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I'm still on my quest to find a good location for a theater. Without giving too many details, what do you think of a 4-plex as an option for a second-run drafthouse/pizza theater? Plenty of first-run screens in the area, but no second-run pizza joints in this part of town. Very generically and with only that info, how much is too much to pay for a lease on something like that?

With no location in mind, it's very tough to answer that.

We pay $1,500 a month for our two screen theater in a relatively small town. We could serve pizza if we wanted, as we are required to possess a food license. I know very little about liqueur licenses, but unless you purchased one outright, that might be tacked on to your lease if the previous owner had a liqueur or beer/wine license that is still valid.

If you found a good college town to cater to, you'd expect to pay a higher lease.

There are a lot of factors to consider, but mostly it comes down to square feet and the going rate of real estate in the area you are looking into.

In no way do I wish to give you unsolicited advice -- but you mention it would be a second run theater because there were plenty of first-run theaters in the area...

My first thought was, "So what?" If you made a first run theater unique in such a way that it stood apart from the others, it would be very indirect competition and there is always room for one more...

Ever consider first run indie movies?

Need to know at least square feet -- how many seats - and population to give any kind of guess.

Theaters have a great deal of dead space. They also are larger than most buildings so they can be seen when not on high traffic streets. Is this a empty theater right now? If so you have even greater leverage as most chains do not want to touch a 4 screen location.

So....I believe you need to look at the best commercial real estate available and then start at a lease of half of that. So if top commercial real estate is $20 sq ft, you should be in the $10.

One thing to keep in mind when talking about a market with plenty of 1st-run screens, you may not get the chance to play the first run movies. AND, many studios can;t give you a clear answer in many case until you are open.

Thanks for the thoughts and advice - always very much appreciated. I know I was a bit vague in my initial post.

Second-run is really going to be the only option because of the proximity of two other first-run, multi-screen theaters. The chain that owns this theater also built the other two and is leaving this one - knowing that it can't be used for first-run. It's done well over the years and it's in very nice shape.

This is in a fairly large city, and it's right downtown. (City population is half-million and change; metro area is about 2.25 million.) Because of its location, the rent is quite high, so that's my big question. The auditoriums are also a little bigger than I'd like - a total of 500 seats.

Any thoughts?

$ 10,000 TO 12,000 PER MONTH IF IT WERE OPEN OR IS IN GREAT SHAPE.

WHAT ARE THEY ASKING?

Sorry so long in getting back on this. I'm just getting the numbers the broker is working with on a proposal.

The rate he's starting with is $10,000 per month (those are just the nets) plus 10% gross sales. I should see some numbers on what the current tenant is doing soon. I know their attendance took a big hit when the same company opened two other first-run multiplexes in the same downtown area. They've been competing against themselves in this location.

Those numbers are also based on the current tenant leaving all equipment - projectors, seating, fixtures, etc. So...any thoughts?

You mention you will be seeing numbers from the current tenant. Although somewhat useful, this data is not something in which you should place a great deal of faith. If they were "competing against themselves" running first run, and you come along and change the business model to 2nd run or whatever, then you will want to adjust your numbers accordingly. I suppose the question is how do you project attendance for a 2nd run theater. I have read on these boards before that art houses can expect 10% of the market share of first run theaters. I don't recall reading a number for 2nd run. In the end, there are no good rules of thumb for projecting your numbers anyway. You have to really know your market area to come even close to having a good estimate. Do plenty of "due diligence".

I would never sign a deal with 10 % of the gross. Also you better have a good film buyer if you have clearance issues from the newer complexes. Never heard the 10 % rule art to 1st run. Art can outgross first run theater depending on the area.

I agree with Slap, the 10% is a deal breaker. You will be lucky and happy to have a 10% profit margin on a normal lease. Old grosses are worthless in this situation as well.

$10,000 is way too high for 2nd run. How long of a lease do they want?

The equipment being left behind is worthless. It would cost the old operator more money than it is worth to have it hauled away. You absolutely have to a plan and a way to pay for digital in two years. Are they leaving the sound equipment? How old are the seats?

The fact that you are moving in right after one moves out could be doubling the rent they are asking. Let them sit on this for a while. You have to be patient on these projects and not jump in. The theater I currently operate sat empty for almost 2 years.

I was just consultant to a theatre that the landlord wanted the 10% of gross. The buyer felt it penalized him for improving the business and he went all out to change the terms opting for increased rent up front.

When we start talking + 10 K per month plus what you need to invest: pizza and bar, is it digital or currently 35MM, etc. suddenly we're talking real money/ Leasing a 35 MM theatre just as the world goes digital could leave you in need of 200K to change over. Are the landlords: the theatre company, including a refit to digital?

Just looked up Alamo Draft House in Austin: they are less than 5 miles from at least 6 theatres with more than 50 screens.

2nd run: most theatres today, and if your landlord is your movie competition it raises many more questions, do not wait until a film is declared (rarely) 2nd run. The category is almost moot these days. It comes down to: is a film playing next door? If it is you cannot have it. If it is: you can have it. There's a lot of gray area and a lot of room for programming.

You are considering a serious business venture: be serious and do the math as if your children were being held hostage.

Good luck.

So what is old 35mm film equipment worth? Scrap! This from Steve Guttag who posted these on film-tech

JPRM,

How much is top commercial space in the area you are looking at?.