Because many consumers prefer an in-person social gaming experience, arcades remain a popular business model. Even if internet gaming is more popular than ever, playing virtual games with people through home entertainment systems or cellphones may still seem alienating. An arcade offers a physical location in which to share enjoyable gaming experiences with family and friends.
Follow these ten steps to start an arcade:
Arcade planning
Create a legal entity for your arcade.
Register your arcade for tax purposes.
Create a Business Bank Account and a Credit Card
Configure Accounting for your Arcade
Obtain the Required Permits and Licenses for Your Arcade
Purchase Arcade Insurance
Establish your Arcade Brand
Make an Arcade Website
Configure your Business Phone System
Starting a company entails more than just registering it with the state. We’ve put up this basic guide to getting your arcade up and running. These stages will guarantee that your new company is well-planned, correctly registered, and legally compliant.
STEP 1: Make a business plan.
A well-thought-out strategy is vital for entrepreneur success. It will assist you in mapping out the intricacies of your organisation and uncovering some unknowns. Consider the following crucial topics:
What are the initial and continuing expenses?
Who is your intended audience?
How much money may you charge your customers?
Fortunately, we have done a lot of the legwork for you.
What are the expenses of starting an arcade?
Your expenditures may vary greatly based on the kind of arcade you establish. A typical arcade could be able to function in a compact location, and your expenditures might be kept in the $250,000 range. Costs for a bigger entertainment centre, such as Dave and Buster’s, might exceed $1 million.
The games alone normally account for the majority of an arcade’s launch costs. With prices ranging from $6,000 to $9,000, even a small selection of 20 games consumes over half of the low-end $250k budget. You’ll also need to rent a space, which can vary in price based on your location and the size of your arcade. A ballpark estimate for a place between 3,000 and 5,000 square feet would cost between $1,200 and $2,800 per month.
The remaining of your money will be used to purchase new equipment such as computers and cash registers, renovate and decorate the area, and pay licencing costs. Finally, you’ll need to pay your workers, albeit arcades need fewer employees than many other sorts of businesses. Of course, if your arcade will provide food or drinks, you will incur extra fees in the form of equipment and supplies.
What are the continuing costs of running an arcade?
The main continuous expenditures are rent and machine maintenance. Utilities are another constant, and with electrical devices running all day, they may be more expensive than you imagine. A popular barcade chain in Texas, for example, spends $15,000 per month for utilities at their smallest location. Aside from that, monthly costs include things like staff salary and keeping everything tidy.
As your arcade accumulates additional consoles, there may not be enough space to store them all. Keeping a machine rotation would need a storage room for empty machines, although this is uncommon in tiny arcades and would not be a problem in the early stages of your firm.
Who is the intended audience?
Your ideal consumer will differ based on the sort of arcade you own. Traditional arcades are frequented by families and children; families may utilise arcade gaming as a bonding experience, while children are in the fortunate position of having discretionary cash but few alternatives for amusement. Meanwhile, “barcades” cater to hipsters who like pairing craft beer with classic pinball. Finally, arcade/restaurant combinations such as Dave and Buster’s cater to a wide range of consumers, from families to business professionals wanting to unwind after work.
How can an arcade generate revenue?
The typical strategy involves charging users to play your games, but there are other alternatives. The traditional approach of having consumers enter money or tokens into machines is still in use, although licencing and taxes difficulties make this method less lucrative than it seems. Furthermore, many individuals no longer carry cash, much alone quarters. Another common concept is charging a one-time price for a certain amount of free play time, such as $5 for 30 minutes. Customers buy gaming “points” on a swipeable card, which enables you to charge extra for particular games
How much money may you charge your customers?
This is mostly determined by the business model you choose, as previously described. Many arcades charge more for modern games (between 50 cents and a dollar) and less for older games (about a quarter) if consumers pay with quarters or pre-paid cards rather than timed free play. You may also encourage upfront spending by giving additional points or free plays if customers spend a particular amount.
