I don't understand why this is so hard to comprehend. I found where I posted this before and pasted it here so I wouldn't have to type it all again, and that was the 2nd time I had explained it as you will see.
It was under: HOUSE ALLOWANCE
I did this once before and would send you to that post to read...except for the fact that I can't find it. Therefore I will be happy to explain it again.
Every theatre is supposed to have an agreed upon house overhead. It should be what it cost you to run your theatre for a week NOT including film rental and concession supplies.
The stated purpose was that since the studio takes the major risk in fiancing and making the films, that once the theatre has hit the break even point that the studio should recieve the lions share of the revenues.(especially if it's an MGM picture...that's a joke son!)
If an accurate house expense is used then the theatre should be guaranteed a ten percent profit on all revenues above the breakeven point.
Film rental is usually determined on a "whichever is greater" method. The contract might say: 35% versus 90/10 over accepted house expense. If your agreed upon house overhead is $2000 it would appear on your contract or confirmation like this: 70% vs 90/10 over 2000 or 35% vs 90/10 over 2000.
If you are contracted to play a film for four weeks you would probably see: 70, 60, 50, 40% vs 90/10 over 2000. All additional weeks at 35% vs 90/10 over 2000. Whichever garners the higher amount of film rent is what the distributor will get.
Let's say you gross $5000 for the week, and your contract calls for 35% vs 90/10 over 2000. You would subtract your $2000 overhead from the $5000 Box office gross leaving you $3000. You would then take 90% of the remaining $3000 which would be $2700, which is actually 54% of the original $5000. Therefore the distributor will take that amount which would be considerable higher then the straight 35% which would only have been $1750.
Most distributors have a per seat figure that they will accept for newly constructed theatres, but older theatres are at the mercy of whatever you can negotiate. If you take over a theatre that was operated by a chain, you will inherit their house expense that will usually be higher then what it really is. If you take over from an independent it will most likely be lower then the real amount.
I hope this made it clear...if not let me know and I'll try again.
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