Starting an arcade of your own (Part 1)

Shaggy April 6, 2008 34

While I have been working on getting my own arcade started I have dealt with the problem where it is difficult to come by useful information on arcade business statistics. I know that many of you have also encountered the problem of finding good information on arcades or just working on getting your arcade business started. I feel that it would be useful to hold a discussion about it and share information that I have come across in my quest to open up my own arcade – together with The Stinger Report and your own comments, I believe that we can have a great discussion on this subject.

First off, many wonder if it is feasible to open up an arcade at this time with news of arcade closures in places like Japan. If you need any reassurances, take a look at recent trade shows where developers and distributors have an optimistic outlook on the arcade scene. 2008 will see a lot of new releases, some of them with a good amount of hype behind them. Prices on new arcades have come down from where they were a couple of years ago which makes it easier for new operators to start up although one doesn’t have to open an arcade with nothing but new games – just games that have proven earnings. So there are positives to look at but as opening and running a business is more complicated than that, we’ll need to delve further into the subject. Hit the post break for more.

Since I first saw the movie Tron I knew I wanted to be like the character Flynn – no not being digitized into a computer but in running my very own arcade. As I have stuck with that dream, I have been working hard on getting this started since I bought my first arcade cabinet in 2000. For this particular feature I will focus on four major points in getting started:

1) Have a passion for video games
2) You need a compelling idea
3) Create a business plan to focus on that idea
4) Use all of your resources to gather information for the plan

Point #1: Have a passion for video games, in particular arcade titles. Why does passion matter? I believe that it is simple answer. If you have two businesses that are virtually identical save for the passion that the owers have for the business, then when difficult times come the owner who holds a strong passion for what he or she is doing is more likely to weather the storm. Running a small business is not an easy task to undertake and statistically the numbers are against new businesses so I firmly believe that those that love what it is that they are doing and will believe that they will make it are more likely to survive. The human mind and heart are powerful things and if you need some encouragement in that direction, I would recommend the book “Think and Grow Rich” by Napolean Hill as an essential read for any prospective arcade owner.

Point #2: Create a compelling idea. While the purpose of this initial discussion is not to focus on how economies work (you can take a class or find a book to freshen up on that subject) I want to make the point of the importance of gauging how well your local economy is doing. If the outlook is bleak then that does not mean that opening up an arcade will equal instant (or even eventual) failure but it will mean that you will need to create an environment even more compelling than what may be the standard to get people to leave their homes and come to you. And this leads me to my first point of launching an arcade busiess and that’s creating a compelling idea for your business. There are many ways that you can go about taking the basic idea of an arcade and improving upon it – researching local tastes is the only way to tell how your idea may be received in the area. An arcade doesn’t have to be ‘just an arcade’ but can be an arcade with other attractive aspects to it. I researching information for my own arcade I have been told a few times that arcades alone will not survive – it needs some other attraction to bring the people in. Now this can vary – sometimes that means ticket redemption games, sometimes it means “Eatertainment” where you offer food, it might mean adding a PC game café, or it may mean creating a competitive arcade scene. I suggest that anyone looking to open an arcade consider these extra avenues because those people telling you this are generally distributors, who are people who best understand the industry. But it is possible to bring people in with just an arcade but your game selection will have to be pretty spectacular to do such a thing to carve out a fan base.

Point # 3: Create a business plan. YOU NEED TO MAKE A BUSINESS PLAN. I repeat that subject and put it in caps becase it is very important and strangely it is often overlooked because people do not want to take the time to “plan their business out”. This lack of desire to plan out something so important is unfortunate and also foolish. While many people say that they don’t need a plan because it’s all in their head, if you need to seek funding from an investor or bank and say it’s all in your head, they will not take you very seriously. Recently I visited the credit union I am banking with to get my loan and the agent said that he was very impressed with me because out of the many people that comes to him for funding, I was one of the very few that was prepared and had a business plan in hand. But that is actually not the most important reason for creating a business plan – making a plan will force you to research all of the revelvant (and sometimes irrelevant) points that are needed to create a successful business, it will help you formulate your idea and strategy and if done properly you will know if it is feasible to go ahead with the idea or not. On top of that it also allows the potential operator to design an operational pattern that can be used to create a working system whereby the business can run if applied to any situation. Imagine that you are creating a franchise (even if you don’t plan on franchising your idea) where you would need to create a system that could be sold to anyone as a model for running a successful business. If you need proof look at franchised businesses like McDonalds – it just takes a good idea and a good, proven system to work.

