot of different things were tribal knowledge," says Olson of the latter. "We'd like to get ourselves in a better position financially. It's been hard because we were so low on inventory. To make $250,000 of inventory, you need $250,000 of profit."
Regulation is also a hurdle. To get new logic boards approved by the FCC costs twice as much as tweaking old designs. "Things are geared toward stifling innovation," says Olson.
Opportunities: Exports. Olson says about 25 percent of sales are outside of the U.S. Recent shipments have gone out to China, Chile, and the U.K. "We ship machines all over," he says. The developing world is a big target. "There's more and more disposable income."
While China is a big customer, Razzle Werks is not in competition with Chinese manufacturers. "It's kind of a niche thing," says Olson. "China would only do it if they could make tens of thousands of machines. . . . There just isn't anybody like us in these other countries.
Needs: A new space. The lease is up in 2016. "We're going to relocate," says Olson. "We'll probably be looking more in the 20,000-square-foot range."