Anyone with experience in running a children theme / recreation business?

In my town, I always hear there is nothing for kids to do or anywhere to take them for a birthday party other than Chuck-E-Cheese. Yet, we have had a longtime bowling alley close and a put put golf / go kart track close after only being in business for 4 years. Both of these places were relatively packed on the weekends, yet still went under.

The demand seems to be there, but are these types of business just not very profitable? Is the insurance the deal breaker?

I'd bet most places like this are run by peole with very little business experience. There are good business models and bad business models, but there's no business plan that's going to succeed while you engage in bad bookkeeping, poor finance, and inconsistant service to the customer.

I had a commercial claim with a kid's party place last year. I asked the owner how profitable and he explained it like this:
Average party is 20 to 40 kids @ $20 each for 4-hours of play, including two slices of pizza, soda, cake and gift bag. He had no coin-up games, ticket dispensing prize machines or ABC license to increase revenue per person. Five parties per weekend (1 Fri, 2 Sat & 2 Sun). He had most weekdays free except to take calls to book parties and show the place.

So rough weekly revenue:
$20 per kid x 30 kids per party x 5 parties per week = $3,000

Less expenses:
2 teenager assistants per party x 5 hours x $10 per hour = $100 x 5 parties = $500
Food, soda, plate and cake costs are approx $4.00 per child x 30 kids x 5 parties = $600
Rent $1,200 per month + $800 utilities = $2,000 per month / 4 weeks = $500

So now you are down to $1,400 per week in net revenue without the deducting expenses for the original capital improvements or maintenance.

I believe he said that he paid something like $80,000 to obtain a $60,000 per year job without any benefits in exchange for him and his wife each working 30-hours per week. This was also in South Orange County California so that is not a good salary for the area. He also said that these earnings are based upon him being able to book 250 parties per year (5 per week x 50 weeks) and he has only come close one year.

I'm in Louisiana.
I think it makes sense now, they're just not making enough volume on non-weekend days.

We have a place by me that has those big inflatables and I've often wondered how profitable a place like that could be. Even on week days during the school year they have enough kids to pay the salaries of the workers (think < 5 year olds) and that doesn't include extras like the snack bar or arcade type games.

In this type of place I'd try to focus on ways you can get the parents to spend money once they're in the door....basic coffee offerings and food items, prize type arcade games that people will buy tokens for, soft serve machine, free wifi, etc. As a parent, keeping the kids occupied for 1-2 hours is priceless so get the parents/kids in the door and then find ways to make $$ after that.

We have tons of these places where I live and they seem to be thriving. Successful places offer really good adult food and free wifi. Places with high overhead, like the places with the BIG inflatables and huge sq. footage (air conditioning) only open by appointment and can run a few parties at a time. This is the key: running multiple parties at a time! So they need a few "party rooms" to eat pizza and contain the mess while there is a more general "play area". It helps to have a healthy population of families with stay at home moms- some demographics have more SAMs than others.... check it out...