How to start an arcade business and make it a hit

An arcade business can be a rewarding venture, one that merges a love for games with sharp business sense. The market is attractive thanks to a wave of nostalgia and diverse revenue opportunities, but that accessibility doesn't guarantee an easy win.

This guide will take you through the practical steps of selecting the right location, acquiring equipment, securing funding, and obtaining necessary licenses to help you launch a successful arcade business in the U.S.

Step 1: Plan your business and validate your idea

Start by researching your local market. Visit family entertainment centers, bars with games, and existing arcades within a 30-mile radius. Note their game selection, pricing, and peak hours. Also, review demographic data from the U.S. Census Bureau to confirm your target audience lives nearby.

Research your market and competition

Use Google Maps to identify direct competitors. Check their social media to understand their events and community engagement. A frequent oversight is to ignore indirect competition. Your arcade competes with movie theaters, bowling alleys, and even home entertainment for your customers' time and money.

Estimate your startup costs

Understanding the full financial picture from day one helps prevent surprises. A realistic budget for a small to mid-size arcade includes several key expenses. You might want to plan for the following ranges:

• Lease deposit and first month's rent: $5,000 - $15,000
• Arcade machines (15-25 units): $45,000 - $150,000
• Renovations and build-out: $20,000 - $75,000
• Licenses and permits: $500 - $2,000

Your total initial investment will likely fall between $75,000 and $250,000, depending on your location and the scale of your vision.

Here are 3 immediate steps to take:

• Draft a one-page business concept outlining your arcade's theme and target customer.
• List all direct and indirect competitors within a 15-mile radius of your desired area.
• Create a preliminary startup budget using the cost estimates above.

Step 2: Secure your legal structure and licenses

You might want to form a Limited Liability Company (LLC). This structure protects your personal assets from business debts. Profits pass through to your personal tax return, which simplifies paperwork compared to a corporation. You can also elect S Corp status later to potentially save on self-employment taxes.

Once your LLC is registered with your state, get a free Employer Identification Number (EIN) from the IRS website. You need an EIN to open a business bank account and hire employees. The online application takes just a few minutes to complete.

Next, focus on local permits. Your city or county clerk's office can provide a full list. Expect to need a general Business License (around $50-$150) and a Certificate of Occupancy ($250+), which confirms your building is safe for the public.

Many cities also require an Amusement Device License, often priced per machine at $25-$75 annually. A frequent misstep is to underestimate these timelines. Plan for a 4-8 week approval window for all permits, so start the process long before your target opening date.

Here are 4 immediate steps to take:

• Decide on your business structure and register your LLC with your Secretary of State.
• Apply for your free Employer Identification Number (EIN) through the IRS website.
• Contact your local city clerk for a checklist of all required business permits.
• Create a compliance calendar to track application deadlines and processing times.

Step 3: Secure your insurance and manage risk

You will want to start with General Liability insurance. This covers customer injuries and property damage. For a small arcade, a policy with $1 million per occurrence and a $2 million aggregate limit is standard. Expect annual premiums between $1,200 and $5,000.

Next, add Commercial Property insurance to protect your equipment and building interior. If you hire staff, you will also need Workers' Compensation. Some insurers that understand entertainment venues include The Hartford, Next Insurance, and Philadelphia Insurance Companies.

Address arcade-specific risks

A frequent oversight is to undervalue classic machines. Your property policy should cover the full replacement cost of rare cabinets, not just their depreciated value. Also, create clear safety rules to minimize risk of customer injury from game use.

Here are 4 immediate steps to take:

• Request quotes from at least two insurers that specialize in entertainment businesses.
• Create an inventory of all arcade machines with their estimated replacement values.
• Review your lease agreement to confirm you meet the landlord's minimum insurance requirements.
• Draft a daily safety inspection checklist for all your games and public areas.

Step 4: Choose your location and stock your arcade

You will want to look for a space between 1,500 and 3,000 square feet. Check that it has commercial zoning, sometimes called an "entertainment overlay" by city planners. A detail people often miss is electrical capacity. Confirm the building can handle the load of 20+ machines running at once.

