23 data to include in the business plan of your arcade game room

This article was written by our expert who is surveying the industry and constantly updating the business plan for an arcade game room.

Our business plan for an arcade game room will help you build a profitable project

Ever pondered what the ideal game-to-player ratio should be to ensure your arcade game room stays bustling and profitable?

Or how many times your machines need to be played on a busy Saturday night to meet your revenue goals?

And do you know the optimal maintenance cost percentage for keeping your arcade machines in top condition?

These aren’t just interesting figures; they’re the metrics that can determine the success or failure of your business.

If you’re crafting a business plan, investors and lenders will scrutinize these numbers to gauge your strategy and potential for success.

In this article, we’ll explore 23 crucial data points every arcade game room business plan needs to demonstrate you're prepared and poised for success.

Game machine utilization should be at least 70% during peak hours to maximize revenue

Game machine utilization should be at least 70% during peak hours to ensure that the arcade is maximizing its revenue potential.

When machines are actively being used, they generate consistent income from players, which is crucial for covering operational costs and making a profit. If utilization falls below this threshold, it indicates that machines are sitting idle, which means lost opportunities for revenue.

High utilization also creates a lively atmosphere, attracting more customers and encouraging them to stay longer.

However, the ideal utilization rate can vary depending on factors such as the size of the arcade and the types of games offered. For instance, a smaller arcade with fewer machines might aim for even higher utilization to remain competitive, while a larger venue with a diverse range of games might find that a slightly lower rate is still profitable.

Arcade game rooms should aim for a 20-25% profit margin, higher than many other entertainment venues

Arcade game rooms should aim for a 20-25% profit margin because they have unique operational costs and revenue streams compared to other entertainment venues.

Unlike movie theaters or bowling alleys, arcade game rooms often have high initial investment costs due to purchasing and maintaining a variety of gaming machines. Additionally, they need to regularly update their game offerings to keep up with trends and technology, which can be costly but is essential for attracting repeat customers.

These factors mean that a higher profit margin is necessary to ensure long-term sustainability and growth.

However, the ideal profit margin can vary depending on factors like location and target audience. For instance, an arcade in a high-traffic tourist area might achieve a higher margin due to increased footfall, while one in a smaller town might need to adjust its expectations and focus on community engagement to drive profits.

Regular maintenance costs should be budgeted at 1-2% of total revenue to ensure machines are in top condition

Regular maintenance costs should be budgeted at 1-2% of total revenue to ensure arcade machines are in top condition because it helps prevent unexpected breakdowns and extends the lifespan of the equipment.

By allocating this percentage, arcade owners can cover routine checks, cleaning, and minor repairs, which are essential for keeping the machines running smoothly. This proactive approach minimizes downtime, ensuring that customers have a consistent and enjoyable experience, which in turn supports steady revenue.

However, the exact percentage may vary depending on factors such as the age and type of machines, as older or more complex machines might require more frequent maintenance.

Additionally, the location and usage intensity of the arcade can influence maintenance needs, as high-traffic areas may lead to quicker wear and tear. Ultimately, budgeting for regular maintenance is a smart investment that helps maintain the arcade's reputation and profitability.

An average arcade game machine should generate $200-$400 per week to be considered profitable

An average arcade game machine should generate $200-$400 per week to be considered profitable because this range typically covers the costs associated with maintaining and operating the machine.

These costs include expenses such as electricity usage, maintenance and repairs, and the initial investment in purchasing or leasing the machine. Additionally, arcade owners need to account for space rental fees and other overhead costs, which can vary depending on the location and size of the arcade.

Generating this amount ensures that the arcade can cover these expenses while also providing a reasonable profit margin.

However, the profitability threshold can vary based on factors such as the popularity of the game and the location of the arcade. In high-traffic areas or with particularly popular games, machines might need to generate more than $400 per week to maximize potential earnings, while in less busy locations, a lower threshold might still be acceptable.

Arcades should aim for a break-even point within 12-18 months to ensure long-term viability

Arcades should aim for a break-even point within 12-18 months to ensure long-term viability because this timeframe allows them to stabilize financially and build a loyal customer base.

Reaching this point quickly is crucial because it helps cover initial startup costs and ongoing expenses, such as rent and utilities, which can be substantial. Additionally, achieving break-even status within this period demonstrates that the arcade's business model is financially sustainable and capable of generating consistent revenue.

However, the timeline to break-even can vary depending on factors like location, target audience, and the variety of games offered.

For instance, an arcade in a high-traffic area with a diverse selection of games might reach break-even faster than one in a less populated area with limited offerings. Ultimately, understanding these variables and adjusting strategies accordingly can help arcades achieve financial stability and thrive in the long run.

