What should I ask about an arcade’s game ownership versus revenue-share machines?
Ask for a list showing which machines the arcade owns outright and which belong to a supplier on revenue share, plus every contract that covers the shared ones. Then confirm what happens to those agreements, and to the income split, when ownership changes.
Start with a machine-by-machine schedule. For each game, record whether it is owned, financed, leased or placed by a supplier, and what the earnings split is. Compare the schedule with the machines on the floor. Anything missing from the list or unlabelled deserves a question.
Next, read the agreements. Ask how long each contract runs, how it can end and whether the supplier may remove or swap machines. Check whether the supplier must consent to a change of owner. Ask your lawyer to review the terms, since a contract may not follow the business automatically.
Look at the money. Ask how the split is calculated, who counts the cash and how often payments are made. Compare records with the financial statements so the revenue is reported fairly, and ask how repairs and prizes are shared. An equipment loan may also exist on owned machines, so ask for those papers. Finally, ask how the mix of owned and shared machines has changed, and what the seller would do next with the floor. Ask whether anyone has ever disputed a payment or a count, and how that was settled, since that shows how the relationship works under strain.
Key takeaways
- Get a schedule marking each machine as owned, financed, leased or revenue-share.
- Read every supplier contract for term, removal rights and transfer terms.
- Ask who counts the money and how the split is reported.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 03Business Development Bank of CanadaGovernmentEquipment valuation: How to do it
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