Can a Gaming Cafe be Successful?

droidlev asks: "For years I've been toying around with the idea of opening up a medium sized gaming cafe in the Chicago suburbs. I have already taken care of the issue on how to make money during the day, when our younger market is in school, However, the question of whether or not a place like this can be successful, still remains. I've seen plenty of undermanned and poorly planned places in the area (and on the East Coast) like this go under in six months. What is your opinion? What ideas and thoughts do you have that could help a place, like the one I'm proposing, succeed? Do you have gaming cafes in your area that are successful? What unique techniques have they implemented?"

Comments

wwtdd

[antiphoton]

I live in Brisbane, Australia, and gaming cafe's are quite popular in the major cities. I know of at least four around inner city brisbane that have been open for years and are quite successful. From my observations their main revenue intake is based around these key concepts: 1. Location 2. Word of mouth Location is imperical, and you need to strike deals/lan nights to get word of mouth generation. Setting up shop near a school (preferably private school) can sometimes make this type of business a success, as i've seen in Brisbane. If you start all nighters and events it will generate a decent amount of friends telling other friends and so on to bring in business and customers. Anyway, these are just a few suggestions i'm guessing you already know about, hope it helps. PS: If you have the room, get a pool table!

What kind of games?

[Enoxice]

You didn't specify what kind of games your cafe would feature. I assume you mean computer games (WoW, CS:S, et al). There is a place in my area that does very well in that market, but only because of variety.

I'd recommend offering something aside from computer games. Set up some tables for Magic: The Gathering, D&D, Battletech, Warhammer, etc so you aren't only catering to the "I don't have broadband" market. This way you'll become a social gathering place for geeks. You may even consider starting a card/miniature trading deal in your shop where you buy things from your customers and sell them back.

That's my advice. But, then again, I have NO business sense.

Re:What kind of games?

[Anonymous Coward]

I coulden't figure out what they were untill i actually went in there

I think you should already know why this place failed.

But to the poster of the article... the first thing you do when you go into ANY business is to draw up a plan. Figure out what services you want to offer. Try to find out if anybody in the area really needs or wants those services, and how much they are willing to pay for them. If there is already competition in the area, figure out if there is an innovative way you can offer a better value: either in slightly better service/product for the same price, or similar quality for a slightly lower price. Figure out how many customers it's going to take to pay back all of your investments, then try to figure out if it's reasonable that that many customers will come through.

Next is a lot of behind the scenes work. Get a lawyer. GET A LAWYER. There are going to be a lot of codes, regulations and liscensing to wade through, and it's difficult to know what to expect. Get an accountant... you will need someone to verify everything to make sure that 1)you are doing it legally and that 2) your employees aren't stealing from you. Now go back to that business plan... make sure that everything is spelled out nice and neat. Some things may not be right, and unforseen opportunities and obstacles will pop up, but having the plan gives you something to deviate from. Without it everything will be chaos. Then have your lawyer and accountant go over the business plan. Are you going in with other people? Friends? Family? Acquaintances? Investors? Partners? Employees? Make sure it is spelled out exactly what is expected of them, and exactly how they will benefit from helping you. Make sure the penalties for either party not living up to their side of the bargain are clearly deliniated beforehand. Otherwise the plan will fall apart, and any existing relationship will become severely strained.

After all this is layed out, take steps to acquiring the storefront, equipment, funding, etc. For the big stuff, make any purchases/loans contigent on everything working out to at least the point where you can open the doors. Get everything in writing, including contigencies such as liscenses going through, funding coming through, etc. Determine occupancy limits and how you are going to enforce them. Make sure the physical premises can be secured, as well as any hardware/software used.

And remember, it is extremely difficult to start a business of any reasonable size alone and keep both a full-time day job and your sanity. Running a business of the size it sounds like you are going for will probably be more than full time, at least in the beginning. Once everything is smoothed out and a lot of the initial investments are paid off, you can think about farming some of the work off to a manager, but right off the bat you want the owner there for most of the time the cafe is open, and there is a lot of work that will have to be done when the cafe is not open.

