Arcade Food and Entertainment Complexes
Business for Sale Industry Economics
2003 - 2020
2020 - 2026
Arcade Food and Amusement Complexes operators mainly offer card- and coin-operated entertainment to patrons, such as board sports, skill games, and redemption games.
While many of these games were common with previous generations, rapid technological transition and changing tastes have caused a systemic shift in the industry since its peak.
Coin-operated games became less popular when the home console gained success. Substitute devices, such as game consoles, have the flexibility and long-term cost savings, while streaming and handheld games will also be purchased for free or at a low cost.
The Arcade Food and Entertainment Complexes industry has grown dramatically over the majority of the five years leading up to 2020.
The industry has come a long way from the coin-operated machines that were common in the 1980s. Arcades have also drawn adults due to increased ancillary service options, most notably the addition of alcoholic drinks, which has widened the industry’s appeal to customers with even greater purchasing capacity.
Dave & Buster’s Entertainment Inc. is the industry pioneer. Dave & Buster’s is an example of the trend, but smaller operators have also adopted the concept. Despite good market success for the majority of the time as a result of rising disposable income and customer spending, the COVID-19 pandemic is expected to have a material impact on industry sales in 2020.
According to research, market sales rose at an annualized rate of 0.1 percent to $2.2 billion in the five years to 2020, with a decrease of 29.4 percent in 2020 alone. Revenue production in the sector has suffered as public mandates and safety issues have plagued industry activity.
The sales output of the Arcade Food and Entertainment Complexes industry is projected to improve significantly over the next five years, to 2025.
Following several years of solid growth as a result of the industry changing its market model and target markets, it will most likely continue to trend in line with consumer spending in the coming years.
Following the effective abolition of the COVID-19 pandemic, new nightlife operators are expected to join the industry to meet the rising entertainment and amusement demand.
While the average business operator is still projected to earn a high-profit margin, this amount could be limited as the industry becomes more reliant on low-margin operations such as food and beverage sales.
According to research, market sales will grow at a 4.3 percent annualized rate to $2.7 billion over the next five years.
Businesses in this sector mainly run video game arcades and game-focused family entertainment centers, which usually offer food and drinks.
Customers pay to play card- or coin-operated arcade games rented or purchased from industry owners.
This business excludes operators mainly focused on gambling machines, billiards, miniature golf, and other larger-scale or outdoor amusements.
The industry of arcade food and entertainment complexes is classified as having a moderate level of capital intensity. According to research, in 2020, the industry will spend $0.20 on capital investments for every $1.00 spent on salaries.
Over the five years leading up to 2020, the industry’s capital intensity remained largely consistent as operators added equipment and manpower at comparable rates.
Over the five years to 2025, the industry’s rising concentration on food and beverage services, which are comparatively more labor-intensive than core gaming activities, is projected to result in a lower level of capital intensity.
Each of the industry’s product offers requires labor, especially if the locations also serve as restaurants. Employees assist the restaurant staff with a variety of activities, including handling cash registers and maintaining products.
As a result, salaries are expected to be the industry’s highest expenditure, accounting for 31.7 percent of sales in 2020. The industry’s other product offerings, on the other hand, are generally automated or managed by the user, which helps to keep wage expenses in check.
Furthermore, because card and coin-operated games provide the majority of industry income, an operator’s ability to preserve both types of money is critical to their success. As a result, the industry’s capital expenditure and depreciation levels are consistently greater than the industry average.
According to studies, the Arcade Food and Entertainment Complexes market has had considerable revenue fluctuation in the past. However, the COVID-19 (coronavirus) pandemic has increased revenue volatility in the five years leading up to 2020.
Because industry services are highly discretionary, they are susceptible to significant shifts in consumer incomes and spending patterns. In addition to some public health laws requiring operations to halt for a period of time in order to battle the virus’s spread, unemployment has reached historic highs, prompting consumers to save.
Additionally, business model adjustments in recent years have contributed to the industry’s high degree of revenue volatility, as many firms have boosted food, beverage, and other ancillary products in response to customers’ greater at-home access to immersive gaming experiences.
Demand is also determined by the amount of free time available to engage in activities such as visiting an entertainment complex, as well as improvements in home consoles, games, or other entertainment possibilities. The research estimates that sales will have climbed 16.2 percent in 2017 and will fall by 29.4 percent in 2020 during the next five years.