Venue Selection and Layout Planning
If you are figuring out the amount of space to lease for your arcade, a good rule of thumb is 150-300sqm commercial space based on how many and what type of amusement machines you will be fitting out. It will need 3–5 square Meters for the operation area ( it may have more or less according to players’ activity range). In practice, 15 arcade machines take up roughly 100 square meters, the optimal amount of space for players to move around and maintain an adequate safety distance.
As a guideline from the layout perspective, you should have 30% gaming areas, 20 % resting and ticketing areas and 50 % walkways or set forms of other facilities. The layout should also make sure that it remains un-congested during peak hours as that is the time when there will be a lot of people entering the station. If we can expect more than 200 players per day, it is a good practice to have two or more entrances and the distance between games at 1.5 meters.
Arcade Machine Procurement
Equipment procurement in the budget is the basic area. The cost of a common arcade machine varies from 8,000 to 20,000 RMB in the market with different configurations and brands. Twenty games of a certain type and variety should be listed from 160,000 to 400,000 RMB as the price range for a medium-sized entertainment center. Therefore, we recommend allocating 70% for classic arcades and 30% for modern multifunction machines to appeal to a larger audience. It would help if you had something for everyone.
Equipment maintenance costs should make up 10%-15% of the total budget. So, take a vending machine as an example; the monthly maintenance costs for one machine are about 500–1000 RMB, and so on by analogy, the monthly maintenance costs will reach 10,000-20,000 RMB. Therefore, if the replacement cycle of arcade machines is 3 to 5 years, it is suggested that funds set aside for equipment upgrades should be no less than 5% per year.
Operating License and Compliance Requirements
It is necessary to apply for an operating license for the home entertainment center before opening. In Tier 1 cities, the application cost of an entertainment business license is usually between 5000 and 10000 RMB, with a permit process that could last for as long as one to two months. Some areas may still restrict the number and styles of arcade machines. But those could be things like limiting the number of machines to 50 or age-restricting certain games in arcades at the discretion of a particular locale.
It also must respect compliance with monthly tax declarations and annual audits. However, if your monthly revenue is more than 100,000 RMB, you will likely need to pay VAT and corporate income tax at a rate of 20%-30%. Hence, you will ensure to appropriately provision tax liabilities in the financial budget to prevent future nirs like tax officers.
Marketing and User Promotion
Your entertainment center customer flow is directly proportional to your marketing efforts. A small to medium-sized home entertainment center should budget marketing between 5% and 10% of annual revenue. Then your monthly marketing cost should be 15K-30K RMB solely on the basis of projected monthly revenue, i.e., if you think per month revenue can be 300,000RMB, then you need to spend 5% — 10 % of upfront sales in Marketing only. You can use this segment of your budget on online ads, social media promotions, and local event promotions.
Certain promotional strategies would be running ad video ads through social platforms. The average cost per click, calculated by CPC, is 2-4 RMB. If this will be your level of customer acquisition through advertising, you should then budget 2,000~4,000 RMB a month per social medium. With offline hold opening celebrations or membership reward programs, each event has to be under 5,000–10,000 RMB control in the budget to make sure it can bring local family customers.
Maintenance and Operations Management
In daily operations, Equipment maintenance and financial management are two core aspects. A Home Entertainment System of average size could need between 2 and 3 employees working full-time in charge of equipment maintenance and customer service, which would lead to annual wages somewhere around the neighborhood of 120-240k RMB. It is also recommended that financial management be done by recruiting specialized software management software for ticketing and inventory. The cost of professional software in the market is 5,000-15,000 per year.
