How to Start an Arcade for Entrepreneurs

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Does the sound of a pinball machine make your ears perk up? What about the humming of racing games? If you answered ‘yes’ to these questions, you may be thinking about how to start an arcade. You might also wonder what steps to take to be successful and stay that way. Well, the answer might surprise you.

Starting an arcade is a great option for an entrepreneur seeking something new and exciting, and it can become highly profitable if successful. However, running an arcade differs daily, with all the experiences and attractions that can be added to a location.

Be sure to continue reading for our guide on the steps and tips you need to know when starting an arcade.

Step 1: Create a Business Plan

When you’re serious about opening an arcade, you must develop a business plan to help you get started. A business plan is essential in setting your goals and ideas to ensure success.

You’ll need to determine your business finances and explore the best ways to secure funding for your project. In addition, what other attractions will you have? Do you envision your location as a small, classic, or old-school-style arcade, or a large family entertainment center that might include a full restaurant, a bowling alley, laser tag, and other prominent attractions? These are crucial decisions to consider when building out your business plan.

If you don’t already have a location in mind, start brainstorming ideas for your arcade. That way, you will know the rent prices and can include them in your business plan and budget.

It would also be helpful to outline the process for obtaining business licenses and permits within your business plan. While arcades are not considered gambling, you must get the correct permits to ensure your business operates legally.

Step 2: Navigating the Permit Puzzle: Key Licenses for Your Arcade Dream

Opening an arcade is an exciting journey. But before the fun begins, you need to handle permits and licenses. Don’t worry; it’s less of a maze and more like a well-organized treasure hunt! Here’s a compass to guide you:

Local Licenses:

Business License: Every arcade is required to obtain a basic business license from the city or county in which it operates. It’s the foundation upon which you build your operation.
Zoning Permits: Ensure your chosen location allows arcades by obtaining the necessary zoning permits. This avoids surprises down the line.
Building Codes and Inspections: Ensure your premises comply with all relevant safety and accessibility regulations. Building inspections will greenlight your operations.
Specific Activity Permits: Depending on your offerings, you may need additional permits for equipment such as pool tables, laser tag arenas, or food and beverage services.

State and Federal Requirements:

Employer Identification Number (EIN): Register your business with the IRS by obtaining an EIN. This unique number streamlines tax filing and unlocks access to business accounts.
State Sales Tax Permit: Most states require you to collect and remit sales tax. Obtaining a sales tax permit ensures compliance and avoids future headaches.
Alcohol and Food Permits: If you plan to serve alcohol or food, you will need to obtain additional permits and undergo inspections from relevant state and local agencies.

Beyond the Paperwork:

Research Your State and City: Regulations vary, so investigate the specific requirements of your state and local city or municipality. Online resources and local business advisors can help you navigate the specifics.
Start Early: Don’t wait until opening day! Obtaining permits and licenses can be time-consuming, so it’s best to start early to avoid delays.
Embrace the Teamwork: Don’t hesitate to seek help from professionals familiar with your local landscape. Accountants, lawyers, and business consultants can ease the process.

Remember, getting the right permits and licenses is not just a formality. It helps protect your business and keeps your customers safe and happy. By investing time and effort upfront, you’ll ensure your arcade can focus on what it does best: creating unforgettable experiences for players of all ages.

So, grab your metaphorical permit compass, research your local treasure map, and embark on the rewarding journey of bringing your arcade dream to life!

Step 3: Find the Coolest Arcade Games and Machines that Fit with Your Type of Location

After you’ve outlined your business goals, you can enjoy the fun part of selecting the equipment. Of course, your arcade won’t be any fun without unique arcade games and machines. Be sure to look for new releases, classics, or even VR arcade games to stock your arcade. You can even try it before you make a purchase. Many amusement trade shows and expos around the world give operators and owners a chance to see new games. They can try these games before deciding to buy them.

You have some options when it comes to buying arcade equipment. You can choose to buy new equipment, invest in used arcade machines, or look for classic arcade games from the 1980s or 1990s. There has been a trend toward recreating classic arcades to capitalize on childhood nostalgia. Keep in mind that older machines need a lot of work to stay running. This includes finding parts and hiring skilled technicians for repairs. There is a community that loves to work on these machines and bring them back to life; if that’s your passion, go for it. However, newer titles would make more sense if you focus more on business.

Having the right mix of games is essential to ensuring profitability. There are three basic categories of typical arcade games, with many more subcategories: Video Games, Redemption Games, and Merchandisers. Allocating a percentage of your space to specific types is necessary for informed decision-making. For a more detailed analysis, check out our post on the various kinds of arcade games.

Step 4: Research Your Competition

Business in this sector is competitive. Identify your local competitors and determine what sets them apart. Also, find out what they might lack. One of your first goals should be to research their arcades and see how they’re operating and what their assortment is. By analyzing the competition, you can determine the most effective way to target your ideal audience. For example, you might find that you can improve the arcade lineup and bring in more clients than your competition.

Local Landscape: Identify all arcades within your target catchment area. Big chains, independent gems, even bowling alleys with arcade sections – map them all.
Target Audience Focus: Do you understand your ideal customers—families, teens, and esports enthusiasts? Analyze competitor offerings from their perspective.

Dive Deep into Operations:

Game Assortment: What games do they offer? Are they cutting-edge titles, retro classics, or a mix of both? Analyze their variety, popularity, and pricing structure.
Ambiance and Experience: Observe their atmosphere. Is it family-friendly, edgy, or focused on esports? How do they manage crowds and maintain cleanliness?
Pricing and Packages: Analyze their pricing strategies for individual games, hourly rates, and special packages. Consider offering competitive or unique options.

Identify Strengths and Weaknesses:

Competitive Advantages: What makes specific competitors stand out? Unique game selections, innovative themes, and exceptional customer service? Identify their winning formulas.
Vulnerable Gaps: Identify areas where they are lacking. Limited game variety, outdated equipment, poor service, and inconvenient location? These are your potential entry points.

Remember, competitive research is not about copying others or lowering prices. It is about understanding the market. You should identify opportunities and create a unique arcade experience that connects with your target audience. By using this information wisely, you can turn competition into inspiration. This will help your arcade stand out and make your customers happy.

So, grab your notebook, sharpen your detective skills, and embark on the thrilling quest of competitive research. Your arcade empire awaits!

Arcade Business Profit

How Much Do Arcade Games Make?

How much does it cost to purchase arcade games, and how much profit can you expect to make? How many games can I fit in my location? Here, you will find some basic industry averages to help set your expectations. However, it is important to understand your specific needs and market.

Average Per Game Budget: $12,000-$15,000*

Big-time titles and extreme games are more expensive, increasing the average price per game. This number is based on a brand-new, full redemption arcade. Costs can be reduced to fit the project’s budget by using used games. Additionally, carefully selecting the extremes can help meet the budget requirements.

Average Per Game Revenue: $250/Week*

This is based on a facility achieving average expected volume. Many arcades outperform industry averages due to their higher volume of customers. Average also assumes the facility is committed to family entertainment. It should have a good mix of games and keep up with prize trends.

Average Per Game Space Allocation: 70 Square Feet*

Extreme games are becoming increasingly prevalent, increasing game square footage while decreasing the overall number of games.

Getting started with equipment can be a financial hurdle, so check out financing and leasing options and consider how used arcade games can help you jump-start your business.

Read our full blog post on How Much it Costs to Start an Arcade.

Start an Arcade in Your Area

An arcade is a great option if you want to create a business that brings fun to your community. This has been a basic outline for starting an arcade. If you have questions or need help getting started, Betson has experts ready to assist you. They can help with your floor plan, game room mix, and more.

*Estimates may vary.