The arcade gaming industry is experiencing a nostalgic resurgence, with the global arcade gaming market projected to grow at a compound annual growth rate (CAGR) of 1.99% between 2022 and 2027. With the popularity of barcades and other social entertainment venues on the rise, now may be the perfect time to turn your gaming passion into profits by opening an arcade.

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An arcade start-up has plenty to get excited about. Today’s arcade entrepreneurs can take advantage of innovative new technologies like virtual reality and innovative payment systems to create unforgettable gaming experiences. They can develop laser tag arenas or host gaming tournaments and events to attract gaming enthusiasts hungry for the arcade’s classic sights and sounds.

This guide will walk you through how to open an arcade. Topics include market research into arcade games and your target market, competitive analysis, registering an EIN, opening a business bank account, common startup business expenses, and more.

1. Conduct Arcade Market Research

Market research is essential to starting a successful arcade business. The arcade industry is full of unique variables that set it apart from others in the entertainment market. Market research offers details on the target market, trends in new and classic arcade games, pricing models, and more.

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Some details you’ll learn through market research include:

• The ample youth population with increasing disposable incomes makes the Asian Pacific market an ideal location for an arcade business.
• North America and Europe present strong opportunities as well thanks to rising demand for social interactive gaming experiences.
• The arcade gaming centers market is fragmented, with portfolios ranging from family entertainment centers that include party rooms for younger children to specialized gaming cafés.
• Family entertainment centers remain popular, though the increasing focus on competitive and recreational gaming for adults is driving demand for specialized gaming bars and cafés.
• Either business model can be profitable if strategically placed in high foot traffic areas hungry for entertainment.
• Hosting birthday parties, gaming competitions, or using the space as an event venue during off-peak hours helps increase ROI.
• Arcade bars can also integrate craft beer, unique cocktails, and food menus to attract patrons.
• The keys to succeeding with an arcade start-up include having a clear target demographic and offering the latest arcade gaming technology like VR.
• Keeping a fresh selection of games, maintaining equipment, and focusing on customer service also pays dividends.

With nostalgic trends bringing arcades back, now presents an opportune time for entrepreneurs to capitalize on this growth industry. Despite rising competition from mobile and console gaming, arcades can leverage the appetite for interactive social entertainment as a key differentiator.

2. Analyze the Competition

Understanding the competitive landscape is critical for any arcade start-up. First, research arcade gaming centers in your geographic area to analyze offerings and foot traffic.

Some ways to get to know about other local businesses as you develop an arcade business plan include:

Drive-by assessments allow you to gauge parking availability, interior spacing, game selection visibility, and customer demographics. Competitor visits then let you experience service quality first-hand while you audit pricing, game variety, food menus, and bonus offerings like prize redemption.

Online reviews and social media monitoring also yield valuable competitive intelligence. Review sites like Yelp and Google provide customer commentary on strengths and weaknesses. Meanwhile, following competitor social media unveils promotional strategies and events that successfully drive patronage. Sales data from sites like Sensor Tower can uncover top-grossing arcade apps and games as well.

Another effective tactic is running anonymous online surveys with those in your target area. Simple questions like “Which local arcade do you visit most and why?” uncover brand perceptions, experiential preferences, and decision motivators. Transportation access, venue aesthetics, game selection, and hospitality all play pivotal roles.

Monitoring local business listings gives visibility into how rivals drive online awareness as well. How often do they update Google My Business profiles? What tactics boost visibility, location pins, photospheres, posts, and offers? Essential for driving discoverability.

3. Costs to Start an Arcade Business

Starting an arcade requires significant upfront capital for gaming equipment, facility leasing/purchase, construction, inventory, licensing, payroll, marketing, and other expenses before opening doors to the public. Thorough planning and cost projections early on are essential.

Startup Costs

In terms of start-up costs, acquiring specialized arcade equipment like videogame consoles, arcade cabinets, pinball machines, air hockey tables, VR headsets, and prize redemption stations takes top priority.

These can range greatly in pricing, but allotting at least $50,000 – $100,000 provides flexibility for a strong initial game selection Mixing classics like Pac-Man alongside multiplayer fighting games and leading VR titles keeps offerings fresh. Refurbished arcade cabinets help limit costs as well.

Leasing an appropriately zoned retail space for the arcade comes next, often demanding $4 – $10 per square foot monthly for commercial real estate. For a 2500 square foot unit, that equates to $10k – $25k in rent per year, excluding property taxes and association fees.

