Pachinko Parlor Business Model

As for any business, sales and profits are different, however, people seem to think that pachinko parlors are profitable businesses only from the perspective of sales. Gross profit (the amount of sales that are lending fees of pachinko balls (tokens) minus the purchase amount of prizes provided to players) varies over time, but currently  fifteen percent (15%)  on average. In addition, the purchase cost of the game machines and personnel expenses for staff as well as the cost of electricity and rent (in the case of a lease), etc., must be subtracted from the sales to obtain the net profit.

The gross profit of a pachinko parlor is managed by the indexes such as “warisuu” that are specific to the industry, in addition to the cost rate of prizes (the ratio of the purchase price to the selling price). “Warisuu” simply refers to the ratio of the amount of prizes acquired to the lending fees of pachinko balls (tokens). Balancing profits and customer collections by increasing and decreasing warisuu is the basic format of the pachinko parlor business. The general rule of all businesses is that while selling goods at a considerably low price generates no profit, selling goods at an unnecessarily high price attracts no customer in the first place, and this applies to the pachinko parlor business as well. A pachinko parlor cannot be successfully operated without keeping a proper gross margin ratio.

Pachinko parlors in their pioneer days kept accounts in a rough way that is called “Donburi kanjo.” A pachinko parlor operator calculated profits on a consolidated basis of its parlors by checking the incoming cash and the amount of prizes provided. This calculation method has been improved to keep accounts more accurately over time. Currently, detailed data such as the lending ball unit price (an indicator of the amount of sales per pachinko ball) and the ball margin (the amount of gross profit per pachinko ball) are also used. In addition, a detailed analysis of the specifications and details of game machines is conducted and the types of customers who are attracted to such machines. A pachinko parlor operator operates a pachinko parlor based on a combination of several indexes, such as how well competitors are attracting customers, the national average of game machines being operated, and other conditions.

Recently, game machines come in and out of popularity quickly and if the game machines are not changed at a frequent enough rate customers will not come back, which is one of problems pachinko parlor operations have scratched their heads about for some time. It can be said that the pachinko parlor business involves the search, on a daily basis, for an effective balance between various operating costs (such as personnel expenses and the cost of electricity in addition to costs required for changing the game machines frequently) and the aforementioned warisuu that fits a pachinko parlor.

<Reference> Average business model of DK-SIS members

Conditions

Number of game machinesPeriodSales per game machine per dayGross profit margin per game machine per dayOperating hours per day
530 machines30 daysJPY 19,100JPY 2,9504.1 hours

Business model

 Amount
(ten thousand yen)
Sales ratioGross margin ratio
Sales30,369100.00%-
Amount of prizes25,67985.55%-
Gross margin4,69115.45%100.00%
Total amount of costsS4,22013.90%89.97%
BreakdownGame machines1,3134.32%27.99%
Personnel expenses9383.09%20.00%
Depreciation cost7972.62%16.99%
Rent5391.77%11.49%
Utility expenses2160.71%4.61%
Other costs4171.37%8.89%
Operating profits4711.55%-
Consumption tax1990.65%-
Operating profits excluding consumption tax2720.89%-