When you find a spot, you can negotiate the lease. Ask for a Tenant Improvement (TI) allowance, which is money from the landlord to help pay for your build-out. Also, make sure the HVAC system is robust enough to cool a room full of hot electronics and people.

Acquire your games and equipment

A good mix of games is key. You can find refurbished classic cabinets like Ms. Pac-Man for $2,500-$4,000. Newer, high-end machines such as racing simulators or rhythm games will run you $8,000-$15,000 per unit. Suppliers like Betson Enterprises or PrimeTime Amusements sell both new and used games.

Here are 4 immediate steps to take:

• Identify three potential locations with the correct commercial zoning.
• Draft a list of questions for landlords, including TI allowance and HVAC capacity.
• Browse supplier websites to create a wish list of 15-20 games with estimated costs.
• Contact an electrician to get a quote for inspecting a potential location's power capacity.

Step 5: Set up your payment systems

Arcades often use tokens, quarters, or reloadable card systems. While cards from providers like Intercard or Embed offer better data tracking, they come with higher upfront costs for the kiosks and readers. You will want to weigh this initial investment against the long-term benefits.

Beyond the games, you need a way to process credit cards for entry fees, party bookings, and merchandise. A detail people often miss is the need for a mobile payment option for sales made away from a central counter, like for drinks or event tickets.

For arcade businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone - just tap and done.

At just 1.99% per transaction with no hidden costs or extra hardware needed, it's particularly useful for selling merchandise on the floor or taking party deposits. This rate is quite favorable, as other providers often charge between 2.5% and 3.5% plus monthly fees.

• Get Started: Download JIM app for iOS
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone
• Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers

Here are 3 immediate steps to take:

• Request quotes for at least two reloadable card systems to compare costs.
• Evaluate your need for mobile payments for things like party packages or floor sales.
• Download the JIM app to explore its features for on-the-go transactions.

Step 6: Secure your funding and manage finances

Find your funding

You might want to start with an SBA 7(a) loan. Lenders often approve amounts from $50,000 to $250,000 for entertainment ventures. You will need a strong business plan and a credit score above 680. Interest rates typically range from the Prime rate plus 2.75% to 4.75%.

Also, consider equipment financing specifically for your games. This type of loan uses the machines as collateral, which can make approval easier. You can often finance up to 100% of the equipment cost. Many people only look for one big loan, but combining sources is often smarter.

Plan your operating cash

With funding secured, focus on your working capital. You should have enough cash to cover at least six months of expenses without any revenue. This includes rent, utilities, payroll, and insurance. For a small arcade, this could be between $30,000 and $60,000.

A detail that trips people up is budgeting for game maintenance. Set aside about 1-2% of each machine's value for annual repairs. This prevents surprise costs from eating into your cash flow during the critical first year of operation.

Here are 4 immediate steps to take:

• Finalize the financial projections in your business plan for loan applications.
• Check your personal credit score with a major credit bureau.
• Contact an SBA-preferred lender to pre-qualify for a 7(a) loan.
• Calculate your six-month operating budget to define your working capital target.

Step 7: Hire your team and set up operations

Build your team

You might want to start with two key roles. An Arcade Attendant handles customer service, prize redemption, and light cleaning. Plan for a pay range of $12-$16 per hour. You will also need a Game Technician for repairs. A part-time hire or a reliable on-call contractor is often more cost-effective at first.

If you plan to serve alcohol, your staff will need state-mandated server training, such as a TIPS certification. Also, consider having at least one person per shift certified in basic First Aid and CPR. This small step can be a big help in an emergency.

Manage your daily operations

To manage shifts, you can use scheduling software like Homebase or 7shifts. These platforms help you build schedules and track hours. A frequent misstep is understaffing on Friday and Saturday nights. Use your software to monitor traffic and ensure you have enough coverage during these peak times.

As you operate, aim to keep your total labor costs between 20% and 30% of your gross revenue. This is a common benchmark for entertainment venues and helps keep your finances healthy. Adjusting staff hours based on weekly sales data will help you stay within this range.

