How Akos Gabossy Built a $15 Million Escape Room Business

Akos Gabossy capitalized on an opportunity. In 2012, escape rooms were popular in his home city of Budapest but not well known in other cities around the world. He made the bold move of using savings to open the first location in the United States, and today the company operates in major cities in North America, Europe, and Asia. Read the story of his journey below.

How much revenue and profit does the business generate?

The systemwide revenue for the entire PANIQ Room brand is projected to reach approximately $15 million for the year 2024. As a franchise network, determining exact profitability can be challenging; however, stores typically operate on a 30% margin rate on average. While some stores exceed this margin, others may have slightly smaller margins.

Tell us about yourself and your business.

PANIQ Room, founded in Budapest in 2012, stands as one of the oldest escape room brands globally. My partners and I introduced this concept to the US, leading to the establishment of 25 locations nationwide.

Escape rooms represent the latest innovation in location-based entertainment, heralded as a significant advancement in out-of-home entertainment. These intellectually stimulating and interactive activities are perfect for team engagement. Our diverse collection of themes includes Wizards, Pirates, and Aliens, offering immersive experiences for everyone.

How does your business make money?

We offer escape room tickets for purchase. In select locations, we provide bar services as well. Hosting birthday parties, family events, and corporate gatherings is a significant aspect of our business. Our latest attraction, the Quiz Room, offers a distinctive real-life trivia experience for groups of up to 16 participants.

What was your inspiration for starting the business?

Budapest, my hometown, emerged as the global capital of escape rooms. Recognizing the potential, I was eager to take it to new heights.

Around 2014, when escape rooms were still a new concept, we opened our first venue in Hollywood. It experienced immediate success, and we’ve been expanding ever since.

Despite challenges like the pandemic, inflation, and evolving building regulations, we persevered. Building an international brand was a personal challenge I eagerly embraced.

View this post on Instagram

A post shared by PanIQ Escape Rooms (@paniqroom)

How and when did you launch the business?

Our first store was constructed in under three months with a budget of $100,000 and launched in Hollywood in 2014. Today, we develop multimillion-dollar units and welcome nearly 400,000 players annually.

Over the years, the landscape of escape room construction has evolved significantly, and while we continue to refine our business model and seek optimal locations, the majority of our venues thrive exceptionally well.

How is the business funded? 

The initial two stores were funded from my and my friends’ savings. Operating as a franchise network, the majority of our stores are franchise businesses owned by independent investors worldwide.

Over the past 4-5 years, our franchisor company has successfully raised over $7 million, which has been allocated to establishing corporate stores and enhancing our brand presence.

How did you find your first few clients or customers?

Initially, we utilized Groupon to attract our first guests, as convincing people to spend $30 or more to be locked in a room for an hour wasn’t easy.

Today, our marketing strategy is more straightforward. We primarily reach our customers through word of mouth, Google, and various social media platforms.

Conversely, our franchise investors typically discover us online or through their own experiences as customers or players.

What was your first year in business like?

It felt like navigating a jungle with bare hands and no knowledge. We were unfamiliar with US bureaucracy, labor rights, real estate law, and financial burdens. It took us a decade to acclimate to the US system; running a small business is genuinely challenging, especially for non-residents.

The first year served as a significant proof of concept as we witnessed people enjoying our games. It became evident to me that we were competing for capital, and we needed to continuously raise funds to expand our store network and build the brand.

What strategies did you use to grow the business?

I aimed to establish PANIQ Room locations in as many major American cities as possible and to do it rapidly. While our aspiration was always to create better and larger stores, it took me a decade to reach a level I consider sustainable.

Now, we can offer six or more different themes under one roof, along with supplementary services for our guests. Additionally, we’ve invested in enhancing our production capabilities; escape room products are integral to our business, and we prioritize creating immersive themed environments.

Our website is another area of focus. Rather than purchasing off-the-shelf applications, we developed everything from scratch, making PANIQ’s website a valuable asset.

What was the biggest challenge you had to overcome?

Undoubtedly, the pandemic posed the biggest challenge for us. We were compelled to close most of our stores for nearly a year. Unfortunately, we didn’t receive assistance from our landlords, and banks were not supportive, particularly due to our non-American status.

Despite these setbacks, we remained patient and worked to raise capital back home in Hungary. It was indeed a daunting task, but we emerged stronger than ever.

What have been the most significant keys to your business’ success?

The most significant keys to our business’ success have been our relentless pursuit of expansion and improvement, coupled with our commitment to creating immersive experiences and investing in production capabilities.

Additionally, our dedication to developing a user-friendly website from scratch has been instrumental in enhancing our brand value and customer experience.

Thrilled to have Neil Patrick Harris take on our escape room challenge like a true star. pic.twitter.com/jhqC7SNPPS

— PanIQ Escape Room™ Franchise (@paniqroom) January 14, 2024

Tell us about your team.

We maintain a sizable workforce at our stores and collaborate with a large team of freelancers. Given our continuous expansion, we employ local contractors and partner with internationally renowned theming companies.

While PANIQ Room’s headquarters are in Hungary, we operate with a small yet efficient central team supported by excellent area managers who oversee operations in the US.

What was the turning point when you knew your business was successful?

Witnessing the second or third team escape from our prison-themed room with just 1 minute to spare at our second location in San Francisco was truly impactful. Observing their enthusiasm highlighted the unique joy that few activities can provide to people.

What are your future plans for the business?

Our flagship store opening in West Hollywood this Spring is a crucial milestone for us. The 7,000-square-foot building will showcase six escape rooms, a Quiz Room, a Karaoke Room, a special Shooting Gallery, and a bar/lounge area.

I’m also considering a significant business move that may lead to an exit strategy. My goal is to merge with a larger company to secure additional capital, accelerating the expansion of PANIQ Rooms. Additionally, I aim to venture into real estate development, a pursuit I’ve been involved in since day one. Transitioning from tenant to landlord is a long-held aspiration of mine.

If you had to start from scratch, where would you begin?

Rather than prioritizing long-term objectives, I would shift my focus towards short-term gains and increasing EBITDA, minimizing heavy investments in brand marketing. Additionally, I would strive to mitigate risk during the pre-opening phase of each project by negotiating more favorable lease agreements.