The Escape Room industry has seen explosive growth over the last decade. The global escape room market size will reach $31 billion by 2032. With more than 2,080 escape room facilities in the U.S. as of 2021.

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As an immersive entertainment business centered around puzzle-solving and teamwork, escape rooms represent a unique attraction. They can foster communication, creativity, and stronger interpersonal bonds.

This guide will walk you through how to start an escape room business. Topics include registering an EIN, forming an LLC, market research, obtaining business insurance, competitive analysis, and more.

1. Conduct Escape Room Market Research

Market research is essential to anyone looking to start their own escape room business. It offers insight into important details for your escape room business plan including trends in escape room games and themes, details on your target market, and local market saturation.

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Some details you may learn through escape room business market research include:

• While the US currently dominates the worldwide market, countries like China, Japan, India, and South Korea present significant opportunities.
• With increasing globalization, entertainment concepts like Escape Rooms have universal appeal across cultures.
• In terms of demographic segmentation, over 56% of Escape Room customers are millennials aged 18-34.
• Participants also tend to be college-educated and employed full-time with higher discretionary incomes.
• Psychographic factors make Escape Rooms popular for team-building events or date nights.
• With low barriers to entry and overhead costs averaging $25,000-$100,000, the concept appeals to entrepreneurial first-time business owners.
• Leveraging a retail site in a trendy, foot traffic-heavy area is ideal. Landlords may offer generous tenant improvement allowances since experienced operators can pay 20-50% revenue shares.
• The operations are not capital-intensive relative to the potential profit margins.
• Owner-designed rooms use ordinary materials and props while proprietary clues and puzzles provide a unique value proposition.
• Escape rooms can also be a part of the party room business, as long as they are designed to be simple, fun, and easy for kids to solve with their parents.
• The primary costs stem from site build-outs, game design, staffing, and marketing expenses.
• Most facilities average 4-10 rooms capable of handling 6-10 participants per hour. Combine rage rooms with escape rooms for an even more interesting and appealing experience.
• With average tickets around $30 per person, a 6-room Escape Room venue can generate over $700k in annual revenues.
• After deducting variable costs, gross margins usually range 50-70% allowing for highly lucrative unit economics.

Given the market size projections and attractive financial metrics, the industry remains in the early growth stages of its life cycle despite market saturation in some regions. As operators expand globally, they can capitalize on the universally resonant themes that drive Escape Room demand.

2. Analyze the Competition

Understanding the competitive landscape is critical for any new business, especially in saturated markets. When evaluating brick-and-mortar Escape Room competition, drive around the target area to identify existing venues noting location, signage, parking, visibility, etc.

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Some other ways to get to know local escape room game competitions include:

• Go inside as a “secret shopper” and objectively assess the environment, staff friendliness, clues/puzzles, and overall experience.
• Online reviews for most escape rooms provide consumer perspectives.
• Check Google to compare online reviews and ratings. This provides a proxy for perceived value and satisfaction.
• Examine their website designs, content marketing, SEO strategies, and social media engagement levels.
• Running websites through tools like Moz and Alexa can quantify traffic volumes and inbound linking, useful benchmarks for developing digital marketing plans.

Monitoring competitors across both offline and online channels provides key insights around positioning, pricing, promotions, and location selection modeled after their success factors. Conducting an ongoing competitive analysis is imperative for outpacing rivals and becoming the escape room of choice.

3. Costs to Start an Escape Room Business

As an escape room owner, initial investments typically range from $25,000 to $100,000 depending on factors like location, size, and build-out requirements.

