In 1995 six Dotty's casinos opened around Las Vegas. They came in under the "restricted license" that allowed bars to have up to 15 machines. These mini-casinos had a country kitchen look. They became popular enough that by 2010 they took heat from the larger locals casinos who took their case to the Gaming Commission. New rules were instituted to make it tougher for Dotty's to compete, like having at least 2500 square feet of floor space, at least 8 bartop machines, and a kitchen operating at least 12 hours a day. But this didn't phase the Dotty's owners. They may have up to 100 locations today.
Where did this business model come from? And what was up with that country kitchen look?
In 1992 five Dotty's Deli's opened in the Portland, Oregon area. Though they were billed as Deli's they were really after the gambling action. At the time a small business could have up to 5 machines and got a 35% cut of the gross win from the state. They came up with the country kitchen look to make it look like grandma's kitchen. Older women were the target market. But if you ordered something to eat in one of these joints you would probably get some prepackaged junk that was heated in a microwave so no one went to them to eat. The anti-gambling crowd piled onto Dotty's for running an out and out gambling operation....not just supplementing their income from gambling. The Dotty's controversy in Oregon pretty much became the test for what these small business' could get away with.
Under pressure the state instituted a law that at least a third of the income must come from non-gaming sales. Dotty's started selling cheap cigarettes. Today the average price of a pack of cigarettes in Oregon is $5.69 but you can buy a pack of Marlboro at Dotty's for $4. Guess who gets all the cigarette business around Dotty's locations.
In a money grab the state cut the take of the small business' to 19% to 26% depending on how much they grossed but allowed one more machine to make a total of six. This did not deter Dotty's owners as they have 40 stores around the Portland area today, Some of them carry other names, like Paddy's. Strip malls are their typical location. Maybe 600 feet of floor space. Only one attendent on duty. Last year, the best Dotty's location took a 1.3 million dollar win with just six machines. That's an average of $600 a day per machine. And of course there are a lot of copycatters in Oregon taking their lead from Dotty's.
A few years back the state of Illinois legalized up to five machines for small businesses. In Illinois the state takes just a 30% cut of the money won. Dotty's jumped right into the market. They have 60 stores there today with plans for 150.
