How to Start an Escape Room Business

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Quick Reference

A fun activity to enjoy with family and friends, as well as a great team-building activity, escape rooms are cropping up all over the country. These experiences provide plenty of challenges and allow competitors to immerse themselves in another world for an hour. If you’re looking for an exciting and relatively affordable business opportunity and you have a love of puzzles and games, then starting an escape room business of your own might be a great idea.

Business Overview

Escape rooms are still relatively new, but this entertaining experience is quickly growing in popularity. Groups of competitors enter a room together where they’re “locked in” and have approximately one hour to escape the room. To escape, competitors need to search the room for clues and solve puzzles that will guide their progression to their ultimate escape. 

These rooms are themed and the challenge is explained by a story. Competitors may be tasked with escaping in time to rescue a historical figure, prevent an upcoming disaster, or even save their own lives. In keeping with their themes, these rooms are decorated with appropriate items. The room’s coordinator is able to watch the competitors’ progress over video, and competitors can usually reach out to the coordinator for a set number of clues to help them during the game.

Industry Summary

The escape room industry has undergone extensive growth since 2014. Escape Room Artist reports that, as of August 2019, over 2,350 escape room facilities were in business in the United States. In 2018, 2,300 escape rooms were operating, marking significant year-to-year growth, especially since more than 240 businesses in operation in 2018 have since closed. 

To understand the larger industry picture, consider that in 2014, only two dozen facilities were in business. Just five years later, that number had reached 2,350 businesses. Since that rapid growth, the industry has begun to mature and level out.

Most of the escape room businesses in operation are independently operated, though some are located within venues like arcades and bowling alleys. Mobile escape rooms have also become a popular business model. Some of these businesses are also expanding into franchises. The largest escape room companies are Escapology, Breakout Games, All in Adventures, Key Quest, and Escape the Room. 

Industry Trends

The relatively new escape room industry is still evolving, but various trends are emerging. According to Super Escape Room, technology – mainly, the use of virtual reality and augmented reality technology – is one of those trends. Virtual reality technology was initially highly popular, but that popularity has since declined. Virtual reality equipment is expensive to purchase and it tends to separate participants from their team members, so they lose out on the experience of truly working as a team. 

Augmented reality technology, like the technology used by the Pokemon Go game, has proven to be more effective and long-lasting. This technology is increasingly used in escape rooms, allowing rooms to present more creative and unique puzzles than what could be achieved in “real” life. 

Immersive games and escape rooms have also become popular. These experiences blend escape rooms with role playing and allow participants to make choices that alter the story and their experience. Naturally, these types of escape rooms are more challenging and expensive to create and operate, but because the plot changes depending on participants’ actions, they offer unique experiences every time and can draw back returning customers. 

Portable escape rooms have also begun to emerge as a trend. These portable or pop-up games offer many advantages. There aren’t any rental costs to worry about and, because the games are temporarily “installed” at a customer’s space, there aren’t repair costs to worry about. These portable games can cost two times less than the cheapest traditional escape rooms. They’re convenient for customers, because you can bring the games to them, so there’s no worry about choosing a location that is too far for customers to travel. Some of these games are even being installed in buses, though this requires higher startup costs and is seen less frequently.

Target Market

In most cases, escape rooms market to people who are looking for a fun experience, but the room’s specialty and design can further determine that target market. Some themed rooms may target fans of certain books, like Sherlock Holmes, while others may take on a history theme to appeal to history buffs. Many of these rooms are designed for adults, and they can make great team-building exercises for workplaces. Others are designed for families or teens, and some rooms can be altered to be suitable for a variety of audiences. 

Skills, experience, and education useful in running an escape room

Starting an escape room doesn’t require a business degree, but certain skills and experiences can help the business to become a success. 

Experience with escape rooms. A business owner who takes the time to familiarize themselves with escape rooms, take part in a bunch of escape rooms, and possibly even work in the escape room industry will be at an advantage.

Creativity. It takes creativity to come up with room concepts, design rooms, and think of clues. A business owner will rely on their creativity daily in this industry.

Attention to detail. Little details carry great importance in this industry. From ensuring that clues are in place to booking reservations, an escape room owner needs to have an eye for detail.

Customer service skills. An escape room owner will need to provide great customer service, and previous experience working with customers is ideal. Additionally, a business owner should be skilled in working not only with adults, but also with kids and teens, too. 

