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TOPIC: 18-year-old wishing to buy local movie theater -- possible?

18-year-old wishing to buy local movie theater -- possible? 28 May 2004 01:23 #8235

Hello,

I am an 18-year-old in a small town with hopes to buy our local movie theater. It's an old 3-screen that has recently resorted to playing all shows for a dollar. It sounds to me like times are getting desperate, but the gentleman selling the theater is actually in very good financial shape and is just looking to get out. Competition is over 15 miles away and with modern renovations, I believe a sound business plan could be built from playing first-run in the big auditorium and second-run in the two smaller auditoriums with discounted prices -- perhaps forgoing renovations in those two auditoriums as a result. But there are so many factors working against me, not the least of which are that I'm 18 years old and I have no collateral to get a small business loan or any significant amount of money. I haven't begun putting together a business plan because even though I am confident in my own abilities to turn around the theater, I question if I have any chance at all at getting a loan or finding a private investor. Any ideas or suggestions? If anyone thinks it's impossible, please let me know why. I would greatly appreciate any feedback, positive or otherwise. Thank you.
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 01:30 #8236

By the way, the going price is $135,000; this includes the building it's in (with two other business leasing from it), all the equipment and stock.
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 02:19 #8237

  • outaframe
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Well, Robert, you demonstrate a lot of initiative for someone your age, and can actually write an intelligent and articulate post, and that in itself is a rarity these days, so you are off on a good start towards something... Yes, you are behind the eight ball as far as securing a normal business loan, due to your age and likely business experience, AND the fact that this is a high risk type of business venture... Are your parents, or other family members in a position to help you with the financial end of this?... Without someone along those lines being involved, it seems unlikely that you'll be able to find a receptive ear regarding a monetary investment, but I'll have to say I admire your chutzpah in even thinking along the lines of getting into this... Good Luck!...
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 02:30 #8238

My older family members are certainly in a better position than I am to finance such a project, but none are equipped to even scratch the surface on such a large expense. The only option I could think of is securing a loan through a family member, but I would rather be responsible for putting myself in debt than someone else. Do you have any other ideas? I believe I have the creativity, intuition, and business smarts to make this a successful venture -- and even though two years of projectionist/management experience doesn't amount to much, I at least have some working knowledge within the industry. Perhaps there is some sort of investment firm that can help out someone in a situation such as mine?

[This message has been edited by RoBeRTFoSHiZZLE (edited May 28, 2004).]
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 03:25 #8239

  • outaframe
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Two years actual experience in the business is a lot more than most newbies bring to the table when they show up around here, and is a definite plus for you... The problem is that you have not lived and worked long enough yet to have accumulated any really sizeable assets, and that's the first thing any lending institution is going to ask about... You will be essentially asking that someone loan you money on a "maybe," and not just for the real estate itself, but also for operating capital which you MUST have before you can open the doors... The real estate loan would be against a tangible asset, and even that loan will not be 100% of the selling price, so you would need to show how and where your end is coming from... The operating capital is something they will expect you to provide IN ADDITION to some part of the purchase price, so you need X amount of money to invest before you can request your loan... Since you don't have that amount in hand, you are going to need an "angel" of some sort to help with your end... In your circumstance it's most likely that would have to come from someone in your family... Even meeting these criteria does NOT mean that the lending institution will be willing to make your real estate loan... Lenders are quite skittish about making loans for this type of business: the failure rate for small businesses is nearly 50% and the movie business is considered even riskier...

I don't know if you could qualify for a government assisted loan, or perhaps some type of junior achievement loan... This is an area for you to look into as a possibility... Another is that the owner might sell this to you on a contract (since he seems well fixed)... IF he has been your boss for the two year's experience you mention, he may have come to regard you as someone he is willing to take a chance on... Still, you will need to put something down, and have operating capital, and it looks like that will have to come from family... Sorry, but this is the way of the business world: money talks, and hot air walks...
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 03:54 #8240

My experience came at a larger theater, which is a mixed blessing of sorts. I don't know the man personally, so I'd imagine a contract with him would be out of the question. But I gained a lot more experience where I was at than I would at this particular theater, so I guess that's a plus. I did figure in operating capital, and I think maybe I could come up with that depending on what that would be. Considering that the theater is operating now and isn't in any immediate disrepair, what would be a rough estimate of the operating capital?
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 10:06 #8241

  • rodeojack
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I'm with the rest of the group here. Good for you for even getting to this point. We bought our first theatre in much the same way. It was largely a matter of luck for us; the owner was very motivated to move-on to other pursuits, his successors were willing to carry the contract, the price was right, we had the talents between us to do just about EVERYTHING here, and we dropped in at just the right time. It was definitely NOT because we had a lot of money in our pockets or the ability to swing a loan... no bank in their right mind would touch a drive-in back then.