Start-up Costs

• For retail sites, landlords may contribute $10-$30/sq.ft toward tenant improvements for experienced operators. Plan at least 800-1,200 sq. ft to allow for a lobby and multiple rooms.
• Budget $8,000-15,000 for constructing themed sets, installing lighting/sound, and safety modifications for fire code compliance.
• Hire specialists for custom-building puzzles and props at around $2,500 per room.
• Allow another $3,500+ for control software and technical elements like cameras, locks, etc.
• Outfit lobby areas and game rooms with items like desks and chairs ($1,000), TV displays ($400 each), point-of-sale systems ($300+), security equipment ($750+), etc.
• Allocate around $5,000-7,500 for initial decor, tools, gear, and office electronics to handle day-to-day operations.
• Items to replenish include escape room props ($500/room), cleaning supplies ($100+ monthly), marketing materials printouts ($75+ monthly) etc.
• Plan $1,500-$2,500 upfront for grand opening promotional items, welcome packets, prizes, etc.
• Register business legally, obtain sales tax IDs, and pass fire/building inspections ($1,500+ fees).
• Liability coverage is required (~$800-$1,500/yr). Also, consider business interruption insurance.
• Hire a contractor/handyman for miscellaneous tasks ($100+ hourly).
• Use a payroll provider to handle taxes, and reporting requirements ($750+ setup fees).
• Consult a lawyer to review lease terms, entity structuring, and local regulations ($150+ hourly).
• Quality customer-facing staff are critical. Pay averages $12-$15/hour. Opening requires 2-3 game masters covering overlapping shifts.
• Allocate $2,500+ for recruiting materials, background checks, training programs, etc.

In total, starting an escape room for an 800 sqft venue ranges from a minimum of $60k for a simple low-budget setup to over $150k for an elaborately designed, high-tech facility in a prime spot. With savvy negotiating and cost efficiencies, aiming for around $100k provides solid infrastructure.

Ongoing Costs

The bulk of recurring monthly Escape Room costs include:

• Expect to pay $3,000-$6,500 for lease dues plus triple net charges. Storefront spaces in trendy locations demand premium rates.
• Allocate $750+ every month for ongoing enhancements and rotating puzzle elements to maximize replay value. Refurbishments help sustain interest.
• Having an experienced manager and several well-trained game masters represents around 60% of continuing costs. With 2 FTE roles, the budget is $4,500/mo for payroll.
• Mobile booking systems, customer management platforms, etc. have monthly fees of around $100 in total. Replenishing office and operating supplies averages under $200 monthly.
• Paid ads via social/search platforms can cost $500+. Creative promotions and PR also help drive traffic and conversions. Most allocate 10-15% of revenues for marketing.

Other fixed overhead items like insurance and accounting may cost around $300/mo. Variable costs per customer served also factor in. In total be prepared for ~$10k in monthly operating expenses, not counting payroll. Performing breakeven analysis helps determine the customer volume needed to profit.

4. Form a Legal Business Entity

When establishing a legal structure for an Escape Room business, owners should weigh options like sole proprietorships, partnerships, corporations, or LLCs based on liability, taxation, and ease of formation.

Sole Proprietorship

A sole proprietorship represents the simplest and most affordable option with no formal registration needed beyond requisite licenses. However, the owner assumes unlimited personal liability for company debts or lawsuits. This poses a significant risk given customer injury exposures inherent at entertainment venues.

Partnership

Forming a partnership costs minimal upfront fees but still exposes owners to unlimited liability, which is concerning for a business with safety considerations. Partners also share profit distributions and management duties, leading to potential conflicts without formal agreements in place.

Corporation

Incorporating enables separate business entity status for larger operations and outside investors. But escape rooms won’t likely need to raise funds or have an exit strategy. Registration, compliance, and accounting costs are high for S-Corps and C-Corps relative to potential GMV.

Limited Liability Company (LLC)

Establishing a limited liability company (LLC) balances affordable formation costs with personal liability protection. As a distinct legal entity, judgments against the business spare owners’ assets. Compared to corporations, LLC operating agreements provide more flexibility for profit allocations and structuring.

5. Register Your Business For Taxes

Even single-member LLCs need an employer identification number (EIN) for business banking, hiring employees, and tax filing purposes. The EIN uniquely identifies your company to governmental agencies for key compliance duties.

Fortunately, the IRS offers free online registration which takes under 10 minutes in most cases. Simply navigate to the EIN Assistant site and answer a short questionnaire about your LLC entity, owners, and business activities.

