Might be good to try your hand at operating, find a location or two first and add some stuff. Try to build a rep and find a following that way first, before going all in.
This would give you more time to find out what your demographic is, and what game types you'll need sustain your location.
What might work in New York or Idaho might not work for you.

I actually thought renting a small space in a mall might not be a bad idea, 500-1000 sqft maybe. Have no idea how much that would cost, but I can't imagine it would be as bad a full fledged venue... guess it depends on the mall and if something like that already exists. I'd get a few other games like a key master, some cranes maybe a coin pusher so your not just chasing one source of revenue. Might even have some overlap. People love easy to understand games where they have the potential to win a crappy mp3 player or some plush toys
Seems like places come and go all the time in malls, maybe the leasing options are more flexible.

Wow a dollar a sqft. not bad at all. You sure utilities aren't split btwn. the centers tenets (CAM)? or is that worked into the rent price? if so yeah that's a pretty descent deal.

If all you need is 1200, you should be able to make that pretty easily I'd think. You know your area better then I do though.
If your looking at going the "freeplay" route, I'd be careful. free play games take probably X10's the abuse vs. pay per play. Personally I'd just set the games cheaper ranging from .25, .50 or .75 depending on ball times and value. I've found that most casual players don't really understand that 2-3 is almost .10 cents cheaper then .75. All they see is the $2 dollar sign, think it's phycological or something. Once you go free play it would be a lot harder to go back to pay per play then the other way around.

If you do wind up going the free play route, just be prepared to triple or quadruple your parts budget and your time down there fixing stuff. Sometimes free play is a good deal, some times it isn't. Personally I'd rather go to a pay per play place, I usually wind up spending the same amount or less for the same amount of time anyway and the machines are usually in better condition. I'm probably in the minority though, most casual players won't be able to hit replays enough to make the money last.