How to Start the Ultimate Arcade Gaming Business

The sounds of coins clinking in slots, joysticks clicking, and pixelated music blaring - for gamers, an arcade is paradise. If you love gaming and want to turn your passion into a business, starting an arcade may be perfect for you.
However, launching an arcade is no game. It requires careful planning, marketing, and management. But with the right approach, you can build a successful arcade business that attracts loyal customers and keeps the quarters flowing.
In this guide, we'll walk you through how to start an arcade business step-by-step, from creating a business plan to finding the perfect location to stocking your space with the latest and greatest games. Get ready to level up your entrepreneurial skills and start your very own arcade!

The Arcade Business Market

Arcades appeal to a niche market of gaming enthusiasts, typically targeting teens, young adults, and families with kids. An arcade business can operate as a local, mass market entertainment venue. Customers pay a small fee to play a variety of video games, ticket redemption games, and other amusements. While arcades were most popular in the 1980s and 1990s, some have seen a resurgence recently as nostalgia for retro games grows. However, arcades still face competition from home gaming consoles and mobile games. To succeed, an arcade needs to provide an experience that can’t be replicated at home, with the latest interactive and virtual reality games, a social atmosphere, and other entertainment options like food, drinks, and prizes. The arcade business model is based on high volume - earning small amounts of money from many customers. So, an arcade needs to be located in an area with plenty of foot traffic and target customers, like teens and families. An arcade can be a stand-alone business or part of a larger entertainment venue like a movie theater, bowling alley, or family fun center.

Your Arcade's Offering

The games and experiences you offer are the heart of your arcade business. To stand out, focus on interactive and virtual reality games that can't be played at home. Provide the latest technology like motion-activated and touch screen games. You can also offer retro '80s and '90s games to tap into nostalgia. In addition to video games, provide other amusements like skee-ball, whack-a-mole, claw machines, driving simulators, and ticket redemption games. An arcade should have 30-50 games and amusements to keep customers engaged for at least 1-2 hours. Develop your arcade's offering based on your target audience. For families, include multiplayer games and ticket redemption games so kids can win prizes. For teens and young adults, focus on the latest action, adventure, fighting and racing games. Provide additional entertainment like food, drinks, and snacks. Some arcades have full snack bars while others just offer basic vending machines. Either way, make sure you have seating areas so customers can relax, eat, and socialize. Your arcade's offering and experience is what will keep customers coming back again and again. Stay on the cutting edge of new gaming technology and rotate your games frequently to give repeat customers something new to experience with each visit.

The Economics of an Arcade Business

An arcade business has a high cost of goods sold since games, equipment, and technology are expensive. You'll need $50,000 to $500,000 to start an arcade, depending on size. The largest costs are:

•Arcade games - $5,000 to $50,000 per game. Buy both new and used games to save money.

•Game licenses and revenue sharing - Many new games require an upfront licensing fee and a portion of revenue. This can cost $200 to $500 per game monthly.

•Equipment like tokens, tickets, card swipers, and ticket counters - $5,000 to $20,000 total.

•Rent, utilities, and building costs - For a small space, expect to pay $1,500 to $5,000 per month.

•Staff - 2 to 3 employees at $10 to $15 per hour. About $3,000 to $7,000 per month total.

To be profitable, you need to generate high revenue through strategic pricing:

•Game fees - 25 cents to $2 per play. Price higher for the newest, most popular games. Offer discounts for bulk play like $10 for 20 game plays.

•Admission fees - If charging admission, $5 to $15 per person. Only charge admission during peak hours and for special events. Waive admission for those who buy game plays.

•Redemption counter prizes - Mark up prizes 2 to 3 times the cost. The profit from prize redemptions can account for 10-30% of total revenue.

•Food and drinks - Mark up items at least 3 times the cost. Non-gaming revenue sources like food can make up 20-40% of total sales.

With the right combination of games, technology, and pricing, an arcade can generate $200,000 to $500,000 in revenue per year with a 10-20% profit margin. The key is keeping costs low while maximizing revenue from all sources - games, prizes, admission, and food.

Marketing Your Arcade

Effective marketing is key to attracting customers to your arcade. Here are some of the top strategies to employ:

•Search Engine Optimization (SEO) - Optimize your arcade's website to rank higher in search engines like Google. Focus on keywords like "arcade," "arcade games," and your location. SEO will drive organic traffic to your site.

•Social media - Create profiles for your arcade on platforms like Facebook, Instagram, and TikTok. Post photos and videos of your games, prizes, food, and happy customers. Run social media contests and promotions to increase engagement. Social media is the best way to reach teens and young adults.

•Email marketing - Start collecting customer emails as soon as you open. Send regular newsletters with coupons, event announcements, and updates about new games. Email marketing has a high ROI and keeps your arcade top of mind.

•Direct mail - For families with kids, direct mail in the form of postcards or flyers is still effective. Distribute to neighborhoods within a 3 to 5 mile radius of your arcade. Include coupons to drive traffic.

•Local partnerships - Team up with movie theaters, family fun centers, kids' clubs, and youth organizations in your area. Provide them with coupons and flyers to distribute to members and customers. Offer to host birthday parties and events. Local partnerships are a great way to reach new customers.

•Advertising - For a new arcade, focus your advertising budget on social media and search ads. You can also advertise on local radio stations, sponsor kids' sports teams, or take out ads in parenting magazines. Measure the results of any ads to determine the ROI before continuing.