Here are 4 immediate steps to take:

• Draft job descriptions for an Arcade Attendant and a Game Technician.
• Research scheduling software like Homebase or 7shifts to compare features.
• Check your state's alcohol board for server certification requirements.
• Create a sample weekly schedule based on your competitor research of peak hours.

Step 8: Market your arcade and attract customers

You should begin marketing 4-6 weeks before your grand opening. Start with local digital channels. Create business profiles on Instagram and Facebook, then post high-quality photos of your build-out and game lineup to generate excitement before you even open the doors.

A frequent oversight is to ignore paid local ads. You might want to run targeted Facebook ads to people within a 10-mile radius who show interests in "gaming" or "80s nostalgia". For entertainment venues, a customer acquisition cost (CAC) under $25 is a good starting benchmark.

Create events that draw crowds

Regular events are the key to repeat business. You could host a weekly "Throwback Thursday" with discounted classic games. Also, plan a monthly high-score tournament for a popular title. A small prize, like a $50 gift card or free game play, is often enough incentive.

In addition, you can partner with nearby businesses. Offer a 10% discount to customers who show a receipt from the pizza place next door. This creates a local ecosystem that benefits everyone and has a very low marketing cost.

Here are 4 immediate steps to take:

• Schedule your first three social media posts announcing your opening date.
• Draft a sample Facebook ad targeting a specific local demographic.
• Outline the rules and prize for your first monthly tournament.
• Identify three non-competing local businesses for potential partnerships.

Step 9: Set your pricing strategy

You will want to choose between two main pricing models. The classic pay-per-play model, using quarters or tokens, works well for nostalgia. You might price retro games at $0.50-$1.00 per play and newer deluxe machines at $2.00-$3.00.

The other option is a flat-rate fee. This could be an hourly pass for $10-$15 or an all-day pass for $20-$30. This model simplifies sales but requires you to accurately forecast customer playtime to ensure profitability.

Calculate your profit margins

Game revenue should have a gross profit margin of 70-80%. A frequent miscalculation is to ignore machine-specific costs. You should factor in the electricity and potential repair costs for each game, not just its popularity, when you set the price per play.

With this in mind, research your competitors' pricing but do not simply copy it. Use their prices as a starting point. Your unique atmosphere, game selection, and customer service justify a different price point, whether higher or lower.

Here are 4 immediate steps to take:

• Decide on a primary pricing model: pay-per-play or flat-rate.
• Create a price list for your entire game inventory based on age and popularity.
• Research the pricing models of two direct and one indirect competitor.
• Calculate the target weekly revenue needed to cover your operating costs.

Step 10: Maintain quality and scale your business

Set your quality standards

You will want to track machine uptime. Aim for a 98% operational rate, which means any single game is down for less than one full day per month. Also, create a daily cleaning checklist for staff to maintain the appearance of games, floors, and restrooms.

For customer service, a good benchmark is to resolve any issue, like a jammed token mechanism or a prize dispute, in under three minutes. This keeps frustration low and the experience positive.

Know when to grow

With your operations smooth, you can look for growth signals. You might want to hire another attendant when you consistently serve over 40 customers per hour on weekends. This prevents long lines at the prize counter and keeps the floor supervised.

Many owners wait too long to expand. If you hit 80% of your building's capacity on peak nights for three months straight, it is time to explore leasing more space. For game rotation, use your card system's data to flag any machine whose revenue drops 25% over a month.

Here are 4 immediate steps to take:

• Create a daily machine uptime log to track game reliability.
• Set a customer capacity alert for peak nights to signal when to add staff.
• Run a monthly revenue report to identify your bottom 10% earning games.
• Draft a simple, one-question customer feedback survey for your prize counter.

Building a successful arcade is about more than just games; it's about the community you create. Remember that the atmosphere and events are what turn first-time players into regulars. You have the steps, now go build a place where people love to be.

And when you handle sales, a simple payment solution helps. JIM turns your phone into a card reader to accept payments anywhere in your arcade for a flat 1.99% fee. Get ready for your first sale and Download JIM.