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TOPIC: Lease Questions

Lease Questions 27 Feb 2001 04:03 #1282

  • Bird
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I have an opportunity to sign a lease for a tehatre that I have worked for as a manager for many years. The landlord just bought the land himself, and wants to "work out" something where we both profit. We currently pay about 6800 a month in rent and another 1500 in CAM costs. I assume he wants a % of the take rahter than a set cost, and I'm not against that, I just don't know what % is right. 10% of gross revenue per month may be too low based on our past earnings, but I was reading in past posts' that 10-12% is right on. Any suggestions?

Also, this 10% is on total sales right? Meaning box office, snack bar and misc revenue. Not just box office sales.

Also, he wants me to work up some "numbers" for him, should I give him some projections of what I think I will be making, or just stick to what his 10 or 15% would be. Does he want attendance forecasts, or what? Thanks for any help.
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Re: Lease Questions 27 Feb 2001 10:52 #1283

  • Ken Layton
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How many screens is the theater, how old is it, and does it have stadium seating and digital sound?

Is this theater in a mall or is it free-standing? Was this a chain-operated theater before?
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Re: Lease Questions 27 Feb 2001 13:39 #1284

  • Bird
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It's a Twin, that I may also consider changing to second run. I really don't see the importance of those questions with regards to % of a lease. I know I want to sign the lease already, the question is if we can come to terms.
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Re: Lease Questions 27 Feb 2001 16:32 #1285

  • Ken Layton
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$6,800 a month for a twin??? That's WAY TOO MUCH! You're getting raped. And why let the landlord put his hand in your pocket, too?

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Re: Lease Questions 28 Feb 2001 00:41 #1286

  • RoxyVaudeville
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Is this mall going in with you as a partner or what? I thought you were going in business for yourself? $6,800 per month for rent PLUS $1,500 in CAM costs, and you say they want a percentage as well. WOW! I closed a twin in a fairly large indoor mall last year where I was paying $5,000 per month including the CAM, and there were NO percentages at all on anything.

If this were a new theatre it would be different, but an older one, and a twin no less... they should be glad that someone is willing to even consider taking it. They are entitled to a 10% profit above their costs and that is all. They are in the real estate business, not the theatre business. If they want to be in the theatre business they should run it themselves if they think there is so much money to be made. If they want a percentage, then they are your partners and should pay the same percentage of your expenses as well.

This does not sound like a good deal to me. I would never consider it, unless it grosses at the box office about $10,000 per week... then, maybe. Only you know the figures, or I assume that you do as you were the manager. Do you know what the overhead is to run the entire theatre? Most managers usually do not. Make sure you have all those figures before signing anything.
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Re: Lease Questions 28 Feb 2001 00:58 #1287

  • Bird
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This is northern California were talking about here. I just bought a small 1840 sq. ft. home for $400,000!

If I offer the 12-15% of revenue, should I make sure their are absolutely no other costs to me?
Is their anything else you can recommend I make sure is included in the lease to protect me from expenses down the road.
Thanks
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Re: Lease Questions 28 Feb 2001 11:09 #1288

  • Mike
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Hello Mr. Bird; as you note: location, location, location. You my be grossing very well so all numbers are relative. Since you seem unsure you need to keep the first year costs as low as possible for yourself. You can always increase your lease/cam/% but if you are choking in 3 months you won't ever get a chance. I'd negotiate from that standpoint. Your landlord wants a piece of the pie so he's going into business with you. Problem is: he's going to want your pie too. If I know anything about pie gourmets! Anyway: you are an experienced operator, you're ready to sign, you know the market, negotiate from that strength for a two or one year renegotiable deal and re-visit it then. I'd really like to hear how it turned out. Here in Central Maine you can buy a very nice house for 100,000.00. I hate to admit that 6 years ago we bought a very nice little 1850's cape with additon on 1 acre for 52,000.00.
You go Bird!

Mike Hurley
www.bigscreenbiz.com
Michael Hurley
Impresario
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Re: Lease Questions 28 Feb 2001 14:20 #1289

I also have been working on a lease for a twin in a mall location. When I first contacted the mall owners they told me the rent would be around $8300 (everything included). I told them that at that price the building would sit empty for a long time. They asked for my offer I said $2000. That was in October now at the end of February they are willing to accept $2500 and that will include all mall charges. I quit my theatre managers job in december and can't wait to get back to work. This time it is for me and not a company in bankruptcy. If you are willing to wait or call their bluff the price will become a lot lower. Also my twin comes equipt with everything but the soda machines, stock and of course film. When a company closes a theatre due to a bankruptcy they must leave the all the equipment in the building. It is a long process until the mall gets the ok from the court trustee to rent the building again but for a theatre that has everything included for $2500 a month isn't it worth the wait. I can't wait to open it will be nice to have more than $3.99 in my checking account...
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Re: Lease Questions 28 Feb 2001 14:42 #1290

  • Large
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Take one very important number, last year's gross. Divide it by 12 and multiply that by .15. Offer that landlord that number as a minimum munthly lease.

For example. If last year the theatre grossed $500,000. Divide by 12 and you get 41,667. Mutiply by .15 and you get $6,250. Then let him have a percentage of the any action above that amount. Now all you have to do, is make more money this year than they did last year.
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Re: Lease Questions 28 Feb 2001 15:22 #1291

  • Bird
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Thank you Large, that was the re-inforcement I was looking for. So 15% IS an acceptable percentage to pay of the total theatre gross. I have all the financials from the past 6 years and 15% fits about in line.

The theatre company that currently runs the theatre is not going bankrupt, they are just on a month to month, and looking to get out of the lease. Hence they offered it to me, their manager of 8 years.

I know I can make a nice profit with this theatre, it's just a balancing act with the landlord, as he has a few other options for the building like making it office space, or turning it into a 4 plex.

Another question, booking is the only area I have NOT had experience in as the manager. If I were to retain the same booking consulting firm that we use right now, do you think our quality of movies would decline? (The company that owns it now has about 18-20 theatres in Southern CA, and I would be an independant owner.) Is booking theatre to theatre, or is it very political - like I'll give you print A, if you keep print B another 2 weeks in your other theatre down the street?

Thanks again
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