Provide contact details and specify if you already have an EIN (select “No”). Ensure you have personal info handy like SSNs and physical addresses. The online tool then auto-assigns a 9-digit EIN and emails a confirmation notice containing the number for your records.

Unlike sole proprietors who use SSNs, having a dedicated EIN adds legitimacy for Escape Room vendors, billing services, and regulatory agencies. It also enables opening business bank accounts which require an EIN during the application process along with formation documents.

Additionally, most states levy sales taxes on Escape Room admission tickets, merchandise, food & beverage, etc. Registering for a seller’s permit and sales tax ID establishes tax compliance from day one of operations, avoiding penalties.

Many municipalities also impose amusement taxes on entertainment businesses like Escape Rooms as well. Contact your local revenue department to ask about any registration needs and fees for cities within your county.

6. Setup Your Accounting

Proper financial record keeping is critical for Escape Rooms to track revenues and expenses, meet tax obligations, secure financing, and benchmark performance over time. Without organized accounts, key business decisions become guesses instead of data-driven analyses.

Accounting Software

Implementing small business accounting software like QuickBooks simplifies recording daily transactions from integrated bank/credit card feeds. It automates tasks like invoicing, inventory management, reporting, and reconciling accounts. For context, QuickBooks plans start around $20/month for core features.

Hire an Accountant

While programs handle number crunching, working with an accountant provides financial guidance and credibility. A qualified bookkeeper can set up your chart of accounts and review entries for accuracy around $100-150 per month.

Open a Business Bank Account

Separating finances avoids commingling personal and business transactions which muddles record keeping. Open a dedicated small business checking account to neatly silo all Escape Room cash inflows/outflows.

Apply for a Business Credit Card

Likewise securing a business credit card in your LLC’s name builds credibility. Issuers determine approval and credit limits based on your LLC’s financial reports rather than personal credit scores. Expect a lower cap initially but responsible use establishes revolving trade credit to fund operations.

7. Obtain Licenses and Permits

Beyond formal business registration, Escape Room owners must obtain location-specific licenses and permits to open doors to the public. 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, secure a general business license that allows commercial activity in specified zoning districts per local statutes. Neighborhood restrictions prohibit certain uses so review codes with the licensing department before signing any leases. Application fees average $50-100 annually.

Cities also require amusement facility permits for entertainment venues like Escape Rooms charging admission fees. These help regulate capacity limits, safety standards, and accessibility for specialized buildings. Expect costs around $150-300 depending on the scope of attractions and events hosted.

Apply for any elevator inspection certificates if your facility has lifts to access the upper floors. Qualified inspectors verify proper functionality and compliance with safety systems before clearing devices for service. Renewals happen every 1-5 years.

Indoor pyrotechnics and decorations also fall under fire codes. Obtain written preapprovals from the county fire marshal before introducing any fog machines, laser tag props, or flame effects. Expect site visits to examine plans and test emergency fixture functionality like alarm pulls and exit signs.

Staff must undergo formal training as some municipalities require special qualifications or cards to operate amusement attractions per local laws. Additionally, post visible occupancy limits in each room as determined by fire officials to avoid overcrowding accidents.

Adhering to disabled access regulations is also mandatory via the Americans with Disabilities Act standards. Entrances, lobbies, corridors, and at least one entertainment room should accommodate wheelchair-turning space, reach ranges, etc.

8. Get Business Insurance

Given the hands-on nature of Escape Rooms, unexpected injuries or property damage happen. Business insurance shields owners from potentially company-ending lawsuits in worst-case incidents. It also covers day-to-day mishaps common across operations.

For example, faulty props could harm participants mid-game. Slips and falls or underlying conditions like seizures endanger safety too. Without insurance, owners bear full liability for medical bills, legal fees, and settlement costs.

Expensive build-outs also carry inherent risks beyond daily wear and tear. Flooding from busted pipes damages intricate sets and electronics. Theft leaves props and gear gone in seconds. Fires quickly ravage rooms without containment plans.

Insuring contents, earnings potential, and legal responsibilities keeps companies solvent through crises. Packages like Business Owner’s Policies (BOPs) bundle property damage, loss of income, and liability together affordably.

