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Startup Questions - specifically Art House 24 Jul 2005 04:57 #10684

  • lionheart
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Hello Everyone. I have been reading the posts and archives on this site with great interest over the last several days. You have a fantastic site here. Thanks very much to all who share their knowledge and experience. Now that I'm blear eyed and too tired to read more, I thought I would finally post something.

If you would, please consider the following situation:

There is an old 4 screen theater in my new town that is for sale. It is located on the historic town square (a beautiful area getting by, but not particulary hip or trendy). Property values here seem high compared to my bank account. Good locations for businesses are near the interstate on the south edge of town, not the town square in the center of town. Still this is only a few miles apart. I consider cost of new construction out of the question (think millions just for the best available land), and I'm not sure about the cost of refurbishing the old theater but it would seem to be the less expensive option. When I discovered that the old theater is for sale, I immediately began to consider the possibility of buying it. I'm sure I'm crazy, so I should fit in well with many of you who have claimed to be the same.

Anyway, the price for the theater is well below other property values in the area, but still probably higher than it should be based on the dismal condition of the building. There is no equipment. The sloped floors have been removed and only flat ones in questionable condition remain. Essentially all the seats are gone too. There are no screens, curtains or wall coverings of any kind except really bad paint that shows the outlines of the old sloped floors and old light fixtures. The theater was closed about 2 years ago. There is supposed to be heat and air conditioning systems still in the building, as well as restrooms (hopefully intact). I hope to look at the property next week. I'm told that a lot of asbestos abatement was done and that's why everything has been removed.

The owner didn't go out of business. He built a new 10 screen cinema about three miles away by the interstate. Great for him, but maybe there is also an opportunity for me here. Normally, I would say this building should be turned into 3rd rate retail space. It doesn't seem to have ever been a grand place, other than being part of a national historic site. No special facade or endearing architectural elements. The building appears to have solid bones in the form of old limestone construction. It is over 11,000 square feet. I don't know the exact size of each room, but I would guess from looking through the windows and pacing off the dimensions from the sidewalk that the two biggest are 25 to 30 feet wide and about 90 feet long. The rest appear to be the same width, but 15 or 20 feet shorter with small store fronts between them and the front of the building. Interior walls are mostly made of brick that is 5 layers thick or other similar strength material. They really built them to last back then. There is an upstairs with restrooms and projection booths. There is a small lobby with one tiny restroom, which must have been for concessions people to wash their hands based on pictures I've seen of the interior taken before the place closed. The area behind the lobby is not a theater, but I think it must be for mechanical systems, such as air conditioning and heating. I will know after the showing. All together the 4 theater rooms and the lobby make up what might have been 5 store fronts when the building was built long ago. People have told me that the theater originally had only one screen but later expanded. Now there is only one front entrance through the lobby.

The building is listed for about $350,000 which is about half the price by square foot of other buildings nearby. One unique aspect of the property is that it is still listed on tax rolls as being three separate properties. The current owner will consider selling only part if necessary. I know everyone always says that more screens are better, but I'm not sure how I will raise even enough money for one part. Especially since it has also been said in past posts that banks don't usually lend money for theaters.

By now, you may be saying that this is a bad idea, but first let me tell you about the demographics. The town has 22,000 people. The county has about 100,000 people. The nearby 10 screen is the only theater in the county. 25 miles away there is a 3 screen theater, and 25 miles the other direction there is a major metropolitan area (millions of people) with many theaters. To get to the nearest regular art house theater, a person must drive about another 35 miles to the other side of the metro area (60 miles from here) where there are at least 3 with numerous screens each. On the near side of the metro area, there is one museum which shows a single art/indie film Fri, Sat, and Sun at multiple times in their auditorium. I've read they have good attendance, but I have not been there. Also, they don't even have concessions. They admit that they can't get major indie films from the likes of Miramax because they have limited showtimes.

As for education levels, more than 25% of populations in the town and the nearby major city have at least bachelor's degrees, but the figure drops in the outlying county area. There is a junior college in town with an enrollment around 5,000 but only a few hundred live on campus. The nearby major city has 4 significant universities, but I haven't checked enrollment numbers yet.

I'm sure you get the picture. The art film fan is definitely underserved here. My only questions are:

1. What would the actual area be that I can draw customers from? Would they drive 25 or 30 interstate miles from the major city, or will they just go the other way to more established theaters approximately equal distance the other direction (albeit through much heavier traffic)?