Concession sales can account for 15-20% of total revenue, making them a crucial profit center

Concession sales can make up a significant portion of an arcade's revenue, often accounting for 15-20%, because they offer a high-margin opportunity to capitalize on the captive audience of gamers.

When people visit an arcade, they often spend several hours there, which naturally leads to a demand for snacks and drinks. Offering a variety of concession items not only enhances the customer experience but also encourages longer stays, which can lead to more game play and, consequently, more revenue.

However, the impact of concession sales can vary depending on factors like location and demographics.

For instance, an arcade located in a busy mall might see higher concession sales due to increased foot traffic, while one in a quieter area might rely more on regulars who spend less on snacks. Additionally, the type of games offered and the target audience can influence concession sales; family-friendly arcades might sell more kid-friendly snacks, whereas arcades targeting adults might focus on selling beverages.

Staffing costs should ideally stay between 15-20% of total sales to maintain profitability

In an arcade game room, keeping staffing costs between 15-20% of total sales is crucial for maintaining profitability.

This percentage ensures that the business can cover other essential expenses like rent, utilities, and maintenance while still making a profit. If staffing costs exceed this range, it can significantly erode profit margins and make it difficult to sustain the business.

However, this percentage can vary depending on factors such as location, size, and the type of arcade games offered.

For instance, a larger arcade with more complex games might require more staff, potentially increasing staffing costs. Conversely, a smaller arcade with simpler games might manage with fewer employees, allowing for lower staffing expenses and potentially higher profitability.

Arcades should budget for a 10-15% annual turnover rate for machines to keep the selection fresh and engaging

Arcades should budget for a 10-15% annual turnover rate for machines to keep the selection fresh and engaging because it helps maintain customer interest and attract new visitors.

By regularly updating their game selection, arcades can offer a mix of classic favorites and new releases, which caters to a wider audience and keeps the experience exciting. This turnover rate also allows arcades to replace underperforming games with ones that have the potential to generate more revenue.

However, the ideal turnover rate can vary depending on factors such as the arcade's location, target demographic, and the types of games offered.

For instance, an arcade in a tourist-heavy area might benefit from a higher turnover rate to consistently offer the latest attractions, while a local arcade with a loyal customer base might focus more on maintaining popular games. Ultimately, understanding the specific needs and preferences of their audience will help arcade owners determine the most effective strategy for their machine turnover.

Location rent should not exceed 10-12% of total revenue to avoid financial strain

In the arcade game room business, it's crucial that location rent doesn't exceed 10-12% of total revenue to prevent financial strain.

This percentage ensures that a significant portion of revenue is available for other essential expenses like staff salaries and game maintenance. If rent takes up too much of the revenue, it can lead to cash flow issues, making it difficult to cover these necessary costs.

However, this percentage can vary depending on factors like location desirability and customer foot traffic.

For instance, a prime location with high foot traffic might justify a slightly higher rent percentage because it could lead to increased revenue. Conversely, in a less busy area, keeping rent within the 10-12% range is more critical to ensure the business remains profitable.

Arcades should aim for a customer return rate of at least 30% to ensure steady business

Arcades should aim for a customer return rate of at least 30% to ensure steady business because repeat customers are crucial for maintaining a consistent revenue stream.

When customers return, they not only spend money themselves but also often bring friends or family, which can lead to an increase in new customer acquisition. This creates a cycle of ongoing engagement and helps build a loyal customer base that can sustain the arcade during slower periods.

However, the ideal return rate can vary depending on factors such as location, target audience, and the types of games offered.

For instance, an arcade located in a tourist-heavy area might rely more on one-time visitors, so a lower return rate might be acceptable. Conversely, an arcade in a residential area might need a higher return rate to thrive, as it depends more on local repeat customers for its business.

Inventory turnover for prizes and merchandise should happen every 30-45 days to keep offerings appealing

Inventory turnover for prizes and merchandise in an arcade game room should occur every 30-45 days to keep offerings fresh and appealing.

Regularly updating the inventory ensures that frequent visitors always have something new to look forward to, which can enhance their overall experience. Additionally, it helps in maintaining a competitive edge by offering the latest and most popular items that attract more customers.

However, the frequency of inventory turnover can vary based on factors like customer demographics and the popularity of certain games.

For instance, an arcade located in a tourist-heavy area might need to update its inventory more frequently to cater to a constantly changing customer base. On the other hand, a local arcade with a steady group of regulars might find that a slightly longer turnover period is sufficient to keep their audience engaged.

