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TOPIC: Reality check

Reality check 02 Dec 2009 14:22 #32916

  • southwest
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First I would like to say that this is a great site with a lot of information. I

I need a reality check. I have been thinking about opening a theater for sometime and need some advice. Like I said I need a reality check to make sure I am on the right track. I am looking to put a 5 or 6 screen theater in a town of 55,000 there is not a theater in town however there is a sixteen screen 5 miles one direction and a 12 screen about 12 miles in another. A recent survey by the city indicated one of the top things people wanted in town was a movie theater. The sixteen screen theater is located at the regional mall, all stadium seating. The 12 screen is in a converted grocery store and is stadium seating. The immediate market would be 55,000 people, with an additional 120,000 around the sixteen screen and 35,000 around the 12 screen. Both theaters are in the process of upgrading to digital. Household median income for the immediate market is $55,619. Using 1 screen for 10,000 people indicates 5 screens, the formula set out by Debo

Average Movie consumption 4.73

Adjustment factor (Market median household income/ National MHHI) = 1.06

Market Movie consumption = 5.04

Average ticket $ = $8.5

Assuming capturing 55% of market results in ticket sales of about $1.3 million

The location I am considering is next to two new restaurants, new Home Depot and Wal-Mart. The lot is 2.5 acres, has sewer and water connections on site and storm water runoff is already handled in the project so it does not have to be dealt with on sight (big deal in Florida). Land cost alone is a minimum of $800,000 - $900,000; impact fees are a minimum of $11 / square foot when you add in equipment and building costs etc you are in a $3,000,000 - $4,000,000 range at minimum. Renting if you can find a space is not cheaper as rent runs $10 - $14/foot plus $3 CAM, and then add in equipment costs etc. My question really revolves around the revenue and expense assumptions do they sound reasonable or am I way off base? As far as financing there are a couple of products available the best seem to be USDA and SBA products. Any help would be great.
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Re:Reality check 03 Dec 2009 11:50 #32918

  • rodeojack
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This topic comes up very frequently. If you look through the forums, you'll probably notice right away that there are no firm answers. All of us are commenting "by remote", so you have to take it for what it's worth.

Going only from what you've laid out, I'd say you'd be better off putting your money in a nice sailboat & heading for Hawaii. I'd expect you'd get the most trouble from the theatre that's 5 miles away. They could be close enough to get you cleared, meaning you don't get film until they finish with it. You could get some product allocated (split between theatres), but that's not guaranteed. Relationships with the studios mean a lot in this business, and if you're just starting out, you're putting a lot of risk on the line.

I once had a theatre with square footage costs like you mention. Frankly, it didn't work... not even close. We put in a lot of money from another business to keep it running. Once you figure your overhead (you got a good start with the square footage numbers), add in projected heat/light, water/sewer, insurance, maintenance/repairs, payroll, taxes and YOU. Then, double that figure and divide it by the number of screens you plan to build. That will give you a very rough average of what you'll need to gross every month in tickets and concessions, just to keep the doors open.

Finally, set aside the really big blockbusters. Those will help, but you really need to figure out what your theatre will do, day in and day out. Putting that load on 5 or 6 screens, in the midst of 28 other (nearby) screens would be an extremely risky proposition, in my view.

It's human nature to offer advise, especially when there's no risk to the advisor. In cases when I've been in, or near your shoes, I've found that roughly 10% of the folks who come in with good ideas for your business will actually support their ideas with their wallets. A nifty new theatre will be an initial draw, but people like to get out of town. You won't keep people from patronizing the other theatres... you'll just dilute the market, mostly.

All that being said, others here have differing perspectives. Perhaps you'll get a more optimistic viewpoint from someone else who's also done this. Having been there, more than once, I do tend to be somewhat skeptical about these things.

You might look into finding a booking agent, who has access to Rentrak numbers. That would give you some hard income numbers for your area. Again, don't take those figures and expect you'll make them, too. You may add some to the market, but you'll also fragment from the screens that are there now... assuming the studios are willing to add another print to your market.

Good luck!
Last Edit: 03 Dec 2009 11:54 by rodeojack.
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Re:Reality check 03 Dec 2009 21:19 #32919

  • slapintheface
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5 miles away is nothing---unless your population is 500,000 or more---run the other way
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Re:Reality check 03 Dec 2009 22:03 #32920

  • rufusjack
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I with the jack and slap.

Unless you are very wealthy and connected, I think you would have a hard time coming up with the financing.

There is a reason no other theater is already there. I guarantee others have looked at that town.

Lastly, you would have to have a pretty impressive 6 plex to get people to come and stay b/c you will be taking money away from someone else.

Run faster the other way!
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