To secure coverage, begin by inventorying assets with replacement values for furnishings, equipment, decorations, puzzles, etc. Also document safety protocols like staff training, emergency procedures, maintenance schedules, etc. as insurers evaluate risk levels based on preparations.

Next, work with an independent insurance agent to review needs and receive quotes from multiple carriers. Expect costs between $800 – $1,500 annually depending on claim history, location risk, and policy limits. Higher deductibles help reduce premiums further for healthy businesses.

Though expensive upfront, insurance keeps your company and finances protected in case of incidents that threaten the core business. Ensuring proper coverage from day one avoids learning painful lessons later on.

9. Create an Office Space

While Escape Rooms operates retail sites, having back office space streamlines administrative tasks like payroll, game design, vendor relations, and marketing offsite. This allows for quiet focus when handling sensitive materials or strategic planning.

Coworking Office

Coworking spaces like WeWork provide stylish, professional environments month-to-month between $300-500. Gain prestige addresses in vibrant neighborhoods surrounded by fellow entrepreneurs. But distractions abound in communal setups lacking private rooms. Confidential calls risk eavesdropping.

Retail Office

Subleasing space within retail shopping complexes aligns with customer traffic patterns when located adjacent to your Escape Room. Expect to pay discounted industrial park rates around $600+ monthly for a basic private office. Noise still permeates some older buildings so test acoustics. Minimal customization flexibility commonly restricts branding.

10. Source Your Equipment

Escape Rooms require extensive props, decorations, electronics, and hardware to create immersive sets. Stocking up on affordably-priced fixtures maximizes initial investments in the space build-out and design.

Buy New

Purchasing brand-new specialty items from escape room suppliers allows complete customization freedom. Sites like Puzzle Break offer thematic puzzles, locks, props, and accessories developers use to outfit their rooms. The Escape Game also lists trusted vendors.

Buy Used

Scouring secondhand markets like Craigslist, Facebook Marketplace, and eBay uncovers discounted supplies from other escape room operators upgrading setups. Expect significant savings of around 30-50% off retail on game elements, decor items, electronic locks, etc.

Event rental companies offer part-time access to big-ticket items. For example, Taylor Rental supplies temporary furniture, video walls, computers, AV equipment, and thematic party decor by the week. Flexible terms allow testing concepts before purchasing equivalents.

Lease

Leasing via specialty financiers plans big investments like millwork, grid walls, lighting, and climate control systems over 2-5 years. While lease payments often exceed retail prices long-term, 100% financing guarantees acquisition.

11. Establish Your Brand Assets

Implementing a coherent brand strategy conveys professionalism and helps Escape Rooms stand out from generic entertainment options. Distinct visual identities and marketing materials leave memorable first impressions while consistent customer experiences encourage loyalty and word-of-mouth referrals.

Get a Business Phone Number

Securing a unique phone line legitimizes operations beyond listing personal cell numbers. Services like RingCentral provide toll-free 800 numbers, custom greetings, and extensions for under $30/month. Call analytics also help gauge response rates across campaigns.

Design a Logo

An iconic, recognizable logo acts as the cornerstone of brand identity. Consider abstract monograms or pictorial marks evoking intrigue or mystery. Graphic design marketplaces like Looka create custom logos from $20 tailored to your vision and color palette.

Print Business Cards

Applying logos across branded merchandise, signage, advertisements, and digital assets reinforces retention. Business cards also facilitate networking and referrals. Print services like Vistaprint offer 500 basic cards for under $20.

Get a Domain Name

Secure website real estate by purchasing matching .com domain names echoing your Escape Room’s ambiance. Registrars like Namecheap provide domains for $9/yr after initial registration. Redirect emails to professional addresses [email protected] vs unbranded alternatives.

Design a Website

Building out an informational website provides a hub detailing admission pricing, hours, FAQs plus email signup forms for promotions. Those handy with WordPress could utilize templated site builders like Wix for drag-and-drop customization.