If you need a good resource for creating a business plan, I’d suggest checking out SCORE.org. They have some templates there that are easy to understand and use. I used their template for creating a business plan and was able to create my business plan without really needing to use existing plans for help (which in the case of an arcade was nearly impossible to come by).
Point # 4: Gather information. This could be considered point 3.5 as a plan requires research to be created but I am making it a separate point as we could talk about it separately for a while. One option that should be considered although it may not be possible for everyone to try out, is to work at an arcade. Why? Because you will better understand the aspects of the business if you do. It will also help you understand what it is like from the perspective of an employee, which I feel is important when it comes to managing employees. I worked in an arcade when I was 17 and 18 and it was one experience that helped me decide that I really wanted to run an arcade. In addition to working as an ‘entry level’ person I worked my way up into managing the arcade where I learned how to handle customers, scheduling, hiring, firing, payroll, opening, closing and more. This perspective will help me in running my own arcade. Also doing this you will get an idea of how much the arcade makes in your area. Knowing this can be a very good help as you can then take what you learn from this experience, find out what can be improved and use that in your arcade.

Let’s say that you cannot go this route due to reasons such as you have a family to support (arcade employees generally make minimum wage or slightly higher because young people are generally employed) or maybe your area doesn’t have any arcades (if that is the case you need to find out if there are any laws prohibiting arcades – find this out early or you’ll waste time. You may need to find another local city that doesn’t have any anti-arcade legislation). If so then find some arcades to visit and talk to the management about their business. Of course it is possible that they would not be willing to open up about their business if they know you’re going to be competing with them but that depends on the operator. I did this in my area (I was in school at the time studying business and I made my own project where I created a report where I was gathering information about how a business is run with how much do they make a week, how many customers do they get on average, what was their most popular game, etc.) and I was able to learn some astounding information that otherwise I would have not realized through any other means. For example, one local arcade stated that they made $10,000 a week on average. They have about 100 games, charge an admission fee and have a number of ticket redemption games. They also have been around for about 20 years so they are well known. Another arcade I visited was much smaller, charged no admission fee, uses a magnetic key system and made about $4000/wk average. For both of these businesses these amounts nearly doubled in the summer time. I also knew from my time managing an arcade that the arcade I worked for generally made between $5000-$6000/wk. So it can vary but what surprised me the most was these numbers compared to a local internet/game café. I visited one of those and unless they were feeding me the wrong information (which is doubtful) they only make $650/wk. They don’t charge as much as many other game café’s I know of however because the local area isn’t willing to pay more than $2/hr for that service. Some areas are willing to pay up to $5 or higher so again it will vary.

If you are unable to talk with a local arcade then find out which coin-operated machine distributors are in your area and talk to their sales managers. In my experience these people are very informed on the subject and will turn out to be one of your most useful resources in creating your business. They know which games are popular, which ones pull in the most cash and will be familiar with the situation surrounding the local economy. They also might have critical statistics you need to build a sound business plan as some distributors (such as BMI Gaming) actually have plans to help people get started.

If you need demographic data, check with your local library or use the internet. Both resources should have easy access to such information. You may also obtain this from a realtor – if you go with a realtor to obtain a place of business they can obtain demographic data for an area that encompasses several miles within the area that your store will be located in.

There is more to getting a business going, but this is a start. It will take some hard work but it is worth it in the end and that’s important to remember as while it may be difficult to start and run a business, the feeling of building something from your own mind and accomplishing such an effort is a sweet reward that everyone could get but few actually try.


34 Comments »

  1. Neil April 6, 2008 at 8:30 pm - Reply

    I think arcades could very well be viable again. The biggest issue and problem is most arcade video games provide an inferior experience to that of the home systems. Furthermore the costs for the games themselves are ridiculous.

    Capcom wants close to $10,000 for Street Fighter IV and Namco wants $15,000 for Tekken 10.9. I could see $5,000 as a -slightly- reasonable price point for either game, but even then it’s too much.

    Previously, arcade games used custom hardware and used to be significantly superior to the home systems, hence the a lot of money went into the development of the hardware.
    Now, technology is so advanced that an arcade game can be run off of a modified home game console or PC. However, the cost of developing the software has gone through the roof.

    BUT, the plus side is that the arcade games can now be ported almost perfectly (or better) to the home systems with little effort, which is the main source of revenue.

