How to Open An Arcade

Here's what it takes to open an arcade. Small arcades (less than 2,500) can usually be up and running in 4-6 weeks. That's enough time to design an arcade and get the games ordered and installed. Finding the location, getting zoning and permits set up and securing financing can happen in 4-6 weeks if you're lucky, but don't be surprised if they take longer.

1) The location

Location includes the zoning permits to run an arcade. Other essentials are good foot traffic from the sort of people you want to be customers. That's usually teens and young people. Some of the best locations are in malls.

Make sure your building can handle the power loads of an arcade, and that the doors are wider than standard size. Some of the larger games need more room than a standard door. In terms of square footage, anything from 1000 to 10,000 square feet will do. Arcades under 2,500 are considered small.

2) Business license, permits and more

You'll need all the usual things required to start a business (employer identification number, tax id number, business certificate, business name and a business structure) plus whatever your town or city requires for commercial locations. If you are going to serve food, you may need to pass a food inspection as well, which can be a tricky endeavor.

By the way... ideally you'll find the location, then get the business/paperwork side of things settled, then get funding, and THEN sign the lease for the space.

3) Get funding

To get funding, you will probably need to write a business plan. Even if your business plan is a mere page, having one page is much better than nothing. If at all possible, expanding that one page business plan into something that's ten pages will greatly improve your chances for success.

The basic parts of a business plan are your business model (how you will make money), a review of the industry with demopgraphic information (in this case, a few paragraphs on what's going on in the arcade business), an analysis of your market (is there room for another arcade in your town? is there any demand for an arcade). Then you do a SWOT analysis of your competition (stengths, weaknesses, opportunities and threats). Finally, you list all your startup expenses, and what your operating expenses will be.

You can bring a draft of your business plan to your local SCORE office to have an experienced business person review your plan or not. It can all seem like a big exercise that's a waste of time, but what you'll learn about your business and your industry and your market while you do a business plan will be invaluable. You'll probably be saving yourself $50 to $100 for every hour you work on your plan.

An average arcade costs between $10,000 to $50,000 to launch. Make sure your startup funds include enough money to keep your business operating for at least six months, even if you only end up earning a small fraction of what you are expecting to make.

4) Buy the machines & setup your arcade

Get some old classic games and a mix of new games. Also expect to have to buy new games every 4-6 months to keep your clientele interested.

5) Advertise, launch and build customer retention

Don't blow too much of your startup budget on advertising. Flyers and free use offers may be enough. And be good to your first customers. It costs 7 times more money to find a new customer than it costs to keep an existing customer.