Purchasing a building brings more financial stability long-term but requires around $200k – $400k up front for mortgage financing, taxes, and insurance. Paying for necessary renovations tailored to the arcade floor plan also falls in the $75-$150k range.

Outfitting the interior with a customized layout warrants supplies like carpeting, lighting, stools for consoles/bars, shelving for redemption prizes, counters, and decorative materials to match the branding. These fixtures ring up around $15k – $25k altogether.

Required business registration, permits, and insurance need to factor in up to $5k as well for costs like sales licensing, food handler training, public liability coverage, and more. Legal and professional fees (logo work, contract drafting, accounting setup) can run $3k – $7k. Don’t forget the change fund (at least $500) for registers and coin dispensers too!

Ongoing Costs

Staffing represents a significant monthly expense in addition to gaming equipment lease payments, inventory ordering, software subscriptions, maintenance/repair, advertising, utilities, and other costs. Having a dependable team to handle customer service, sales, tech troubleshooting, and administrative tasks is pivotal.

Industry wages for managerial and full-time floor staff land around $45k per employee. For a staff of at least 4 (1 manager, 3 attendants) payroll reaches upwards of $200k annually. Workers’ compensation and benefits jack up labor overhead exponentially too.

While volume dictates costs substantially month-to-month, projected annual operating expenses easily exceed $300k including the fixed salaries, non-employee expenditures, and COGS.

Savings from refurbished machine purchases and quarterly vendor account reconciliation help offset such overheads. Overall though, the complexities of managing an arcade call for intensive operational planning paired with circumspect financial oversight, year in and year out.

4. Form a Legal Business Entity

Launching any arcade demands weighing the pros, cons, and liabilities of each legal structure. As a sole proprietorship, your arcade assumes no separate business identity from personal assets, spelling immense financial risk. Any legal trouble directly impacts your home and bank accounts.

Sole Proprietorship

A sole proprietorship is a solid company structure for any single-owner business. It can also be used if a married couple wants to share ownership of a business. A sole proprietorship keeps you in the driver’s seat where small business administration and big decisions are made, but it doesn’t protect your assets in the event of legal trouble.

Partnership

Partnerships seem an affordable option as you equally split arcade liabilities with others. But any co-owner blunders or conflicts become your own. Their assets stay tied to yours. Partnerships face heavier tax burdens as well. And good luck getting a bank loan when co-owners’ lives inevitably shift.

Corporation

Establishing a Corporation better shields your assets from arcade troubles while easing expansion prospects long-term. Its formal designation as separate entities adds legitimacy and trust for securing business financing too. Just beware of added paperwork and annual renewal fees. Corporations are the most complicated and expensive entities to form.

Limited Liability Company (LLC)

An LLC proves ideal for combining personal asset protection with pass-through taxation flexibility for arcade entrepreneurs. Setting up an LLC only demands around a few hundred dollars plus moderate filing and renewal fees annually. Compare that to incorporating where state laws require appointing directors/officers and issuing shares. This added complexity benefits larger chains but overcomplicates most arcade launches.

5. Register Your Business For Taxes

Securing your arcade’s Employer Identification Number (EIN) establishes your legitimate business identity in the eyes of the IRS and state regulators. The EIN formally registers your arcade enterprise separate from your identity for tax and employer purposes. Without one, you can’t open critical business bank accounts or apply for needed licenses.

Thankfully obtaining an EIN takes just minutes online. Simply access the IRS EIN Assistant tool and select the option best reflecting your LLC ownership structure. Enter your identity details like name, address, and SSN along with your soon-to-be arcade’s legal name and address.

With EIN secured, call your state revenue office to register for necessary sales licensing so you can legally collect and remit taxes. This requires submitting your state sales tax permit application form along with a one-time registration fee ranging from $10-$50 depending on your state.

Additionally, certain local jurisdictions require separate business or amusement licenses for arcade operations on top of standard sales permits. Research specific municipality statutes to steer clear of compliance violations or surprise fees down the road. Consider assigning these administrative tasks to a reliable manager or support staffer as operations ramp up.

Between the SZN, sales licenses, and any local amusement/gaming permits, properly registering your arcade covers crucial legal and tax bases while empowering genuine market legitimacy. Taking these foundational steps flags you as an ethical business committed to integrity from day one.