•Special events - Host tournaments, competitions, movie nights, kids' clubs, and other special events at your arcade. Events bring in new customers and give existing ones another reason to visit. Promote events on your website, social media, email, and through local partnerships.

With an effective marketing strategy that utilizes digital and traditional tools, you'll build awareness of your arcade, reach your target customers, and keep the quarters flowing in. Be sure to track the results of all your marketing efforts to optimize your strategy and spend.

Sales Strategies and Processes

To maximize revenue in an arcade, focus on upselling customers at every opportunity through strategic sales strategies and processes:

•Offer bulk game play discounts like $20 for 100 tokens to encourage customers to buy more upfront. This makes them feel like they're getting a deal and ensures they stay longer.

•Suggest customers add to their game play purchase once their tokens start running low. For example, "You only have a few tokens left. Would you like to add another $10 worth?"

•Require customers to exchange cash for arcade tokens or game play cards. This makes them pre-pay and ensures they spend their entire purchase in your arcade.

•Place popular, high-profit games near the entrance and token counter. This entices customers to spend more to play the latest and greatest games right away.

•Offer a free game play or two when customers first walk in. This gives them a taste of the experience so they want to buy more.

•Provide incentives for larger purchases like bonus tokens, free plays, or food/drink discounts. For example, spend $30 get $5 in free tokens.

•Suggest add-on purchases at the redemption counter like "Would you like to purchase more tickets so you can get a larger prize?" This upsell works well for families with kids.

•Train staff to suggestively sell by asking open-ended questions to determine customers' needs and budgets. Staff should then recommend specific game and food options in those price ranges.

•Run frequent promotions and specials like two-for-one game plays, bonus tickets, or prize giveaways. Promotions bring in more customers and get them spending more.

With an effective sales strategy focused on upselling and maximizing customer spend, an arcade can significantly impact revenue and profits. Be sure to provide proper sales training to staff and evaluate the success of different promotions and incentives to optimize your strategy.

Operations and Execution

To run an arcade business successfully, focus on the following operational areas:

•Staffing - Hire friendly staff to handle game operation, token and ticket sales, prize redemption, and food service. Provide ongoing customer service and sales training. For a small arcade, 2-3 employees at a time is typical.

•Purchasing - Buy both new and used arcade games, redemption prizes, food/drinks, and supplies. Negotiate the best deals and financing options from vendors. Maintain a consistent budget for purchasing to control costs.

•Maintenance - Perform regular maintenance on all arcade games and equipment to ensure everything is functioning properly. Do routine cleaning, repairs, and tests. Take games out of service as needed for full servicing.

•Customer service - Greet customers as they enter, answer any questions, and handle any complaints promptly and courteously. Provide a friendly, fun atmosphere that keeps people playing and coming back.

•Security - Install security cameras to monitor for any theft or damage. Enforce age restrictions on certain games. Do regular walk-throughs, especially at closing to ensure all customers have left before locking up.

•Accounting - Keep detailed financial records of all revenue, costs, profits, and taxes. Conduct regular accounting to track the performance of your arcade and make business decisions. Work with an accountant to file taxes appropriately.

•Legal compliance - Follow all laws regarding arcade game operation, liquor licenses, age restrictions, and employee regulations. Obtain proper business licenses and permits to legally operate your arcade.

•Safety - Ensure your arcade meets all fire codes and building safety regulations. Perform regular safety checks and emergency drills. Properly maintain fire extinguishers, emergency lighting, and exit signs.

With efficient operations and solid execution in each of these areas, an arcade business can run smoothly and successfully. Be sure to create policies, procedures, and checklists to keep your arcade compliant and optimize the customer experience.

Legal Requirements and Regulations

Before opening an arcade business, be sure to research all legal requirements and regulations in your city and state. Some key things to consider:

•Business licenses and permits - Obtain proper licenses and permits to legally operate a business in your area. Requirements vary in each city and state.

•Building codes - Ensure your arcade location meets all building safety codes, especially for occupancy, fire exits, ventilation, and electrical systems.

•Zoning laws - Check that an arcade business is allowed under the zoning regulations for your desired location. Some areas prohibit arcades or place restrictions on their operation.

•Age restrictions - Implement policies to follow any laws regarding age limits for certain arcade games. Provide proper ID checks when required.

•Food and drink - Obtain licenses and permits to serve food and drinks on the premises. Follow all health department regulations for food handling and distribution.

•Gaming regulations - Adhere to laws regarding arcade game operation, revenue sharing, and licensing. Many new arcade games require licensing fees and a portion of revenue which varies by state.

•Taxes - Pay business taxes, sales tax on games and revenue, employee taxes, and any other required taxes. Work with an accountant to file all taxes properly.

•Insurance - Obtain business insurance policies like liability, property, and casualty insurance to protect your arcade. Additional insurance may be needed for employees, food service, and liquor.

•Employee regulations - Follow all laws regarding minimum wage, overtime pay, discrimination, and other regulations that apply to employees.

Level Up Your Business

Starting an arcade business is challenging, but with the right approach, you can build a successful operation. Develop a strong business plan, secure financing, and find an ideal location. Stock your arcade with the latest interactive and virtual reality games along with classic favorites to attract customers. Implement a marketing strategy focused on your target audience through social media, events, and local partnerships. Focus on upselling and maximizing customer spend to generate significant revenue from games, food, prizes, and admission fees.

If you provide a fun, social atmosphere with great games and customer service, your arcade will become the hottest spot for entertainment. So get ready to level up - it's game on! Open your doors, turn on the neon lights, and welcome players to experience the excitement of your very own arcade.