This is just one of the stories from our “I’ve Always Wondered” series, where we tackle all of your questions about the world of business, no matter how big or small. Ever wondered if recycling is worth it? Or how store brands stack up against name brands? Check out more from the series here.

Listener and reader Tommy Gober from The Woodlands, Texas, asks: 

How do fireworks stands make their money? Surely it’s quite profitable, but how do they attain the fireworks? What’s profit margin like? The tents and plywood stands I understand are low overhead, but does the landowner get a cut?

Bigger question: Why are there some permanent metal buildings that can afford to sit vacant 90% of the year and only open during “fireworks time”?!

Craig LaFleur, the owner of PyroSpot Fireworks in Florida, blames his dad for getting into the business more than 10 years ago. 

When he was a kid, the two would go to a nearby fireworks store in his Louisiana hometown, where they’d buy rockets and an assortment of novelty products. 

“We would light the Roman candles and all that stuff together. So for me, it’s very nostalgic,” LaFleur. “I have that memory, and it helps to fuel my passion”

Now that he owns a fireworks business, he enjoys seeing other families come in to pick out items. 

He’s about to see those families again, as people in the state gear up to purchase fireworks for New Year’s.

Come with cash or something to barter

LaFleur’s costs for operating a fireworks business include licenses, labor (including overnight security), fireworks and storage space. 

A wholesale license in Florida is $1,000, while a retail license (needed for each location) will run you $200, he said. 

LaFleur said that while he initially purchased fireworks domestically, he also began to import them from China many years ago. He has over 300 different types in stock, which can cost him a few cents to $300. 

The retail price for his products can cost a couple of bucks, a few hundred or even … a pizza.

LaFleur said customers sometimes barter with him for products, which he’s open to. 

Along with food, he’s traded fireworks for a generator, a giant cooling fan and liquor — more than once. 

“If it’s equipment that I know I need, I have no problem making a deal for it,” he said. 

Rising supply and shipping costs have also meant higher prices for fireworks businesses, with the price of a shipping container rising from between $8,000 and $10,000 in 2019 to about $45,000, according to the American Pyrotechnics Association earlier this year. 

LaFleur said he paid $36,000 in shipping costs for the last container he used, although he’s seen prices start to decline.

“One of the reasons why I did expand is because as you import a higher volume, you get price discounts on volume,” he said. “I was able to lower my cost across the board.” 

He carries brands such as World Class Fireworks, Cutting Edge Fireworks and Brothers Fireworks. 

“I stick with the big brands. I have carried a few other brands if I’ve seen things that I really liked,” he said. “I watch literally hundreds of videos every year of new products. And we actually attend demos each year from some of the importers and manufacturers to look at their new items. So if there’s something that catches my eye, I will try it out.”

LaFleur also pays for the tent, a lease and equipment, which can total $10,000 for each location, and for year-round storage space, which runs about $150,000. 

The profitability of fireworks

If you have a 20% margin in this business, LaFleur said “you’ve done a great job.” 

He’s reached the 20% range in previous years, but last year, his profit margin was around 12% to 14% because of investments he made in his company.

In his first year of business, LaFleur said he just about broke even, and in the second year, he saw a small profit. 

“Because of all the changes that I was making, we were very low profitability for several years,” he said. For example, he would change the type of shelving that the business used. 

Revenue from New Year’s is about a third of that from the Fourth of July, LaFleur said. While he wouldn’t go into specifics about his own revenue, he considers pulling in $15,000 on New Year’s good business. 

The average markup for fireworks is roughly three times the wholesale price, said Jay Zagorsky, an economist at Boston University’s Questrom School of Business who has studied the fireworks industry.

If you buy a case for fireworks for $100, he said, the business owner will likely rake in revenue of $300. 

But Zagorsky said it can be tough to get an overall sense of the average profit margin or total revenue that fireworks stands bring in because of other variable costs involved in setting up the business. 

Rent and wages, he pointed out, can change dramatically from region to region. 

Operating a fireworks stand requires roughly 10 weeks of full-time work throughout the year, LaFleur said, on top of around six weeks of part-time preparations. Outside of operating his stands, he also has a full-time job. 

But Kelley Martinez, the vice president of Mr. W Fireworks, said she works for her company year-round. After the season is over, the business spends months closing out, which entails inventorying their products and paying sales taxes, and getting ready for the next season.

“It’s constantly work,” she said. Mr. W Fireworks has about 300 stands and 200 stores located in Texas and New Mexico, and imports its fireworks from China. Other costs include rent, electricity, property taxes and advertising. 

Martinez said the industry is competitive, with both good seasons and bad seasons. Weather is a crucial factor, with a dry season putting a damper on sales because of fire danger.  

Zagorsky said some of the key benefits of running a fireworks business are that it’s seasonal work, allowing people to take on other jobs, and it’s similar to running other types of retail businesses, so the skill set is transferable. 

The downside: It’s a business that requires long hours during fireworks season and one that requires paying for licenses and inventory up front, among other resources, Zagorsky said.

How some buildings sit vacant most of the year

Zagorsky said there are several types of businesses that sell fireworks to consumers: large, permanent stores operate year-round. Seasonal ones in states like California, where many booths are run by nonprofits, athletic groups or charities. And individuals who set up temporary stands or tents. 

A youth baseball league in Lompoc, California, told the Lompoc Record in 2016 that fireworks vendors like TNT or Phantom will front them the fireworks and booths. In exchange, the nonprofits keep 10% to 20% of the proceeds. 

As for why some businesses can afford to let buildings sit vacant most of the year? They may be counting on making enough during New Year’s and the Fourth to pay costs for the rest of the year, LaFleur said. 

If you drive by some stores that operate year-round, he said you might see just one employee during off seasons, while some may offer appointments during other times of the year.

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