6. Setup Your Accounting

Juggling arcade operations without disciplined accounting Habits courts financial disaster long-term. Tracking revenues, inventory, wages, taxes, and assorted expenses demands detailed recordkeeping, or else profit leakage and IRS penalties become inevitable. Thankfully modern tools paired with an adept accountant’s guidance make accounting manageable.

Accounting Software

Implementing QuickBooks early on works magic through automatically importing arcade sales receipts and vendor bills when synced to business bank/credit card accounts. This eliminates manual data entry drudgery so you focus on customers instead. QuickBooks also automates payroll handling, reconciliation, invoicing, refund processing, and other tedious paperwork.

Hire an Accountant

Supplementing with an accountant’s expertise ensures full compliance across taxation, accounting rules, auditing protocols, and more as your arcade enterprise expands. A qualified accountant also provides invaluable business advisory services across growth planning, expense optimization, payroll strategies, and investment decisions over time. Expect fees of around $200-$500 monthly when utilizing an accountant year-round.

Open a Business Bank Account

Strictly separating all arcade finances protects personal assets and simplifies reporting. Establish dedicated business checking/savings accounts plus a business credit card only used for arcade expenditures. Personal and arcade funds must remain wholly distinct for easier accounting and heightened liability protection.

Apply for Business Credit Cards

Applying for a business credit card also assists cash flow via flexible financing. Lenders determine credit limits according to annual arcade revenue projections. Ensure all projections seem reasonable since personal credit scores are now irrelevant. Instead, provide the arcade’s EIN, projected sales, and ownership/entity documentation during application. Then let financing fuel growth!

7. Obtain Licenses and Permits

Beyond standard business registration, arcades demand specialized permitting tied to gaming devices, youth admission, food & beverage service, and amusement tax protocols. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.

At a minimum, an operational arcade license from your city must be displayed publicly per local statutes. Fees range $100-$500+ for review, processing, and site inspections to ensure building codes and safety standards stay met. Zoning classifications must enable commercial recreation too. To confirm your intended property address works before signing any lease.

Usage licenses then come for the units themselves including game consoles, coin dispensers, VR rigs, and redemption prize machines. Permits range from $50-$100 apiece in recurring fees, capped at certain quantity limits depending on square footage. Carefully tally all arcade equipment ahead of time to avoid surprise gaps or charges.

With minors comprising the target demographic, attenuated care for safety and supervision remains paramount. Most states mandate obtaining amusement ride operator permits for entertainment venues focused on serving those under 18. These certification review processes examine employee background checks, security protocols, emergency procedures, and injury incident readiness to verify sufficient precautions are taken.

Health permits similarly demand awareness should your arcade offer traditional cuisine, just snacks and fountain drinks, or integrate a full-scale restaurant. Check state statutes on necessary food handler training, site compliance, public operating standards, and kitchen equipment rules if going beyond pre-packaged goods.

Don’t forget amusement taxes which apply steep surcharges between 5-10% on arcade revenues in certain cities. Beyond sales taxes, amusement levies help fund municipal budgets by targeting admissions fees, equipment usage charges, prize redemption token purchases, and similar arcade activities.

8. Get Business Insurance

Operating any arcade without adequate insurance invites financial ruin should equipment get damaged, customers get injured, or other unthinkable scenarios arise. Yet convincing entrepreneurs to splurge on protection plans rather than flashy new consoles proves challenging. Here’s a perspective on coverage critical that prudent owners cannot afford to overlook.

• Scenario A: a normally docile redemption prize machine unexpectedly topples during peak hours, injuring a child while sending two nearby teens to the hospital. The untreated floor anchor failure triggers a flurry of seven-figure lawsuits. Was proper liability coverage in place to prevent bankruptcy?
• Scenario B: a freak electrical storm strikes your city one Friday night, sending a power surge racing through circuits and frying every arcade cabinet beyond functionality. With no safety net, can you afford to replace $300,000+ in charred gaming inventory?
• Scenario C: En route to a trade show, your box truck loaded with prized arcade wares gets T-boned on the highway. The uninsured driver flees while your custom cargo sinks to a total loss without adequate protection. Does closure loom without stopgap coverage?

Now ponder those worst-case scenarios with ample insurance backing every corner of operations. Accident claims help replace damaged goods plus handle legal settlements without batting an eye. Business interruption policies ensure payroll, utilities, and fixed costs get covered when unforeseen events like natural disasters force unexpected closures. Customized protection brings peace of mind.