I'm sure other questions will come up here. Based on what you've told us, the asking price for a triplex with competitive potential seems awefully low. If you're forced to stay sub-run behind whatever's in the town 15 miles away, you've got some built-in problems. On the other hand, I've seen clearances broken as close as 7 miles, so it can be done.

Do you have any feeling for the current owner's motivation... other than that he's getting old? If he's been looking for a buyer for a while, and there hasn't been much interest in the property, that could partly explain the price. In many parts of the country... certainly in mine, $135,000 might put you into a small starter home... maybe. On the other hand, dollar houses are becoming more scarce than drive-in theatres. It worries me that he's using this as a business model to attract a buyer. If the theatre could compete as a first-run operation, why isn't he doing it now?

Oh... just as a matter of thought... mixing tiers... and possibly the admission prices is a tough sell in one property. If you depend on the first-run business to bring in the crowds, you might find that many of them will figure out that you'll be dropping the film into the sub-run auditoriums in a week or two... with resultant price levels. THAT will also be a problem with the film companies, because they consider additional weeks on your booking to be hold-overs. It will take some talking to get them to agree to price changes on a film that's continuously booked in one property. Except for many years ago at our drive-in, I haven't seen that done, though others here might have accomplished it. Your contract will say that you have unilateral authority to charge whatever you want (over certain per-capitas for first-run product)... but I think they'll look closely at you if you change price levels on them mid-stream.

Don't forget that, if you manage to swing this deal with every resource you can possibly find, you'll then have to figure out how to make any improvements you feel the business needs. If you can't do that, you have to decide if the place is good enough to run "as it is" until you either pay it off or build up some capital, equity, maturity or confidence with a local banker! You have a lot of enthusiasm now... but that will drain off if you find yourself a slave to your business. Make sure there's enough activity there that you can make yourself some money and take a day off now and then. It'll get old real fast, if you find you have to move into the furnace room in order to keep the doors open.


In any case, as others have noted here, it says a lot about you, that you're giving the idea this much consideration. Keep us up to date on your progress!

[This message has been edited by rodeojack (edited May 28, 2004).]
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 10:10 #8242

  • BurneyFalls
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I would contact the owner, introduce yourself and tell him your plans for the theatre. Once he sees how serious you are and how mature you seem to be, maybe the two of you can come to some sort of owner financing deal. That is how I bought my theatre.
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 10:53 #8243

  • mosquito
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RoBeRTFoSHiZZLE -- what state are you in? I realize you probably don't want to give out any major location details on the board, but I have been looking for an opportunity like this in/near Minnesota. Would it happen to be anywhere near me? If so, we should get in touch.
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 14:51 #8244

  • criterion
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Robert FoShizzle (nice name),

I'm 24 years old and my wife and I find ourselves in the exact same spot as you. We're currently in the final stages of polishing off our business plan to start a small, twin art-house in a moderately sized town in the Midwest.

Like you, my wife and I have both worked in a multiplex theater off and on for the past 5 years. We've been responsible for everything from box, concession, floor, projection... all the usual stuff. We have a good grasp on how things get done, but very little experience on how to run the show. Your best bet will be allying yourself with an established entrepreneur or former theater owner. Would the gentleman who currently owns the theater consider attaching himself to your project as an advisor? That could help give you some ammunition for securing financing.

If you're able to acquire a three screen theater with all the fixtures intact and in fine working order, for the price you mentioned... I can only envy you from afar. Don't forget, you will need a stellar business plan REGARDLESS of how you plan on getting your financing. A solid business plan will help you stay grounded and on track. Most banks or other lending institutions require 15% to 20% injected capital before they'll even consider speaking with you in regards to a small business loan. Therefore, if you're looking for $200K, you're going to need to scrape together $40,000 on your own. Family would be the first place to look, then friends, then angel investors, and finally a bank.