 


 

Costs to Start an Escape Room

The cost to start an escape room will depend on many factors, but traditional escape rooms cost a minimum of $10,000 to start. Portable escape rooms cost closer to $4,000 or $5,000. 

Some of the higher-priced costs to start an escape room include:

  • Waiting area furniture
  • Renovation costs
  • Supplies and decor for the room
  • Video cameras and viewing system
  • Vehicle (for portable escape rooms)
  • Signage

Steps to Starting an Escape room business

Step 1. Write your Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan.  Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related:
How to write a business plan
Free sample business plans

Step 2. Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation, and LLC.  Each type of entity has its own pros and cons such as liability exposure, costs, and administrative requirements. 

Related: Comparison of Business Entities

Step 3. Select your Location

Rental costs will depend on the size of the space and location. Renting space in a high-traffic area, like within a mall, can drive awareness of the business and generate walk-in traffic, too. Keep in mind that these high-traffic areas do carry higher rental costs, though. 

Related: Choosing a business location

Step 4. Apply for Business Licenses and Permits

An escape room owner will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located.  Some of the common local, state and federal registrations an escape room business may need, include a sales tax permit, Employer Identification Number, and Occupancy Permit among others. 

Related: Common business licenses, permits, and registrations by state

Step 5. Find Financing 

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a escape room business is another.  In order to get a loan, the borrower(s) will need to have good credit and be able invest 15-25% of their money towards the total start-up costs. 

Related: Finding the money to start a business  

Step 6. Get your Marketing Plan in Place

Marketing is an ongoing activity for escape room businesses, especially since customers won’t naturally become returning customers unless the business offers a variety of escape experiences. A new business may benefit from investing in professional photography and videography to create effective marketing materials. Common marketing techniques include social media marketing, online advertising, direct mail, and radio advertising. Marketing costs will depend on the type and volume of each marketing activity performed. 

Related: Low-cost ideas to market a new business

Step 7. Get Insurance

An escape room business needs several types of insurance for full coverage:

  • General liability insurance helps to protect the businesses from expenses that it might incur if a customer is ever hurt while on the business’ property. 
  • Commercial property insurance helps to protect the business against losses if the escape room is ever damaged or destroyed by an event like a fire. 
  • Workmans comp insurance helps to cover expenses like medical bills and legal fees that could result if an employee is ever hurt while on the job. 
  • Commercial vehicle insurance (for portable escape room businesses) protects the business against legal fees and other expenses in case a business vehicle is ever involved in an accident. 

Insurance costs will depend on factors like the business’ location and the number of employees on staff. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the differences in the premiums, but also differences between plan exclusions, coverage limitations, and deductibles, too. 

Related: Common types of insurance a business may need

Step 8. Hiring Employees

While a business owner could initially run the business alone, as the business grows and it’s time to expand operational hours, it will be necessary to hire at least a few employees. Indeed reports that escape room front desk agents earn an average of $10.00 per hour, while administrative assistants within the industry earn approximately $12.00 per hour.

Other expenses come along with hiring staff. A business may need to cover worker’s compensation, unemployment insurance, and paid time off for employees. 

Related: Hiring your first employee

 

How much can you potentially make owning an escape room?

Escape rooms can be highly profitable. According to Xola, United States escape room locations earned an average of $317,571 in 2018. That profit had increased from $256,860 in 2017. Xola’s report also found that customers used online checkouts half the time, and phone and walk-up purchases the other half of the time. Since the escape room industry is rapidly growing, it’s likely that profits will continue to increase. 

Things to consider before starting an escape room

Escape rooms are all about the experience that they offer to customers, so be prepared to put plenty of time into planning out your room. Finding the right theme can be a challenge, but a room with a unique theme that appeals to a broad audience can help to drive bookings. 

Planning out the room’s clues and puzzles requires creativity and an awareness of human nature. Rooms need to strike a balance between being too challenging, which will frustrate competitors, and too easy, which will leave competitors bored and even allow them to finish the room early. Including too many mentally taxing puzzles can be exhausting, especially when competitors have been in the room for nearly an hour. Leave plenty of time to plan and test out puzzles on friends and family to find the right balance between the puzzles and the room’s storyline. 

Resources:
Association for Room Escapes of North America
International Association of Escape Games