    The overall biggest problem is that no game company is pushing the envelope anymore with arcade games. I had hoped by 2008 that arcade games would have been significantly more realistic and innovative than what exists today. It seems that the arcade manufactures simply regressed into a lowest common denominator approach, instead of taking the high road.

    Arcades could be more viable if home console manufactures created cross-arcade/home games, as an example.

    I could talk about this all day, but I gotta go to work 🙂

  2. Geo April 7, 2008 at 1:13 pm - Reply

    My question is: what is the average monthly income that i can make having an arcade bussines here in the U.S.A…???

  3. Geo April 7, 2008 at 1:29 pm - Reply

    OK i did not read the rest of the information until now, amazing the amount of money you can make having an arcade bussines, and you don`t actually need to be there during the all day for your bussines to keep running, you can do something alse while your arcades is open, EXCELENT information thanks ARCADE HEROES…

  4. Shaggy April 7, 2008 at 2:02 pm - Reply

    You make excellent points Neil – those are my sentiments as well and have been for most of this decade as I have watched the innovation in arcades decrease and the number of “me-too” games increase. Personally I plan on doing something about that after my arcade is running and established by creating my own development group but I know it will be a challenge to develop great software and good cabinets with a small dev. team but I’ve already got a notebook filled with game design ideas. Once the software is created and the hardware put together then comes the challenge of getting it out there. But I will have my own arcade as a test vehicle for new games. My goal will be to not release any game for more than $7000 if it can be helped – I’ll target the $3000-$4000 range if possible but certainly not $10k (since I’m not familiar with the costs involved in creating arcade machines at the moment it’s hard to say but I believe that there is plenty of room for improvement). The hardware itself doesn’t have to break the $1000 mark – you can build a decent SLi gaming PC for under that price (I think SLi/Crossfire is the way to go for arcades, Atari Games had the right idea there). HD monitors are becoming cheaper every year; I don’t know about what it costs to mass manufacture cabinets that might be the largest expense; and then a little compensation has to go into the price tag for the development team and company. But while I might charge lower the plan is to make up the lower profit margins by obtaining more sales as more operators could afford the game. There’s a lot to look at but I think it can be done.

    @Geo – your welcome, I’ll write more on the subject soon, please ask if there are any specific subjects you’d like me to tackle. 🙂

  5. Geo April 9, 2008 at 3:26 pm - Reply

    what is the best place to install an arcade bussines: ,mall, shooping center…?
    any ideas..??

  6. Shaggy April 9, 2008 at 3:43 pm - Reply

    The depends on a couple of different factors so it’s hard to say exactly what is the best. Either way arcades thrive off of foot traffic so malls, strip malls, busy city walkways, etc. are all good for arcades. The difference will be in what the landlord requires really. One thing that you have to look at with a mall is their hours. Some malls are open only at certain times in the day and they require you to be open when they open and close when they close. Depending on the hours this could be good or bad – for example one mall I’ve considered going into opens at 9AM and closes at 9PM (even on Saturdays). I’m not sure why they have such an early closing time but that is obviously bad for an arcade which does a lot of business on Friday and Saturday nights where you usually stay open until 12AM. If a mall you look at does something like this, you could check with them and see if you can get a spot where there is an outside entrance so you can stay open as long as you want. Keep in mind that depending on where you go will change the price, in malls, strip malls or anywhere else. The more visible the store, the more they charge per sq. ft. Stores on a street corner usually have to pay the most just like stores in a shopping mall with the most visibility usually have to pay more.

  7. Geo April 9, 2008 at 7:52 pm - Reply

    Thanks shaggy, very good advice`s…..I will keep all that in mind….

  8. Dave Mandelson April 21, 2008 at 9:02 pm - Reply

    I am embarking on building a new bowling center, and leasing the arcade. What range of price per square foot works well in the arcade business? I understand the foot traffic is the main driver, however, this will be a new venture.

    Thanks for you response.

  9. Shaggy April 23, 2008 at 1:44 am - Reply

    @Dave,

    It always helps for it to be cheaper but prices can vary depending on typical prices in the area. Something between $8-$12 sq. ft. would be ideal – the larger the space the cheaper to be more attractive.