SBA is a hard sell these days, despite whatever initiatives the president claims to be making to support small businesses. Some towns have district improvement alliances that might be able to loan you some capital at a very attractive rate. Our town offers $75,000 at 6% if we choose to renovate a building in the downtown district.

I'm babbling now. Keep at it. This forum is an invaluable source for information, as is Film-Tech.com... I'm also keeping a blog to chronicle our theater's progress from idea to reality, so if you're interested I'd be happy to give you the address so you can read along.

Good luck!

[This message has been edited by criterion (edited May 28, 2004).]
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Re: 18-year-old wishing to buy local movie theater -- possible? 28 May 2004 15:05 #8245

  • Larry Thomas
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Hey, Robert:

I'm one of the "old guys" on the board. I've been interested in this biz since I was a real little-bitty kid. Was running projectors at 12; booking at 16; etc., etc. I won't bore you with the details.

All I can say is: if you have a dream and a vision, and the ability to pull it off...go for it. As much as I whine and complain about how miserable and corporate this biz has become, I can't imagine doing anything else.

Except, of course, if I could be a retired millionaire with my own private island. But that's another story.

Go for it, Robert. ESPECIALLY while you're young.
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Re: 18-year-old wishing to buy local movie theater -- possible? 29 May 2004 00:21 #8246

  • RoxyVaudeville
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Robert:

I'm wondering from what source you have gotten your information about the theatres availability and price. It seems that you may have already talked to the owner. If you did, what feeling did you get from him as to his urgency for selling?

I agree with Burney, that if you have not already done so, you should talk to the owner about your interest and ask if there is a way that he could help you achieve your goal to own the theatre. Maybe you could work for him for awhile so that he can become aquainted with your abilities and motivation. Maybe he would lease you the theatre with an option to buy, possibly even crediting a portion of the monthly rental towards the purchase price. Maybe, just maybe, he would hold the mortgage himself where he could profit from both the principal and the interest.

I was 19 when I opened my first theatre which I leased with no upfront money at all, but then that was 36 years ago. I know things have changed, but it can still happen if you meet the right person. You'll never know if you don't ask. My young assn't manager will hopefully be buying my theatre from me eventually. He won't need a penny as I'll hold the mortgage. He'll just start paying monthly payments just like he was paying rent and eventually it will be his. His patrons will buy it for him just as mine did the same for me. I've had 18 theatres over the years and have yet to put out 1 cent of my own money to aquire any of them.

As far as a booking policy goes, I wouldn't mix runs. That doesn't work very well for several reasons. Either be first run or subrun, but not both.

Reading your posts brings back many wonderful memories of my early years in this business. I wish you the best of luck and success. Even if it shouldn't happen at this location, don't give up. I can tell that you have the determination and drive to make it happen somewhere, and with perseverance you WILL make it happen.
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Re: 18-year-old wishing to buy local movie theater -- possible? 29 May 2004 11:31 #8247

  • Mike
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I would consider getting a "buyers broker" involved. You need expert advice even if you are going to lease or buy it on a contract. You should also get a relationship immediately with a good book keeper and accountant or you will screw yourself up. Don't try to be Mr. Office Expert at first! Also think about SCORE (retired execs) and keep reading and talking to people.

Best/ Mike

Michael Hurley
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Michael Hurley
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Re: 18-year-old wishing to buy local movie theater -- possible? 30 May 2004 02:36 #8248

Well, I should note that it's still primarily a first-run theater. This week, they're playing Raising Helen, Shrek 2, and Van Helsing. They opened Shrek 2 on its opening day and I'm pretty sure they've had Van Helsing since it opened as well.
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Re: 18-year-old wishing to buy local movie theater -- possible? 30 May 2004 13:28 #8249

  • rodeojack
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Well, then I'm confused.

Are you saying that this guy is playing first-run pictures for a dollar a person? Your first post would tend to indicate this.

I don't think the studios would allow that. Antitrust laws give the exhibitor the right to set his own prices... but the studios write a minimum "per capita" rental into their master licenses. He can charge a buck if he wants to, but he's contractually bound to pay a lot more than that.

What am I missing here???
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