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I am starting a three screen independent theatre that will show first and second run films. We want to have a "glorified" concessions stand serving more gourmet snacks and hot items, as well as beer and wine. I'm trying to determine the costs of food and beverages for my business plan. Is the 33% of sales rule a good one to follow? And is that just 33% of concession sales? This just seems high. Any advice would be appreciated. Thanks!

No matter what you add to the mix, popcorn and soda will rule the day. Make sure that whatever you add don't detract from popcorn and soda. Like don't offer peanuts and potato chips at 300% profit instead of popcorn at 1,000% profit.

25% cost of goods sold is a good target for other items other than popcorn and soda. Some things you will not be able to price that high, but that's a good rule of thumb.

We run about 16% food cost serving traditional theatre fare - popcorn, drinks, candy, nachos, hot dogs.

We are fairly aggressive about getting stuff to sell from the least expensive supplier. So we deal with a number of different paper goods, cup and candy sources. We also drive to Sams Club to pick up our bottled water rather than having it delivered by some other company at a higher price. Many of us independents do these sorts of things. We do it to counter the pricing advantage that the chains have by buying in large bulk quantities at contract prices. However, the other factor is the price that you sell your stuff for. Most of the chains charge their customers at the concession stand much more than we do for the same items. So if they buy them for less and sell them for more than we do their cost of goods sold as a percentage of sales will be much lower than ours. So you need to take the percentages mentioned here and consider them in your context with how much of a price mark up you can get from your customers and how low you can buy your inventory from your suppliers. We also consider that the napkins, straws, cups, lids, trays and paper towels used daily in the concession stand are part of the equation. Putting all these factors together we are running about 23% - 26% of concession sales for standard items such as popcorn, pop, candy, coffee, cappuccino, slushes. However, I know nothing about the profitability of beer or wine. From experience most of us know to go easy on the gourmet items. At least figure on a large allowance for waste/spoilage.

So is there anybody out there doing higher quality food items and making a good profit?

Our business model is based on a way to get people to buy food items that might cost the same as a large popcorn at the googleplexes but retain the same margin of profit for us. Is this a misconception? Example: We've thought about selling popcorn at a much reduced rate (yes, I know that's where all the profit comes from) but I could finance this project myself if I had $10,000 for everytime I heard someboday ask "Are you going to charge an arm and a leg for popcorn?" So my thinking is, set the popcorn price low, and that might sway them to say "Well, I could get popcorn for $2 or I could get that amazing black bean hummus and pita for $4" You might not get the same profit margin, but in my mind you come across that you are giving the customer more value than the googleplex. And that brings people back, right?

Or do you just do what everybody else is doing because it just flat out works?

[This message has been edited by showandtell (edited June 10, 2005).]

Haha - my crowd wouldn't even know how to prounouce "hummus" much less purchase any. Now, if they only had Schlitz available in kegs ... then I'd make a killing. Nachos anyone?

From many years in the food business and hearing the same from just about every theatre owner: DON'T EVER mess with your staple items. In this case, that's popcorn and soda. Sure, by all means, provide the high-end stuff, do a good job of it, promote it, and most importantly, DON'T carry so much that you're throwing away alot of spoilage. But the high-end is only really there to draw customers on a perception level. There are just certain economic drivers in any foodservice business (and the theatre is certainly a food business) that you need to generate the revenue to cover all the niceties and salaries. Most indies don't charge chain prices, but you need the high-profit/low-effort items to subsidise the high end stuff which often don't make a whole lot when you consider prep time and cost. Anecdotal customer comments like "you should charge less for popcorn" never paid a banker's note.

As I begin to talk to more people about this idea, it is becoming very clear that people will pay high prices for popcorn because it is apart of the experience. And I think that as this industry continues to change very dramatically in the coming years, it is very important to make sure the experience stays above what people can get at home. And people will pay for that experience.

If you charge a quarter or fifty cents less than the corporate multiplexes for popcorn and soft drinks you'll get all the perception of value you're looking for. If you feel you must, you can under-cut their price without slashing your margin.

Remember, you need to appeal to the masses. "Hummes" doesn't appeal to the masses. Popcorn, soda, and candy will ALWAYS be the staples. Always. Charge slightly less than your competitors and your customers will notice this. Serve a good quality product. If you really feel like adding other items, add things that people like and will buy frequently, keeping in mind that these are also low-waste items and highly profitable. You could add gourmet pretzels, Nachos and cheese, cotton candy, shaved ice, "specialty drinks", add a single pod coffee maker to make coffee on demand... Most of the other gourmet items are WASTE. You will throw away more "Hummes" than you sell...You need to keep in mind, the concession stand is WHERE YOU MAKE MONEY IN A THEATRE.

That's true. But you have to realize too that hummus is pretty darn cheap and you can make small batches fairly quickly... But I understand your point. (Other items on our menu would be low cost/high margin items as well)

And I'm strictly speaking to the independent/art/foreign crowd here. I realize that you can't sell hummus and beer and wine to 6-20 year olds. But at the same time you can't sell shaved ice and cotton candy to people that are coming to see Sideways, Enron, and Millions. Or can you?



[This message has been edited by showandtell (edited June 14, 2005).]

Even the vast majority of the arthouse crowd want traditional concession items when they come to the movies. For most of them is part of what the movie going experience is and that means popcorn and soda. Yes, there are the vocal few who want organic popcorn or healthy snacks, dairy free this and soy that. I've tried to accomodate them at a 5 screen arthouse and you know what, the stuff doesn't move and the margins are no where as good as you can get on popcorn and soda. Make good fresh popcorn every show and offer interesting stuff to put on it. As I tell all my kids, popcorn is what pays everybody.

Boy, is Rialto right about "good, fresh popcorn"! I can't tell you how many plexes I have been to that buy the prepacked, already popped corn that is dry, spongy and tasteless. Some people don't realize that just because popcorn can keep indifinitely, that donesn't mean that it will taste good indifinitely! The subtle taste of the corn and its oil is transitory; within an hour of being popped, most of the steam that heats and vitalizes the corn will have escaped, and the volitale oils that give it a taste will have evaporated with the heat (where do you think the smell of the popped corn in the air is coming from, but out of the corn?!!) If you want favorable patron reaction and returns for delicious corn, pop it lightly in coconut oil, and make more only when the previous SMALL batch has been sold. Don't worry that there won't always be enough. Sometimes telling people that the next batch is in the cooker now and their being able to smell it cooking, will do more to win their eager wait than any amount of stale corn available. If you are going to run a 'restaurant' then you had best run a good restaurant.

Points well taken.

We have three candy bars and three cafes in our three cinema complexes. Two sell alot of variety and one sells less variety because of the size of the kitchen. We have seperated the cafes from the candy bar. In that people wanting popcorn, coke go to the candy bar if they wanted hot dog, hot chips, hamburgers, salads, toasted sandwiches,nachos, great espresso coffee, milkshakes they go to the cafe. The cafes have one cook and two people serving coffee on a busy night and one cook and one person serving coffee on day. This is for a six plex complex and about average 8,000 people per week. For the candy bar we are getting on average about $2 per person and for that cafe $1 per person and it sits about 50 people. The problem with the cafe is the time to make coffees, hamburgers, milkshakes is alot more labour intensive than potato chips, popcorn, postmix etc with less margin but the cafe does add to the experience and social aspects of going to the movies and also adds as a waiting sit down area. We have wine and beer at one complex but it is not a big seller but it helps with group bookings and functions.