How to Start an Arcade

Part 1 - How to start an Arcade business - Background

Starting an arcade can be an exciting and rewarding business venture for entrepreneurs who are passionate about gaming and bringing people together through entertainment.

Having said that, you should keep in mind that launching a successful arcade requires careful planning, significant investment, and a wide range of skills.

In this comprehensive guide, we’ll walk you through all the essential steps you’ll need to take to start your own arcade, from conducting market research and securing funding to obtaining licenses, setting up operations, and attracting customers.

Our guide is in 3 parts:

• Part 1 - How to start an Arcade business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

Industry Overview

The arcade gaming industry is booming, with the US market alone being valued at $18.64 billion in 2023. What’s more, this is only expected to continue according to projections that it will expand at a compound annual growth rate (CAGR) of 5.20% until 2031.

Arcade games remain one of the most popular genres within gaming, largely due to innovation in areas like augmented reality (AR), motion-sensing, and virtual reality (VR) — which are driving the industry forward due to the immersive and personalized experiences that they offer.

As demand for these experiences continues to rise, now is an ideal time for entrepreneurs to enter this constantly evolving sector.

Startup Costs

If you’re considering whether an arcade is right for you, the first thing you’ll need to know is whether it’s a) affordable, and b) worth the investment. I mean, how much can you actually make running your own arcade?

Well, it depends. The initial investment for an arcade varies widely based on factors such as your business’s size, and the number and type of machines you want to offer:

• Arcade Games: The largest expense when launching an arcade is likely to be the games themselves — which if bought new, can cost between $6,000 and $9,000 each, depending on the type and complexity of the game (e.g., driving simulators, pinball machines, or redemption games). This means that you’d likely be looking at a total investment of up to $180,000 for a basic setup with around 20 games. Naturally, as you expand and add more games this cost will only increase further, but then again so will then the customer experience and potential revenue.

• Lease for Space: After the games themselves, securing an appropriate location for your arcade is likely to be your next largest cost. A space between 3,000 to 5,000 square feet typically rents for $1,200 to $2,800 per month, though this will vary greatly based on the city, neighborhood, and visibility of the location. In the high-traffic areas you should ideally try and target (e.g., malls or entertainment districts), rent is likely to be even higher.

• Renovations and Equipment: Beyond games and rent, a significant portion of your budget will need to be dedicated toward renovations and customizing your space to ensure it’s attractive and functional for customers. This will likely include flooring, lighting, seating, and decorating to create an engaging setting, as well as the equipment you’ll need in order to operate (e.g., computers, cash registers, card readers, and security systems).

In terms of the ongoing costs you’ll face as the owner of an arcade, rent and machine maintenance will make up the most part, though utilities can also be significant as the machines are running constantly. Additional ongoing costs include paying staff, cleaning, and potentially renting storage space for extra machines as the arcade expands.

Opting for second-hand games and equipment is an effective way to minimize this upfront cost, though it’s important to bear in mind that these older machines will generally need more maintenance — which will increase ongoing costs.

Earning Potential

The earning potential of an arcade depends largely on the business model you choose and the area you’re based in. While traditional coin-operated machines are still in use, more modern payment methods like swipeable cards or timed free-play sessions have proven to be more efficient and profitable.

With this more contemporary model, many arcades now charge their customers a flat fee in return for a set amount of gameplay time, or allow customers to purchase points on a card that they can spend on various different games.

However, if you decide to charge customers for each attempt at a game, prices will normally range between $0.25 and $2.00. Higher rates are typically charged for newer, popular games, while vintage games are normally offered at a lower price.

For a newly-formed arcade, you can typically expect each machine to earn somewhere between $100 and $250 a week — with 20 machines in your arcade, this would enable you to earn up to $260,000 a year. However, since machines can vary in your profitability it may not reach up to quite as much as that.

Day-to-Day and Growth

Who is the target market?

The target market for your arcade depends on the type of experience you offer — while retro arcades may appeal more to nostalgic adults, those with modern machines may cater to children instead.

Most arcades will contain a mix of both of these types of machines in order to cater to a wider audience.

How does an arcade make money?

Put simply, arcades make money by charging customers to play games. While coin-operated machines are still used, most arcades now offer swipeable card systems or charge a flat fee for timed play.

The card model, popularized by venues like Dave and Buster’s, allows for flexible pricing based on game type and playtime.

How much can you charge customers?

Pricing varies depending on your business model. Newer games typically cost 50 cents to a dollar per play, while vintage games might cost 25 cents.

You can also offer prepaid cards or bonus points for upfront spending, or instead opt for timed sessions (e.g., $5 for 30 minutes) as another pricing option.

How much profit can an arcade make?

A new arcade in an area with good foot traffic and the right machines can expect to earn anywhere up to $260,000 a year.

However, your take-home profit will be largely dependent on how much you reinvest to keep your arcade fresh and appealing to customers.

Part 2 - Is an Arcade business the right fit for you?

Part 3 - Action plan to launch your Arcade business in 90 days