  10. Milton June 19, 2008 at 1:58 pm - Reply

    Hello my name is Milton I just got to say you got a lot going on here. How long have you been doing this. Hope it’s going well for you, Thanks

  11. Shaggy June 19, 2008 at 2:00 pm - Reply

    Milton,

    I just opened last week and so far so good. If you start on the homepage of the site and work back from there you’ll see further updates on my own arcade in case you haven’t read those already. 🙂

  12. Neil Scanlon August 16, 2008 at 2:15 am - Reply

    Hi guys,Brilliant site. First off i would like to wish all of you the best of luck with your business`s. I myself am in the middle of opening my own arcade here in ireland,my town is getting very big and very competitive and one thing it does not have is any form of arcade what so ever,so i am confident with enough effort i can make it work. That is how i found this site,i am just looking for any info that could give me a little more if you get my drift,anyway keep me posted guys. Neil

  13. Shaggy August 16, 2008 at 4:33 pm - Reply

    Neil,

    Thanks for dropping by, I hope that the site has been helpful. You can check the forums for a little more info as well.

  14. Simon September 14, 2008 at 4:48 am - Reply

    Thank you very much for this. Im making a business plan for my business studies class on arcades and this article is very helpful.

  15. wizel August 13, 2009 at 3:28 am - Reply

    can you help me in making a project feasibility study about an arcade? i just finished reading your article about how to start an arcade at your own an i really appreciated it. Somehow, it can help me in making my FS study..

  16. Gatorsauce February 13, 2010 at 10:41 pm - Reply

    I am very excited to be planning a new arcade in a very underserved area – there are really no INDOOR activities in the area – it is a huge outdoor area – lots of lakes for boating/swimming/fishing in the summer and mountains for skiing/hiking, etc. but if it rains or gets dark – there is nothing to do. well there is one movie theater in town, with 1 screen. But you get the picture. So I’m trying to figure out how to estimate income. The plan is to have 10-15 regular arcade games, a ‘video gaming’ pit with a 60″ screen, surround sound, comfy couches for those who like to play games with their friends, and also considering a golf simulator. In addition, food-wise will be hotdogs/popcorn/snacks/soft drinks. I just can’t figure out how to to figure out potential revenue!! Can anyone give me a rule of thumb (like per-game/per-hour revenue or something? I think if we build it they will come… but I’ve got to convince the investors that it will show a return sometime in their lifetime! Thanks in advance. This is a great site and I’ve already learned a ton.

    • Joey June 14, 2010 at 2:17 am - Reply

      Any luck so far Gatorsauce? I’m in the same boat as you are it sounds like. I live in a small town to, not much to do after dark & nothing arcade wise with more than about 10 games ( pizza Parlor). I think I found a good score with a HUGE stock of vintage arcade cabs & old em games, so I’ll be going the old school route. I can’t find per game revenue projection either.

  17. neal June 16, 2011 at 8:47 pm - Reply

    i want to start arcade place in my town how i can setup everything?

  18. Rebecca July 9, 2011 at 2:00 pm - Reply

    I was reading this article cause I myself wanted to start my own arcade here in a small town. There isn’t much to do here whatsoever, or even in the closest areas. Most people go to the Bowling alley/roller rink which isn’t even open most times. There are tons of young people here too and families that don’t get to do much cause of it. I talked with my dad about the idea and he also suggested lazer tag to make it different (also lots of people love hunting here). The closest arcade here is either a hour away or too far to really get to do something for one night. I really never got to work at a arcade ( wanted to, but just didn’t) but I have worked in retail and know a bit about customers. I know there is more to just running the place, but I am getting the general idea as I figure out if would work here or not. I am just researching my possibilities at this point and figuring what I could have in an arcade or someplace fun that everyone would enjoy.

  19. Anna B. July 19, 2011 at 2:55 pm - Reply

    what is the most useful marketing plan for the arcade place in the midwest and how much money need to be spent on the marketing and advertising?
    could you give us some reccommendations?
    Could you let me know what the best practices of some Arcade places are?
    Is a bar successful with an arcade?
    what are some ways o brin in some new people?
    what games are most succeful?
    I appreciate you answers and opinions!
    Thank you!

    • arcadehero July 20, 2011 at 7:18 am - Reply

      Sure. First off, use the free marketing tools at your disposal – Twitter and Facebook. They are means to constantly stay in contact with fans and combined with an official website is where you can make some headway on that. Aside from that there might be some good opportunities in print media right now, coupons on pizza boxes and such. Radio and TV advertising is still quite pricey despite the economy but if you have the money for a short radio campaign to announce your grand opening, then I believe that would be worth it. It’s what I wanted to do for The Game Grid but I didn’t save up for that like I should have.

      Yes a bar can be successful with an arcade. Check your local regulations about alcohol though before getting to far into that. You’ll need to check local regs about just the arcade too so take care of that before you get too far along as sometimes you’ll need to come up with a creative workaround depending upon what the law is in your town regarding arcades.