What kind of profit can an arcade make?
This is heavily dependent on the number of consumers, the cost of maintenance, and the amount you spend back into your firm. As previously said, each game has the potential to earn $10,000 every year, which adds up. In 2014, one successful entrepreneur who runs three tiny arcades made $165,000 in earnings. Keep in mind that your take-home earnings will vary depending on how much you put in your firm to ensure its long-term sustainability.
How can you increase the profitability of your company?
Using a points-based card system instead of quarters may boost earnings, both because it encourages players to play more and because it avoids certain antiquated tax restrictions regarding the usage of quarters. Offering games where consumers may redeem tickets for prizes is a traditional way of increasing arcade revenues, since it encourages people to return to the machines to “earn” more tickets. We’ve also considered additional ideas, such as introducing food and beverage service or hosting happy hours.
What will you call your company?
Choosing the correct name is both crucial and difficult. If you don’t have have a name in mind, check out our How to Name a Business guide or use our Arcade Name Generator to help you come up with one.
If you run a solo proprietorship, you may choose to use a company name different than your own. More information may be found in our DBA guide.
We suggest studying your company name before registering it by checking:
The business records of your state
Trademark registrations at the federal and state levels
Platforms for social media
Availability of a web domain.
It is critical to register your domain name before someone else does.
STEP 2: Establish a legal entity
Sole proprietorship, partnership, limited liability company (LLC), and corporation are the most frequent business structure forms.
Creating a legitimate company organisation, such as an LLC or corporation, shields you from personal liability if your enterprise is sued.
STEP 3: File your taxes
Before you can begin for business, you must register for a number of state and federal taxes.
To register for taxes, you will need to get an EIN. It’s really simple and completely free!
Taxes on Small Businesses
Depending on the business form you choose, you may have multiple choices for how your company is taxed. Some LLCs, for example, may benefit from being taxed as a S company (S corp).
These guides will teach you more about small company taxes:
Taxes on LLCs
LLC vs. sole proprietorship
Corporation vs. LLC
S Corp vs. LLC
How to Form a S Corporation
S Corporation vs. C Corporation
There may be state taxes that apply to your company. In our state sales tax guides, you may learn more about state sales taxes and franchise taxes.
STEP 4: Establish a company bank account and credit card
Personal asset protection requires the use of distinct business banking and credit accounts.
When you combine your personal and business accounts, your personal assets (your house, vehicle, and other possessions) are at danger if your company is sued. This is known as penetrating your company veil in business law.
Furthermore, understanding how to develop corporate credit may help you get credit cards and other financing in your company’s name (rather than your own), lower interest rates, larger lines of credit, and other benefits.
Establish a business bank account.
Opening a business bank account is not only required when asking for business financing, but it also:
Separates your personal assets from the assets of your firm, which is required for personal asset protection.
It simplifies bookkeeping and tax reporting.
Create a net 30 account.
Net 30 accounts are used to develop and grow company credit while also increasing cash flow. Businesses use a net 30 account to purchase items and refund the whole debt within a 30-day period.
Many net 30 credit suppliers submit information to the main business credit agencies (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how firms establish business credit in order to get approved for credit cards and other lines of credit.
Apply for a business credit card.
Obtaining a business credit card benefits you in the following ways:
Put all of your company’s costs in one location to separate personal and business spending.
Build your company’s credit history, which will be important for raising funds in the future.
STEP 5: Establish business accounting
Recording your numerous costs and sources of revenue is crucial to assessing your company’s financial status. Keeping precise and thorough accounting also makes yearly tax filing much easier.
Our LLC Expenses Cheat Sheet simplifies LLC accounting.
STEP 6: Obtain all required permissions and licences
Failure to get appropriate permissions and licences may result in significant penalties or possibly the closure of your firm.
Requirements for State and Local Business Licensing
When running games that require players to pay you money (or other objects of value) to play, most states require you to get a game of chance licence. Visit the Small Business Administration’s reference to state licences and permits to learn more about licencing requirements in your state.