Arcades typically lose 2-4% of revenue due to theft or machine malfunctions

Arcades often experience a revenue loss of 2-4% due to factors like theft and machine malfunctions.

One reason for this is that arcade machines can be tampered with or manipulated, leading to unauthorized play or coin theft. Additionally, machines are complex and can suffer from technical issues that prevent them from functioning properly, resulting in lost revenue.

These issues can vary significantly depending on the location and security measures in place at the arcade.

For instance, arcades in areas with higher foot traffic might experience more theft, while those with older machines might face more frequent malfunctions. By investing in modern technology and implementing robust security protocols, arcades can potentially reduce these losses and improve their overall revenue.

Effective loyalty programs can increase repeat visits by 20-25%

Effective loyalty programs can boost repeat visits to an arcade game room by 20-25% because they create a sense of reward and belonging among customers.

When players know they can earn points or discounts for their continued patronage, they are more likely to return to the arcade to take advantage of these benefits. This sense of earning something extra makes the experience more engaging and can turn casual visitors into regular customers.

However, the effectiveness of these programs can vary depending on factors such as the target audience and the specific rewards offered.

For instance, a program that offers exclusive game access might appeal more to hardcore gamers, while family-oriented rewards like group discounts could attract more families. Ultimately, tailoring the loyalty program to match the preferences and interests of the arcade's primary customer base is crucial for maximizing its impact.

Digital marketing should take up about 5-7% of revenue, especially for new or expanding arcades

Allocating about 5-7% of revenue to digital marketing is crucial for new or expanding arcade game rooms because it helps build brand awareness and attract customers in a competitive market.

For arcades, especially those just starting or looking to grow, investing in digital marketing ensures they reach a wider audience through channels like social media, search engines, and online ads. This percentage of revenue is a guideline that balances the need for effective marketing with the financial constraints of a new or growing business.

However, the exact percentage can vary based on factors such as the arcade's location, target audience, and competition level.

For instance, an arcade in a highly competitive urban area might need to spend more to stand out, while one in a less saturated market might get by with less. Ultimately, the key is to tailor the marketing budget to the specific needs and goals of the arcade, ensuring that it effectively reaches and engages its target audience while staying within financial limits.

Arcades in high-traffic areas often allocate 3-5% of revenue for partnerships and event hosting

Arcades in high-traffic areas often allocate 3-5% of revenue for partnerships and event hosting because these activities can significantly boost their visibility and attract more customers.

By partnering with local businesses or hosting events, arcades can create a unique experience that draws in crowds who might not otherwise visit. This strategy not only increases foot traffic but also enhances the arcade's reputation as a community hub for entertainment.

However, the percentage of revenue allocated can vary depending on factors such as the arcade's location and target audience.

For instance, an arcade in a tourist-heavy area might invest more in partnerships to capitalize on the influx of visitors, while one in a residential neighborhood might focus on hosting local events to build a loyal customer base. Ultimately, the decision on how much to allocate is influenced by the arcade's specific goals and the demographics of its clientele.

Seasonal events and promotions can boost sales by up to 30% by attracting new and repeat customers

Seasonal events and promotions can significantly boost sales in an arcade game room by up to 30% because they create a sense of excitement and urgency that attracts both new and repeat customers.

During these events, customers are often drawn in by special offers and limited-time deals, which can make the experience more appealing and encourage them to spend more time and money. Additionally, themed decorations and activities can enhance the atmosphere, making the arcade more inviting and enjoyable for visitors.

However, the effectiveness of these promotions can vary depending on factors such as the target audience and the timing of the event.

For instance, a Halloween-themed event might attract more families and younger children, while a New Year's Eve promotion could appeal to adults looking for a fun night out. By tailoring the promotions to suit the preferences and interests of different customer segments, arcade owners can maximize their impact and ensure a successful boost in sales.

Arcades should maintain a current ratio (assets to liabilities) of 1.5:1 for financial health

Arcades should maintain a current ratio of 1.5:1 to ensure they have enough assets to cover liabilities and remain financially healthy.

This ratio indicates that for every dollar of liability, the arcade has $1.50 in assets, providing a buffer against unexpected expenses and ensuring they can meet short-term obligations. A higher ratio might suggest inefficient use of resources, while a lower ratio could indicate potential liquidity issues.

However, the ideal current ratio can vary depending on the specific circumstances of the arcade, such as its size, location, and business model.

For instance, a larger arcade with more diversified revenue streams might comfortably operate with a slightly lower ratio, as it can rely on consistent cash flow. Conversely, a smaller or newer arcade might aim for a higher ratio to safeguard against market fluctuations and ensure stability.

