The family entertainment center industry consists of venues that traditionally offer video and outdoor games and recreation in a neighborhood setting. On average, though, these businesses score poorly in business performance. According to IBISWorld in November 2014, arcade-based establishments experienced only a half-percent annual growth between 2009 and 2014. IBISWorld also reports in September 2014 that the Golf Driving Ranges & Family Fun Centers segment rose two-tenths of a percent a year from 2009 to 2014. These metrics hint at the effect of economic conditions and technology on family entertainment centers.
The industry's clientele leans toward the affluent sector of the population. White Hutchinson Leisure and Learning, LLC reported in 2014 that households earning at least $100,000 per year were twice as likely to visit family entertainment and other location-based entertainment centers. According to a December 2012-January 2013 article in the RMA Journal, bowling centers' largest segment of bowlers come from households making above $100,000 per year.
Home and Mobile Threats
Home gaming and mobile devices have challenged family entertainment centers, including arcades, for players. White Hutchinson notes that between January and March 2014, smartphone users devoted 32 percent of their time on gaming. According to the report, users during the first quarter of 2012 averaged 1 hour and 49 minutes a day on online games, social media and other entertainment. White Hutchinson also says household spending for video game hardware and software and smartphones doubled from 2004 to 2013. During the same period, fee-based spending at location-based venues dropped from 16 to 10 percent of entertainment expenditures.
Single No More
According to a 2014 report from White Hutchinson, family entertainment centers market themselves as places with multiple attractions. The typical fare includes a mix of bowling, arcade games or laser tag, and food and beverages. By 2014, centers also relied increasingly on birthday parties and other large groups. The RMA Journal notes in its December 2012-January 2013 issue that bowling centers derived 55 to 60 percent of revenues from birthday parties, corporate groups and customers not affiliated with a bowling league. The issue also says that, at bowling centers, arcade games account for 25 to 50 percent of revenues, and food and drinks for up to 40 percent.
Barriers to Entry
Financing is a significant hurdle to starting a family entertainment center. BMI Gaming says the typical cost to open one is about $1 million. White Hutchinson places the price tag for location-based centers between $3 million and $10 million, depending on attractions, amenities and space. Lenders will typically contribute, at most, only 70 percent of the cost.
- IBISWorld: Arcade, Food & Entertainment Complexes in the US -- Market Research Report
- Risk Management Journal: Credit Risk: Lending to Bowling Centers
- BMI Gaming: Starting a Family Entertainment Center or Commercial Arcade Gameroom
- White Hutchinson Leisure & Learning Group: The Hybrids are Coming
- International Association of Amusement Parks and Attractions: Trends and Futures of FECs; Gregg Borman
- White Hutchinson Leisure & Learning Group: Is an LBL the Business for Me? & Frequently Asked Questions
- IBISWorld: Golf Driving Ranges & Family Fun Centers in the US -- Market Research Report
- White Hutchinson Leisure & Learning Group: The Migration of the Meaning of Place
Christopher Raines enjoys sharing his knowledge of business, financial matters and the law. He earned his business administration and law degrees from the University of North Carolina at Chapel Hill. As a lawyer since August 1996, Raines has handled cases involving business, consumer and other areas of the law.