9. Create an Office Space

Establishing an administrative headquarters separates oversight duties from distracting arcade clamor crucial for maximizing productivity. Managers require quiet surroundings to concentrate on vital paperwork like payroll, bookkeeping, inventory orders, and vendor accounts while fielding permits and licenses.

Coworking Office

For managers overseeing multiple locations, coworking spaces like WeWork provide movable offices suiting expansion ambitions. Membership plans offer 24/7 building access, utilities, administrative support staff, and amenities from $300-500 monthly. WeWork empowers flexibility.

Retail Office

If you prefer singular workspace permanency, retail office suites adjacent to established arcades centralize oversight. The proximity encourages direct engagement with customer experiences while keeping behind-the-scenes businesses physically separate on-premises. Expect lease rates around $800 and up monthly based on square footage needs.

10. Source Your Equipment

Launching an arcade demands significant upfront investment in specialized gaming equipment. From iconic staples like PacMan to trendy VR setups, attracting clientele requires the hottest entertaining attractions. Thankfully myriad options exist for furnishing state-of-the-art diversions without draining startup capital.

Buy New

Buying brand-new equipment from leading manufacturers ensures flawless functionality for years while allowing customization latitude. Work directly with sales reps to tailor gaming suite specifications to your space limitations, power constraints, aesthetic preferences, and targeted demographic appeal. Just brace for premium price tags ranging from $75k and beyond for robust initial inventory buys.

Buy Used

Scouring the resale market unearths cost savings on gently used machines discarded by shuttered arcades. Vintage gems like pinball offer wonderful retro flair. Facebook Marketplace and Craigslist provide local pickup options for those upgrading inventory or downsizing. Expect to pay 40-60% less buying second-hand. Just inspect closely and test everything before swiping cards.

Rent

Renting gaming equipment also helps new arcades conserve capital for other build-out expenses. Skip repair and maintenance costs by signing flexible short-term rental contracts instead of owning outright. Operators like BMI Gaming offer reasonable weekly rates. This lets entrepreneurs regularly rotate attractions keeping offerings fresh. Customers enjoy trying new technology without the monopoly fatigue.

Lease

Leasing strikes an ownership feel without huge frontline capital demands through spreading payments over months or years. Benefit from reliable tech and negotiate service bundles without obliterating budgets. Be sure to scrutinize terms for hidden rate hikes, ownership delays, and early termination penalties before committing, however.

11. Establish Your Brand Assets

Cultivating an unmistakable brand identity fuels crucial customer awareness, retention, and referrals over the long term. While gameplay quality drives the initial trial, a polished aesthetic matching experiential promises gives arcades mass appeal and sticking power.

Get a Business Phone Number

Centralizing business communications under a single phone number projects consistency and professionalism across all client touchpoints. Services like RingCentral provide toll-free local numbers with call routing, voicemail transcriptions, SMS capabilities, and more starting at $30 monthly.

Design a Logo

Designing an iconic, meaningful logo also ignites visual familiarity and nostalgic connections with target demographics. Classic arcade iconography modeled through services like Looka simplifies graphic production starting at around $20 per logo. Modify colors, typography, shapes, and themes until you land the perfect mark aligning with your brand personality.

Print Business Cards

Printing staff business cards, loyalty program pamphlets, redemption prize signage, and table tents bearing the vibrant logo multiplies subliminal impressions. Sites like Vistaprint offer 500 basic cards for under $50 including free design templates to incorporate graphics. Cards enable personal outreach during community events and site visits while other collateral blankets the arcade with awareness-building visibility.

Get a Domain Name

Staking an online home for customers through registering an intuitive domain cements brand legitimacy while owning a digital asset. Namecheap features domains from $8.88 annually plus free email hosting, SSL certification, and private registration if desired. Choose short, simple name variants centered on location or experience themes for easy retention.

Design a Website

Building a sleek website alongside social media profiles showcases gameplay offerings 24/7 to web searchers. User-friendly services like Wix facilitates intuitive site creation without coding starting at $14 monthly. For more advanced designs, Fiverr connects affordable developers, copywriters, and graphics geniuses beginning around $5 per task.

12. Join Associations and Groups

While competitive zeal drives most entrepreneurs, collaborating with industry allies through associations unlock support, insights, and connections pivotal for excelling in unfamiliar terrain. Rather than reinventing gameplay wheels alone, leveraging groups’ Veteran savvy illuminates proven formulas worth borrowing.

Local Associations

Local associations like the American Amusement Machine Association provide both online and in-person opportunities interfacing with amusement innovation frontrunners. Attending conferences keeps the inspiration flowing as you examine growth strategies or bleeding-edge attraction sneak peeks other owners are eyeing.

Local Meetups

Ongoing meetups also encourage consistent networking through feeds like Meetup. Typing “arcade” into location-based searches uncovers active regional groups coordinating gatherings for industry insiders plus gaming fans. Hosting or attending recurring events nurtures community ties and referral pipelines as you demonstrate thought leadership in discussing emerging sector trends.

Facebook Groups

Meanwhile, niche gaming groups on Facebook facilitate broader digital conversations examining pressing topics. The Arcade Game Buyers community features over 4.8k global members sharing repair tips, inventory sourcing guidance, and troubleshooting simulations. Others like Business Startups Forum offer mentorship for raising capital.

13. How to Market an Arcade Business

Savvy marketing remains non-negotiable for sustaining steady arcade patronage beyond grand opening hype. Unless intentionally promoting offerings through paid and organic channels, locally-reliant entertainment venues quickly fade into obscurity when relying solely on word-of-mouth referrals.

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Personal Networking

Tap friends and existing networks first for invaluable seed endorsements. Offer incentives like free gameplay passes to delighted visitors providing social media tags or positive reviews. Nothing fuels further patronage like visuals of friends embracing fun.

Digital Marketing

Digital platforms also offer affordable advertising scalability to keep attractions top of mind nearby and beyond. Consider:

• Google Ads campaigns to capture web searchers. Target those seeking local family fun or specific gameplay options using tailored ad copy and landing pages.
• Facebook/Instagram ads displaying vivid event images with irresistible captions and On-Site activity tagging for social buzz.
• Launching a YouTube channel with gameplay highlights reels and tournament recaps to amass subscribers.
• Posting on community event pages and neighborhood listservs.
• Optimizing Google Business profile with immersive imagery including virtual tour clips.
• Publishing ongoing blog content highlighting new games and attendee experiences for SEO.
• Email/SMS list segmented outreach with discounts and loyalty promotions to drive reactivation.

Traditional Marketing

Traditional platforms like print, radio, and out-of-home displays also furnish cost-efficient brand reinforcement:

• Distributing bold flyers and coupons to pedestrian hotspots, schools, etc.
• Sponsoring Little League teams or community fundraisers for goodwill.
• Claiming retail/restaurant table tents and displays to captivate diners.
• Placing vibrant street pole banners near heavily trafficked corridors.
• Running 30-second radio spots on stations popular with your target demographic.
• Advertising on billboards along commuter routes or highways with heavy impressions.

An integrated marketing framework mixing organic buzz, paid ads, and offline visibility keeps arcade environs brimming without overextending ad budgets or overwhelming patrons. Assessing campaign analytics guides optimal channel focus for maximizing returns.

14. Focus on the Customer

While gameplay creativity and technical polish drive initial trial, an arcade’s long-term prosperity ultimately depends on hospitality exceeding expectations every visit. When staff radiates genuine care, referrals and loyalty build steadily.

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Consider an attendant noticing a shy tween struggling to master a new VR game. Taking a moment to explain proper calibration and stance tips leaves the grateful player with improved competency and confidence. Such warm guidance costs nothing but earns goodwill dividends as the tween enthusiastically recounts gameplay gains to friends.

Similarly, imagine a family celebrating a birthday when redemption prize systems unexpectedly crash. An owner apologizing profusely and providing complimentary gaming passes for a future visit assuages frustration while creating positive perceptions. That family likely returns while sharing about the integrity.

With countless entertainment alternatives vying for patrons’ time, arcades relying solely on hardware buzz quickly lose luster. But those delivering consistently thoughtful service stand apart. Customers intrinsically trust staff have their best interests in mind. Word spreads as local havens earn reputations for transcending transactions with genuine hearts.

In a world filled with cold competition, leading with compassion proves the ultimate disruptor. Make service enhancements a top priority for frontline teams through ongoing training. Nurturing a culture where employees instinctively exceed expectations at every turn seeds an unshakeable foundation for expansion years beyond grand opening fanfare.