If you sell food, you will also need to get a licence from your local health authority, which will require you to pass regular health inspections. These inspections will verify for compliance with local health rules, which are generally connected to food contamination prevention. Check with your city or county clerk’s office for further information on local licences and permits, or seek assistance from one of the local organisations mentioned in the SBA’s database of local business resources.
For additional information on local licences and permissions, please visit:
Check with the clerk’s office in your town, city, or county.
Contact one of the local organisations mentioned in the US Small Business Associations database of local business resources for help.
Licensing of Music
Permission from the composer or licence holder is required to play music in a commercial environment. You may often get a blanket licence that permits you to play music held by a vast library of artists and recording companies. Performance rights organisations, such as ASCAP or BMI, may provide such licences.
Occupancy Certificate
An arcade is always conducted from a physical site, and as such, a Certificate of Occupancy is usually required (CO). All construction requirements, zoning laws, and government restrictions have been satisfied, according to the CO.
If you intend to rent a space:
In most cases, it is the landlord’s obligation to get a CO.
Before leasing, make sure your landlord has a CO that is appropriate for an arcade or can get one before you operate.
A new CO is often required after a big remodelling. If your company will be refurbished before opening, incorporate wording in your lease agreement indicating that lease payments will not begin until a valid CO is given.
If you intend to buy or create a location:
You will be in charge of obtaining a valid CO from a local government official.
Examine all building laws and zoning restrictions for your company location to verify that your arcade is in compliance and may receive a CO.
STEP 7: Obtain commercial insurance.
Insurance, like licences and permits, is required for your company to operate safely and legally. In the case of a covered loss, business insurance protects your company’s financial well-being.
There are several sorts of insurance plans designed for various types of companies with varying risks. If you are unaware about the hazards that your company may encounter, start with General Liability Insurance. This is the most popular coverage required by small companies, so it’s a good place to start for yours.
Workers’ Compensation Insurance is another important insurance product that many companies need. If your company will have workers, your state may require you to purchase Workers’ Compensation insurance.
STEP 8: Establish your brand
Your company’s brand is what it stands for, as well as how the public perceives it. A strong brand will help your company stand out from the crowd.
How to Market and Promote an Arcade
While conventional marketing mediums such as print, television, and radio are crucial, the nature of the arcade business type encourages more innovative techniques. Customers come to arcades for a communal gaming experience, thus having a strong social media presence is critical. This helps you build positive word of mouth by giving a central platform for consumers to discuss their experiences (e.g., your Facebook page, Twitter/Instagram accounts, etc.).
Advertise at other young entertainment places, such as malls or skating rinks, to simply tailor advertisements to your niche. Finally, you could want to provide your loyal consumers discounts and incentives for returning or bringing friends.
How to Keep Customers Returning
The “happy hour” tactic is one that works well for arcades. Whether you provide food and drinks or not, having a defined time each day when customers may play games at a discount can create revenue during quiet hours or build up crowds before or after busy times. You may also host theme parties, such as a “80s night,” to leverage on the nostalgia nature of arcade games, or cross-promote with “Comic Con”-style events. Keep in mind that an arcade is, by definition, a specialty attraction, which typically aids in the development of repeat consumers.
STEP 9: Create your company’s website.
After you’ve defined your brand and designed your logo, the next step is to build a website for your company.
While developing a website is an important step, some may be concerned that it is out of their grasp due to a lack of website-building skills. While this was a fair concern in 2015, online technology has made significant advances in recent years, making the lives of small company owners considerably easier.
The following are the primary reasons why you should not put off developing your website:
Every genuine company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
Social media accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for your own business website.
STEP 10 : Install your business phone system.
Getting a phone for your company is one of the finest methods to keep your personal and professional lives distinct and private. That isn’t the only advantage; it also helps you automate your company, provides it legitimacy, and makes it simpler for prospective clients to identify and contact you.