Thinking of Opening a Game Room Business
We get this call about once a week or more; “I want to open a game room” or “do you do game rooms?” In answer to the first question, we always ask another question, “where will your game room be and what’s your demographics?” The standard reply is “I’m in whatever city, and there’s nothing for the kids to do.” Or “I have this big building that I need to fill.” At that point, we realize that the eager new business owner has not done a true assessment of the proposed business nor a thorough due diligence. Most gamerooms or a family fun center (FEC) will not survive without a hefty amount of startup cash. In the past, operators would supply the games but would share in a percentage of funds received in the games. An operator in the game industry purchases the arcade games, maintains or fixes them and collects the money or data. Unfortunately, most operators do not wish to invest such a large amount of money for an arcade room startup, especially if the business does not have a detailed business plan with projected revenue and an advertising/marketing plan. We traditionally use Dave N Buster’s game room as an example. The smaller upright arcade games like Ms PacMan or Donkey Kong cost about $4,000-$5000. While the larger sports shooting games like Super Shot basketball will run $7,000-$8,000 each (not including sales tax nor delivery). And the new flat screen racing games cost about $10,000-$12,000 each. On top of the games, now add the new card readers to each game. This system allows you to program each game and retrieves customer playing info such as time of play, duration and spend rate. That system would cost about $25,000 to $30,000 and does not include training or custom cards. Some of the card reader systems can tie into your POS system too.
Dave N’ Buster’s Posse represent (Photo credit: seanmonkey)
A Dave N Buster’s facility typically has about 200 games in their game rooms and they boast about their Million Dollar Midway that includes traditional arcade, redemption, and simulators along with party rooms and a full scale restaurant and bar. Even if you use a low average of $4,000 per game and have 200 games, the cost would be $800,000 for the games only. How many business owners do you know would be willing to invest $800k in assets for someone else’s business without seeing a detailed business plan. Keep in mind, that Dave N Buster’s definitely gets a price break since they purchase for over 50 locations. Most of our prospects are only opening one location at a time. If you’re looking for new games, distributors have a full line from all manufactures. Betson and Brady Distributing are two of the most reputable companies serving the south and east areas.
Let’s say that you’re willing to have used games in your new arcade game room, but you’ll purchase them on your own. There’s hundreds of used arcade games on Ebay today not to mention the industry auctions. Quite a few of the listing look like new games. One of the questions you may ask yourself is “Why are there so many operators selling so much equipment? Even selling their more newer pieces? One of the main reasons would be that they are not making money. The majority of the public owns smartphones or tablets that have games they can play on them already. The latest number for 2013 smartphone users in the U.S is 181.4 million. So why pay to play a game? Another reason could be that their local government has changed their regulations. Arcade games are part of the gaming industry and is a regulated and taxed industry. Each state has different regulations and license requirements. An operator must be licensed in your state to be able to work with you for a game room business.
Donkey Kong arcade at the QuakeCon 2005. (Photo credit: Wikipedia)
Even after all the above, you still want to proceed. You’ve purchased your games, have a location and necessary licenses and are open for business. But a couple of your games are not working now. They worked when you bought them but one has a flickering screen, one has a black screen, another has no sound and then someone stuffed pennies into the coin slot. Most used games are sold “as is” with no warranties so you’ll have to find some to fix them or you may have done your homework and have hired a skilled technician as part of your staff. Some fixes are quite easy to a skilled technician, but some could be costly and time intensive to repair. Some of the older games like Galaga or Donkey Kong are over 20 years old and parts could be hard to come by. Replacing an old tube monitor can run about $300 or if you swap out for a flat screen you’ll need a signal converter, new framing plus the flat screen. All of this could run about $500-$700. Keep in mind, these costs are for a 18″ monitor, the cost for the bigger screens are substantially more. Parts and repairs should definitely be a line item in your detailed expenses.
As with Dave N Buster’s, a game room will not survive on games alone. Food, liquor and other entertainment is a must in your business mix. You’ll notice that FEC’s include food plus laser tag, rock climbing or inflatables or a combination of all. Even if you’re not opening a facility on the scope of a Dave N Buster’s, include an additional revenue stream. Don’t want to have a commercial kitchen and all the regulations involved, think about vending machines. The technological breakthroughs in the newest vending machines are amazing and take up a small footprint in your venue.
There’s so many factors to consider but furthermost, we suggest that you do a tremendous amount of prep work and due diligence to ensure that your new business will be a success. We’ve created a checklist for those who’d like to proceed into the game room industry to help you in your venture. Click here to download! And if you’re not looking to open a game room business, but need a temporary game room setup for your next conference, we definitely can help you. Give us a call 866-767-4420 or fill out the below form.