Effective game placement and rotation can boost revenue by 10-15% by maximizing machine visibility and appeal

Effective game placement and rotation can significantly boost revenue by 10-15% in an arcade game room by maximizing machine visibility and appeal.

When games are strategically placed in high-traffic areas, they naturally attract more players, increasing their usage and profitability. Additionally, rotating games regularly keeps the arcade experience fresh and exciting, encouraging repeat visits and longer stays.

By ensuring that popular and new games are prominently displayed, arcades can capitalize on their novelty and demand.

However, the impact of game placement and rotation can vary depending on factors like the size of the arcade and the demographics of the visitors. For instance, a smaller arcade might benefit more from rotating games frequently to maintain interest, while a larger venue might focus on creating themed sections to cater to different age groups and preferences.

Arcades should have 0.75-1 square meters of space per machine to ensure comfortable customer flow

Arcades should allocate 0.75-1 square meters of space per machine to ensure that customers can move comfortably and enjoy their experience without feeling cramped.

This space allocation helps to prevent crowding and bottlenecks, which can occur when too many people are trying to access machines in a confined area. Additionally, it allows for adequate room for players to interact with the machines, especially for games that require physical movement or have peripherals like steering wheels or dance pads.

However, the exact space needed can vary depending on the type of games and the expected number of visitors.

For instance, a venue with a high number of multiplayer games might need more space to accommodate groups of players. Conversely, a smaller arcade with fewer visitors might be able to get away with slightly less space per machine, as long as it doesn't compromise the overall customer experience.

Health and safety scores can directly impact foot traffic and should stay above 90%

Health and safety scores are crucial for an arcade game room because they directly influence the level of trust and comfort patrons feel when deciding to visit.

When these scores are above 90%, it signals to potential customers that the arcade is a safe and well-maintained environment, which can significantly boost foot traffic. Conversely, scores below this threshold can deter visitors, as they may perceive the arcade as unhygienic or unsafe.

In specific cases, such as during a health crisis or in areas with heightened safety concerns, maintaining high scores becomes even more critical.

For instance, families with young children or individuals with health vulnerabilities are more likely to avoid places with lower scores. Therefore, consistently high health and safety ratings not only attract a broader audience but also help in retaining loyal customers who prioritize safety.

Upselling during peak hours can increase average spend per customer by 15-20%

Upselling during peak hours in an arcade game room can significantly boost the average spend per customer by 15-20% because customers are already in a spending mindset and more receptive to additional offers.

During these busy times, the arcade is bustling with energy, and customers are often more willing to indulge in extra purchases like game tokens or snack bundles. The excitement and social atmosphere can make people more inclined to say "yes" to upsells, especially when they see others doing the same.

However, the effectiveness of upselling can vary depending on factors like the type of games offered and the demographics of the customers.

For instance, families with children might be more interested in combo deals that include food and game credits, while teenagers might be drawn to exclusive game access or limited-time offers. Understanding these nuances allows arcade operators to tailor their upselling strategies to maximize effectiveness and customer satisfaction.

Arcades should aim for a 5-7% year-over-year growth in average customer spend to offset rising costs

Arcades should aim for a 5-7% year-over-year growth in average customer spend to effectively counteract the impact of rising operational costs.

As costs for utilities, maintenance, and staffing continue to increase, maintaining a steady growth in customer spending helps ensure that the arcade remains profitable. This growth target is crucial because it allows arcades to invest in new games and technology, keeping the experience fresh and engaging for customers.

However, the specific growth target can vary depending on factors such as location, competition, and the arcade's current financial health.

For instance, an arcade in a highly competitive area might need to aim for a higher growth rate to stay ahead, while one in a less competitive market might find a lower rate sufficient. Additionally, arcades with a strong existing customer base might focus more on increasing customer loyalty rather than aggressively pursuing new customers to achieve this growth.

Establishing a machine revenue variance below 5% month-to-month is a sign of strong management and control.

Establishing a machine revenue variance below 5% month-to-month in an arcade game room is a sign of strong management and control because it indicates a consistent and predictable revenue stream.

When revenue variance is low, it suggests that the arcade is effectively managing factors like machine maintenance and customer engagement, which are crucial for maintaining steady income. It also reflects that the arcade is successfully adapting to seasonal trends and customer preferences, ensuring that the games remain popular and frequently played.

However, this variance can differ based on specific circumstances, such as the location of the arcade or the types of games offered.

For instance, an arcade in a tourist-heavy area might experience more significant fluctuations due to seasonal tourism, making a 5% variance more challenging to achieve. Conversely, an arcade with a loyal local customer base might find it easier to maintain a low variance, as their revenue is less susceptible to external changes.