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Two entrepreneurs score big with a fleet of mobile arcades

September 16, 2009 by by Ian Mount, Fortune Small Business

Game Boys

Two entrepreneurs score big with a fleet of mobile arcades.

David and Stuart Pikoff want to see your kids spending more time outdoors... playing Halo, Guitar Hero 3 and laser tag. The brothers' two-year-old Austin company, Games2U, brings truck-mounted video game theaters and laser tag gear to birthday parties. Last year Games2U started selling franchises; the Pikoffs project revenues of $15 million to $20 million this year.

Games2U has signed up 38 franchisees to handle 13 territories in 16 states. New franchisees pay the Pikoffs a $35,000 fee up front and a 6% royalty on sales. For each territory, a franchisee must also buy a branded Games2U trailer or vehicle from the Pikoffs, brining the startup cost to between $89,000 and $200,000. Each Games2U unit is outfitted with screens and video-game consoles that allow 12 to 24 gamers to compete at once. Clients typically pay a flat fee of $300 to $350 for a two-hour party appearance.

"I wouldn't be so bold as to say we're recession-proof," says David Pikoff, 42. "But franchisees are hearing that while people aren't purchasing big houses or cars, they won't cheat their kids out of a childhood memory for a few hundred bucks."

Games2U's biggest obstacle? The credit crunch, which makes it harder for would-be franchisees to get financing. And particularly in a down economy, it's not easy for franchisees to cover the deprecating value of the vehicles and to purchase new games, says Jack Plunkett of Plunkett Research, a market research firm in Houston. "You need to get hired for weekday events, not just birthdays," he says. "That takes networking and marketing skills."