2. Would it make sense to buy only the lobby and one long theater? Or should I only consider buying if I can manage to raise enough funds to buy two theater rooms? Or do you think it's necessary to buy the full 4 theater rooms? I'm hoping to maybe swing 2 if I can get a loan, but I don't know how I would ever buy 4.

3. If you were the current owner with a 10-plex, would you be willing to sell to someone who doesn't want to compete with you on first run movies? (The realtor says he might, but I haven't got an answer on that yet.)

4. If it were you, would you want to take on this project?

Thanks for any help or comments you can provide.

lionheart

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Re: Startup Questions - specifically Art House 24 Jul 2005 14:01 #10685

  • Larry Thomas
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I would sell my Granny on eBay for a good art house somewhere, but really believe for it to work, you need at least 100,000 metro population and/or a huge university enrollment. The condition of your building also makes this whole venture seem very daunting and expensive...too expensive for such a small town.

Keep looking.
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Re: Startup Questions - specifically Art House 24 Jul 2005 16:46 #10686

  • Mike Spaeth
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People will travel from small town to major city for entertainment ... but not the other direction.
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Re: Startup Questions - specifically Art House 24 Jul 2005 17:45 #10687

  • lionheart
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I wonder why they don't want to travel out for entertainment.

I've been in different places around the country where city folks are certainly willing to travel to outlying areas to go antique hunting, shop in unique little shopping districts, take in some historic sites, or even just to pick apples. Ok, so we don't have u-pick apple orchards here, but we do have several antique stores in a historic little frontier town, concentrated in an area near the old town square. I don't think our tourist trade is big, but there is a little of it. Unfortunately, just about every town of any size around here considers it's old town square to be historic. Others are on the national register as well. One such town in another county not too far away has an active drive-in theater that I'm told is actually kind of popular.

Has anybody ever tried to lure people out of an underserved metro area? Maybe the phrase "underserved metro area" has never been seen before? I actually read an article that said our metro area was like the Afghanistan of the art film world.

So, does anyone have any examples or data to help me understand why people won't come out of the city for entertainment? I don't want to be a hard head, but dreams die hard.

Thanks.
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Re: Startup Questions - specifically Art House 25 Jul 2005 09:51 #10688

  • Mike
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Job # 1 is to get a non compete from the seller and an agreement that he won't go after your product niche.

Michael Hurley
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Michael Hurley
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Re: Startup Questions - specifically Art House 26 Jul 2005 15:02 #10689

  • lionheart
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Your absolutely right, Mike. However, the realtor was wrong that the owner might allow another theater to go in there if it wasn't a "direct" competitor. He didn't care that I was going to target people who rarely darken his doorstep, or who are outside his normal trade area. Of course, theoretically, he is right that any entertainment business is his competition, but I still think the money he would get from selling the building would have more than offset the lost revenue.

Oh well, it probably wouldn't have been a good location anyway...just like Larry and Mike Spaeth said.

Thanks everybody.

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Re: Startup Questions - specifically Art House 26 Jul 2005 16:42 #10690

  • RoxyVaudeville
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People will leave the big city and drive to the small town movie theatre if you give them something they can't get in the city. Especially if what you give them is better then what they have there.

I know as I have such a theatre. I'm in a small town of about 10,000 people on the outer edge of a metro area made up of 3 cities that run into each other. The largest and closest at seven miles has 110,000 people, the 2nd at 8 miles has 75,000 people and the 3rd about 15 miles away has 25,000. The total metro area is almost 700,000.

Even though I am 2nd run, and there is a 2nd run in the largest of the three cities that they could go to, I do 5 to 6 times the business of that 2nd run. Often 2/3 of my audience is from those cities. I have often said that if they put a fence around our town and left no one in, I would be out of business within a few months. Of course if they didn't let anyone out either, I might survive as the many many people that leave town for first run films would be forced to wait and see them at my theatre. It all balances out.

The good news is that there are only the 10,000 people from town that I can lose to the other theatres in the metro area, but there are 690,000 that I can possibly intice to come in.

The bottom line is, give them something unique, that they can't get anywhere else and they will come to you. The trick is to get the advertising and publicity out to let them know that you exist and what you have to offer is something that they want.
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