When setting up all the finances, don't forget to budget money for yourself to live. It's okay to give yourself a salary out of loaned money to the company, as long as you are honestly working on the project. There is going to be a LOT of work that has to be done before the doors open, and you will be burned out before that time if you need a full time job to live.

Re:Yes we have one.

[kindlekoma]

There's also one here in sunny Portland, OR. It's called backspace ( www.backspace.bz ). They have just celebrated their 3 year anniversary of gamingness. I think the trick that Backspace has pulled is that it's in a very swanky area of downtown Portland, and they've fused a cyber cafe with a full-fledged art gallery, and chill out area. They've got a lot to offer in the way of neo-entertainment. Modern art, coffee, free wi-fi, comfy chairs, chess and other board games, pool, and a slew of PC games with either an internet or LAN option for play. It should also be mentioned that their location in downtown provides them with a maximum amount of both, business traffic in the daytime, and lots of people in the evening that are within walking distance that want to get out of their tiny apartments. I don't know how you'd convince a bunch of suburbanites to leave their tract housing developments to play games. But, I think a key is to offer diversity and appeal to professionals looking for a convienient and chic place to have meetings, as well as gamers looking to come out of their caves. Good luck!

Uh, no, they generally can't.

[fthiess]

I started and ran my own cybercafe/game center for 3 years, so I have some experience with this subject. It was GREAT fun! Financially it always made enough money to get all the bills paid, with a little (really little) left over as salary for me. That doesn't mean it was profitable, though: unless you like charity, you need to be looking at whether a business will be profitable in an economic sense, not just an accounting sense, and that means you need to take into account not just what a reasonable salary for yourself is, but little things like depreciation of your assets (so you can afford upgrades), your cost of capital (even if it's your own money), and a reasonable return on investment (compared to what you would earn on the money if you didn't put it into a game center). After having looked at my experience in the business every way I could think of, I'm firmly of the belief that there is just no way to make money on this type of business unless you have a very special set of circumstances. Consequently, I closed my place down a couple of months ago.

I like to think of the real problem game centers have in terms of system dynamics: a game center draws customers from within a limited geographic radius (about 10 miles, or maybe 15 km, in my case). Within that radius there are a limited number of people who will be interested in what you offer. In the early days business grows exponentially, but NOT because of any kind of growth in the number of potential customers--it's just that more and more of your fixed number of potential customers are finding out about you. At some point you reach saturation, and that where the system dynamics comes into play: you are in a fight between the number of potential customers in your area that are leaving (graduated, moved away, bought their own computer, ran out of money, lost interest, etc.) versus the number of new potential customers that are being created (moved in, got old enough mom would let them play, etc.). Basically, there are many more paths for customers to leave then there are for them to arrive in your pool of "potentials", so it's a loosing proposition.

Yes, there are things you can do to change the coefficients of some of the terms in the basic equation: you can try to bring in more adults, you can add more games more frequently, do more advertising, etc. What I've seen, though--and I've validated the basic model with several other (former) game center owners--is that if you do everything right business is good for about a year and a half, then it peaks and falls off to much lower level. Revenues can remain stable after that point, but at a level that is WAY below the peak--and that generally means you don't have the profits you need to upgrade machines, buy new games, etc. When you stop being able to upgrade and add new games, you enter the final part of the curve when business falls off further from the already-low plateau it was at, and then you're dead (in terms of the business).

Tweak the situation a little bit and the timing of when you hit the inflection points on the curve will shift forward or backward some, but the basic shape of the curve doesn't change--that's why I say that this really isn't a viable business.

Oh, those "special circumstances" I mentioned, that would make it viable? They DO exist, but are rare: for example, you don't pay for most or even any of your games (a popular strategy in developing countries, and unfortunately used much more frequently than you might think even in the developed world!); you're setting up business in a community where there's nothing else for kids to do; you find other uses for the floorspace and computers that you can make money on when people aren't playing games (computer classes, for example). Even if these or similar factors apply in your case, though, they usually only make the difference between surviving and not--I've never seen a case where they are enough to actually get things to the point where the business is financially attractive to be in.

Yes, all of the