Virtual reality drops users into settings and situations they previously only dreamt about. Location-based VR is supercharging that standard VR experience, while free-roaming VR is enhancing it with high-end VR headsets attached to backpack-mounted gaming PCs.

This combined with Hollywood motion-sensor tracking technology allows multiple players to literally walk within the digital experience. The availability of that technology makes location-based VR an exciting out-of-home experience for its users.

But it’s also a niche market just scratching the surface of profitability. Interested entrepreneurs should build out that experience into a unique, community-based business model.

The Virtual World

Consumers believe they can walk into VR experiences and be completely surrounded by content. While true to a degree, consumers only realize that vision in out-of-home, free-roaming experiences.

And it’s a vision that only a location-based VR business can bring to fruition. But success in any new business endeavor starts with understanding market progression. Home-based VR systems, for instance, haven’t caught on as analysts predicted; this leaves an opening for location-based VR businesses to cater to those interested in VR who just haven’t interacted with the equipment.

The objective for location-based VR entrepreneurs is to create an environment that combines the best part of VR arcades and free-roaming centers. Arcades provide users home-quality VR experiences at an affordable price, though their lack of differentiation from in-home gaming options makes them susceptible to disruption. Free-roaming facilities, meanwhile, use expensive enterprise-grade VR hardware and motion-sensor technology specifically developed for out-of-home group outing experiences.

Location-based VR presents an opportunity to split the difference between arcade and free-roaming. To bring that balance to fruition, interested entrepreneurs need to create a VR experience that feels new yet familiar enough to appeal to a wide array of consumers.

A Dose of Reality

According to a Futuresource Consulting study, location-based VR’s generated revenue could exceed $800 million by 2022. For entrepreneurs or businesspeople looking to capitalize on this level of growth, consider the following three strategies:

1. Invest in a VR arcade. Location-based VR’s biggest source of growth comes from arcades. According to Futuresource, VR arcades accounted for 40 percent of VR revenue in 2017, providing users with experiences similar to those they had at home without requiring them to invest in expensive technology.

VR arcades aid location-based VR in distinguishing itself from home options. Create an arcade with a VR atmosphere that’s more interactive and lifelike than what players experience at home.

Use high-end, high-priced headsets like the Oculus Rift or the HTC Vive and join them with more intricate, expansive games and experiences. Then, make it reasonably priced to draw in birthday parties, work events, and other group outings. Your location-based VR arcade can gain traction if it provides a unique product at an affordable price.

2. Find a partner. The financial investment needed to build your arcade will be steep. Building your own experiences can demand large amounts of capital, so it helps to enter into a joint venture. For example, Facebook and high-end camera manufacturer RED will produce a camera able to capture imagery that can be explored in a VR environment in real time.

While your joint venture might not include household names like Facebook and RED, a partnership can do more than boost your finances. Find another individual or business with different but complementary areas of expertise. Maybe your partner is flush with capital and you have the perfect location or vice versa. Either way, a union can add to your facility’s appeal and its earning potential.

3. License a franchise. Those who’ve pondered starting a business are probably familiar with small business ventures’ low success rates. Franchises, however, are a different matter. A study found that franchise success rates exceed 90 percent, making them the safest type of business one could open.

Chain establishments are a popular option for potential business owners for a number of reasons, including the reduced risk that comes with starting out as a known commodity. To a certain degree, franchises provide a blueprint for success, and they often come with a network of owners who can help newcomers to the business.

Franchises and VR each benefit from the idea of “experience economy,” defined as using goods and services as a means to create a memorable customer experience. Location-based VR is a memorable experience with a culture and model that’s easily applicable to a chain approach. Aim to create a franchise that’s easily transferable across many sites and facilities.

While cost and processing demand continues to limit location-based VR technology’s in-home use, the industry itself continues to build momentum. Make it the center of a business model to ensure that your product — and experience — is one that customers won’t soon forget.