Alternatively, Fiverr freelancers design fully responsive, SEO-optimized sites from $500 complete with lead generation tools.

12. Join Associations and Groups

Joining industry associations, attending trade events, and participating in online communities provide invaluable mentorship opportunities. Get to know the local escape room community and meet others involved in escape room businesses as you build your own escape room.

Local Associations

The International Association for Escape Games offers members beta testing of new room concepts plus discounts on products, services, and conferences like the Annual Escape Room Convention. Regional groups also rally peers in local lobbying efforts regarding state regulations. Expect dues between $50-150 annually.

Local Meetups

Attending consumer exhibitions like EscapeX allows networking with fellow builders about emerging trends plus evaluating the latest tech products suits. Sites like Meetup list events allowing you to RSVP. Trade show entry fees average $25-50 per day.

Facebook Groups

Industry forums on Facebook facilitate free 24/7 crowdsourcing on game mechanics, staffing, marketing tactics, etc. Top groups like Escape Room Startups & ideas & DIY Making, Online Escape Room Enthusiasts, and Escape Room Owners Promotional Group share actionable advice.

13. How to Market an Escape Room Business

Implementing a multifaceted marketing strategy combines digital promotions and real-world activations to drive brand visibility and trial for new Escape Rooms. As niche entertainment concepts, branding, and customer experiences determine viability more than locations alone.

Referral Marketing

Focus on delighting initial visitors via grand opening promotions to trigger word-of-mouth referrals. Satisfied escapees eagerly endorse challenges to friends seeking shared adventures. Encourage social shares by offering prize giveaways for the most online testimonials. Seeding viral advocacy expands its reach exponentially.

Digital Marketing

Ongoing digital tactics keep your escape room top of mind across local event searches:

• Launch Google Ads campaigns targeting keywords like “room escape game”, “team building activity”, “date night ideas” etc. to attract serious prospects. Expect to invest at least $500 monthly optimizing for conversions.
• Foster organic local rankings by updating Google Business listings with photos, offerings, and contact forms. Strong profiles display prominently in Maps and Search.
• Share behind-the-scenes design stories via Instagram Reels and YouTube shorts for algorithmic amplification to casual viewers who may try rooms later.
• Send email nurture sequences educating subscribers on room themes, booking process, and promotions to transition cold leads into ticket buyers.

Traditional Marketing

Complement digital activities with targeted print and out-of-home visibility:

• Distribute promotional flyers at high foot traffic zones like college campuses, malls, and tourist spots. Bring the escapist experience to life through vivid imagery and succinct event details.
• Sponsor escape room elements on local radio stations to tap drive-time commuters across wide geographies. Contest giveaways incentivize social sharing for extra airtime plugs.
• Place visual billboards along major highways leading into your metro area to intrigue road trippers seeking fresh destination ideas. Bold escape symbols ensure message retention.

Sustaining awareness across media exposes escape rooms to qualified audiences, driving trial and repeat visits through evergreen nurturing.

14. Focus on the Customer

Delivering exceptional customer service is the key differentiator setting successful Escape Rooms apart. Within the niche entertainment sector, word-of-mouth referrals and online reviews directly impact brand perception and conversion rates.

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Some ways to increase customer focus with an escape games business include:

• The intimate experiences inherent at small-scale venues like Escape Rooms rely on thoughtful touches to craft meaningful memories.
• Guests expect personable, enthusiastic hosts to immediately make them feel comfortable tackling tricky puzzles in close quarters with new friends and strangers alike.
• Friendly game masters confidently explaining rules and carefully monitoring progress without excessive hinting enhance engagement.
• Seamless transitions between locked rooms timed to rising crescendos of theatrical soundtracks introduce excitement.
• Congratulating groups who “escape” with bubbly high fives and photo keepsakes celebrate victories.
• Even participants who fail to solve all puzzles in time leave smiling if the journey felt thrilling thanks to attentive service.

These visitors drive the most powerful referrals and social reviews organically as they recall highlights to peers. Positive word of mouth then attracts new patrons at exponentially greater volumes than any advertising alone.