      Most arcades these days focus on having a sizable redemption area along with a video area. Probably a 60/40 or even 70/30 split. That doesn’t mean you have to go that route necessarily but it’s what others do. I’ve seen a variety of ways to pay for it from Nickelcades to just entry fees to standard quarters. You can use a card system but they are very expensive to start and maintain.

      Keep the lighting nice but make sure you avoid having glare in the screens. Aside from broken controls, nothing kills a game quite like not directly seeing what you are playing. Keep them maintained. If people come across multiple broken games, they likely will not come back.

      A lot of places focus on older, used games as it saves money. But keep in mind that new games will bring in the big bucks. They are expensive to get which is the downside but people haven’t seen the newer stuff as much as the older games.

  20. Saq August 15, 2011 at 8:56 am - Reply

    Hey I have a question … Is it possible to open a lounge where they can play console gaming systems? Like ps3 xbox360 etc.

    • arcadehero August 15, 2011 at 10:37 am - Reply

      yes it is possible although I have not heard of one that does very well or that survives very long. You would need to be setup with iGames to do it legally as well. To be honest, there just isn’t enough with this type of room that serves as an attraction for people to come out in droves, unless you combine it with some amusement games people can’t get at home. Even if you offer stuff like huge TV screens and great sound systems, if they can play it at home they have little reason to dump a lot of money into the business.

  21. Joshua August 23, 2011 at 8:30 am - Reply

    Hello! First of all, thank you for this resource. I am so impressed with the information and wealth of knowledge here.

    My friend and I have dreamed of starting an arcade for years, and we’re both big into gaming. There was an arcade about an hour from us that was fantastic – games were always great, prices were right, simply bar with beer and hot dogs and good people… but it recently moved quite a bit further away. We would like to do something like that, starting small, in our local area.

    I was a bit curious to know about how much arcades make on average and equally curious to find out about how much they cost to start and maintain.

    Is it a viable business plan and is there still a market for it? More importantly, is it something that can be properly structured as a franchise?

    Thank you again, look forward to your feedback!

  22. Nick September 5, 2011 at 1:31 am - Reply

    Hello and thanks for all the info. Its definitely a great help. I do have a question regarding the electrical aspect of it all. When searching for a location, is there anything I should ask about or need to look into as far as if the building is setup to handle such a high load of electricity? I know a lot buildings that were planned to be arcades have the outlets in the ground but what if I find a building that doesn’t have those? What are my options for power? Thanks for the help!!

  23. Murray November 10, 2011 at 12:58 am - Reply

    Hello

    I am also looking at opening up a arcade. So far I have 4 pinball machines and looking to get a few more. My question is, what percentage of revenues come from pinball as opposed to video games? What would be a good number of machines to open with?
    I don’t believe a place just with arcade games will suffice. You need other revenue streams, but I don’t want to go the beer/alcohol route. Any ideas?

    Thanks

  24. Aaron Dunn January 25, 2012 at 10:12 am - Reply

    I am a photographer looking to buy a arcade old school machine 60 games pacman, donky kong etc. Wondering if anyone knows traffic statistics averages. We would be putting it in an HOA clubhouse with 370 members.

  25. Tori July 21, 2012 at 6:32 am - Reply

    Is ur arcade open now bc I would love to come see it

  26. MKurama September 24, 2012 at 1:13 pm - Reply

    Hi I’m a huge gamer and working on running my own arcade in the city of New Orleans. I have a great business plan if i do say so myself already set also have a partner who already has his own gaming business succuesfully running (something like a GameStop) my question is where can i find good mint condition arcade machines without paying a arm and a leg plus a kidney for it?????
    *mtaplet@gmail.com- any responds.

    • Chris October 28, 2012 at 9:59 am - Reply

      I read your post and I’m in the beginning stages of writing a business plan are there any key components in need to start writing this thing seems like it’s going to be a task any advice would be helpful

      • arcadehero October 28, 2012 at 10:24 am - Reply

        I personally used the template provided by SCORE.org and used information I gathered from the Play Meter State of the Industry Report and local research. At the end of the day all you can do is a best guess on potential earnings but as long as you can show that the idea is viable in your business plan you should be good.

  27. sduduzile November 14, 2016 at 6:16 am - Reply

    Hi

    Please help I want to open an arcade game shop, and I really need your help

Leave A Response »

%d bloggers like this: