January 11, 2024

How to Start an Arcade for Entrepreneurs

5 Minute Read

Does the sound of a pinball machine make your ears perk? What about the excitement of players competing against each other to win a game? If you answered ‘yes’ to these questions, you might be thinking about how to start an arcade and what steps to take to become and remain a success. Well, the answer might surprise you. 

Starting an arcade is great for an entrepreneur looking for something new and exciting, and it could become very profitable if it is a success. However, running an arcade differs daily with all the experiences and attractions you can add to a location. 

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

Step 1: Create a Business Plan

If 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 figure out your business finances and see the best ways to get funding for your project. In addition, what other attractions will you have? Do you envision your location as a more miniature classic/old-school style arcade or a large family entertainment center that might include a full restaurant with 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 one in mind, start brainstorming location ideas for your arcade. That way, you will know the rent prices and can include them within your business plan and budget. 

It would help if you also outlined how to get business licenses and permits within your business plan. While arcades are not gambling, you must obtain the correct permits so your business can run legally.  

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

Opening an arcade is an exciting journey, but before the joysticks start singing, you must navigate the sometimes-daunting realm of 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 needs a basic business license from your city or county. It’s the foundation upon which you build your operation.
  • Zoning Permits: Ensure your chosen location allows arcades through proper zoning permits. This avoids surprises down the line.
  • Building Codes and Inspections: Ensure your premises meet all safety and accessibility regulations. Building inspections will greenlight your operations.
  • Specific Activity Permits: Depending on your offerings, you might need additional permits for equipment like pool tables, laser tag arenas, or food and beverage service.

State and Federal Requirements:

  • Employer Identification Number (EIN): Register your business with the IRS by obtaining an EIN. This unique number simplifies tax filing and opens doors 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, prepare for additional permits and inspections from relevant state and local agencies.

Beyond the Paperwork:

  • Research Your State and City: Regulations differ, so delve into your specific state and city requirements. 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 take time, so 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 proper permits and licenses isn’t just about checking boxes; it’s about protecting your business and ensuring the safety and enjoyment of your customers. 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 done all the work to outline your business goals, you get to do the fun part of choosing 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 buy it. Numerous amusement trade shows and expos worldwide allow operators and owners to get exclusive sneak peeks at the latest games and play them before investing in them.

You have some options when it comes to buying arcade equipment. You can choose between buying new equipment, investing in used arcade equipment, or looking for the ’80s or ’90s classic arcade machines. There has been a trend toward creating classic arcades to take advantage of childhood nostalgia – be aware of everything that goes into keeping older machines up and running, like finding parts and technicians specializing in fixing those machines. 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 ensure you’re profitable. There are three basic categories of typical arcade games with many more subcategories: Video Games, Redemption Games, and Merchandisers. An essential part of the decision-making process is the percentage of your space allocated to specific types. Check out our post on the different types of arcade games for a more detailed analysis.

Step 3: Research Your Competition

Business in this sector is competitive, so make sure you find who the competitors within your area are and what makes them stand out or 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 find the best way to attract your target market. 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: Understand your ideal customers – families, teens, 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? 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, exceptional customer service? Identify their winning formulas.
  • Vulnerable Gaps: Find areas where they lack. Limited game variety, outdated equipment, poor service, inconvenient location? These are your potential entry points.

Remember, competitive research is not about copying or undercutting – it’s about understanding the market, identifying opportunities, and crafting a unique arcade experience that resonates with your target audience. By wielding this intel strategically, you’ll turn competition into inspiration, paving the way for your arcade to dominate the scene and light up your customers’ lives.

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 Profitable Are Arcade Games?

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’ll find some basic industry averages to help set your expectations, but you must understand your specific needs and market.

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

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

Average Per Game Revenue: $250/Week*

This is based on a facility achieving average expected volume. Many arcades do far better than industry averages due to higher volume. Average also assumes the facility has committed significantly to family entertainment, with a current game mix and keeping up with prize trends.

Average Per Game Space Allocation: 70 Square Feet*

Extreme games are becoming more prevalent, causing the square footage for games to increase while decreasing the overall game count.

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.

Start an Arcade in Your Area

An arcade is a great way to go if you’re trying to develop a business opportunity to bring enjoyment and fun to your community. This has been a basic outline for starting an arcade. If you have any questions or want help getting started, Betson has team members who know the industry inside and out and can help you with the layout & design of your floor plan, game room mix, and more.

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*Estimates may vary.