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TOPIC: Normal markups and concession per capita

Normal markups and concession per capita 11 Apr 2010 14:15 #33731

  • Magic
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Hi there,

I manage a small (65-seats) single-screen arthouse in a small town in California. I 'inherited' the concession stand items and prices when I took over.

I was wondering what criteria people use to decide how much to markup an item? Double the cost to us? More? Does it depend on the item (higher markup for popcorn vs candy, etc)?

We sell organic popcorn cooked in canola oil (non-GMO certified, and with real butter topping) and only non-high fructose corn syrup drinks so our cost for these items is probably higher than traditional theaters with regular popcorn and fountain drinks.

Also, I see numbers that say a concessions per capita of $2.15 is ok, $3.00 is great....but, I am wondering if those numbers are still accurate?

Any thoughts on these topics would be greatly appreciated! I am new here, btw!

~Celine
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Re:Normal markups and concession per capita 13 Apr 2010 17:37 #33749

  • BWT
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Most of the major publicly traded theater operators earn between ~$2.50-$3.50 per cap on concession revenues. When I look at revenue potentials for a theatre project, I like to use sizable discounts in the beginning on my assumptions so that any upside in concession per cap spending is a benefit to the bottom line.

With respect to marking up your concessions, I'm sure you will get as many different answers as there are participants in this forum. I like to work backwards from a target gross margin to get derive pricing. I also have to factor in the wealth of the local population...I can charge $6.00 for a medium popcorn in a wealthy metro suburb (pop 90,000) while I probably can't get away with that in Checotah, OK (pop: 7,000).

Since you are using all natural ingredients, then your concession COGS is probably going to run higher than folks who use the industrial concession stuff, but I'd probably shoot for a gross margin of at least 70% if I were in your shoes. Since you are going to drive a big chunk of your profitability from concessions revenues (since ticket gross margins are normally 50% max), I would try to work pricing back from there as opposed to trying to guesstimate pricing from the top down.

As point of reference, the publicly traded theater operators I mentioned above normally run their concession COGS somewhere in the 11%-20% range.
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Re:Normal markups and concession per capita 14 Apr 2010 11:43 #33752

  • lionheart
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Well, I feel like I'm being drawn into this thread. I wondered why my ears were burning. I guess it's because BWT mentioned Checotah, OK. That is the location of my theater, the Gentry Cinema, although it's closed and for sale. (See GentryCinema.com for details.)

First, I'm not sure where you are getting your population data, BWT. Perhaps in some certain mile radius around the town? Checotah has a little less than 3,500 people within the city limits, but most people live out of town. Sperling's uses 2009 data (I think) and shows there are over 12,500 people in zip code 74426. While pretty much every reference shows McIntosh County to have a little under 20,000 residents, as of the year 2000 census. So, how many people are in my market area? I count the 20,000 and leave it at that since I am the nearest theater for almost all residents of the county.

Now, how does that relate to how I priced my concessions? Well, it is true that Checotah is not as affluent as the wealthy metro suburb of 90,000. So, I priced many of my concessions based on what I thought the market would bear, and also on what my competitors 22 and 37 miles away were charging. And, I also considered a basic restaurant concept in my pricing strategy, and that is that COGS (cost of goods sold) should be held down to 30%. I normally only used the 30% figure as a 2nd check to see if I were charging enough to earn a decent margin. If not, then I would have to raise the price or discontinue the item.

It certainly does depend on the item when deciding how much to mark it up. Of course popcorn is marked up far beyond most other items. This is because people accept that it will cost several dollars and not just the small change a 30% COGS figure would dictate. One competitor had a $1 small popcorn, and our small bag seemed pretty small to me. The banks give that size away for free in Checotah. Therefore, I matched the competitors price and made it $1. I opted not to offer a medium size, although it could be argued that was a mistake, but it kept my paper goods cost down not to have to stock another size. I think it worked out about the same since some people would upsize if there were no medium and some would go down. Usually the free refill on large swayed a lot of people to go up, especially when it was for more than one person. Instead of a medium, I offered a large (85 oz.) bucket for $5. And, oh by the way, if anyone asked, the bucket held exactly 5 of the small bags, so it was a fair price based on volume.

On drinks, I had small (16 oz) for $1.50, medium (24 oz) for $2.50, and large (32 oz) for $3.00. Note medium isn't really fairly priced based on volume, but I still sold a lot of mediums just because that is what people tend to order when they are not sure what size they want. That is called "central tendancy" and it is something I learned in a statistics class somewhere. People usually choose an option in the middle when being surveyed, so I figured it would apply to concessions too. Seems to work. When somebody ordered a medium my margin was actually higher per volume of drink because of this. Anyway, the large is priced only a small amount above the medium to get people to upsize. Many fast food places use a similar strategy I think. Soda COGS is certainly well below 30% as well.

Now, candy is difficult to price at 30% COGS. You will end up with old candy you have to throw out and some unhappy customers if you try to price it that way. I charged $1 for all my candy. I didn't stock traditional theater candies or theater sizes, just the most popular regular sized candy bars, M&Ms, and Skittles. Some people asked for other things, but again I kept inventory costs down by offering fewer products. Most people simply choose from what you have if they want candy anyway. They don't really care that you don't have a specialty candy when they can get a more common item for $1. I usually paid 55 to 60 cents per candy bar, so the margin was reasonable. Candy is normally a small seller compared to popcorn and soda anyway. It is stocked as a convenience to the customer, not as a big money maker, so that is why I did what I did.

When I priced other items like hot dogs, I placed more emphasis on the 30% rule. That brought my price up to $1.50 for a hot dog and $2.00 for a hot link on a bun. We also sold other hot foods, but nothing above $2.50. I kept none of these hot food items hot. We cooked to order with special equipment. No roller grills or the like in our place. That eliminated a lot of spoilage.

My overall percap averaged around $2.50, so I wasn't far behind those national chains BWT mentioned. Keeping prices low keeps customers happier, and, in my thinking, coming back more often. That's how I set my prices in Checotah, OK. Does that apply in small town California? You decide.
Last Edit: 14 Apr 2010 12:57 by lionheart.
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Re: Normal markups and concession per capita 24 Feb 2011 00:42 #35379

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how is your concession stand going Celine?
Michael Hurley
Impresario
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Re: Normal markups and concession per capita 03 Mar 2011 18:58 #35478

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I think I missed Lionhearts reply before. I would disagree with the theatre candy. I sell normal size items from an old vending machine for around $1. I then sell the theatre size candy from the concession. I buy the smaller sizes at Sams. I pay only a little more per item for the theatre size but charge $2 to $3 for the theatre size boxes.

So I would always stock the bigger sizes.
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Re: Normal markups and concession per capita 09 Mar 2012 05:22 #38010

  • HarveyHG
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What most people don't know is that theaters have to have high prices on concessions. That is where theaters obtain the most earnings and otherwise, ticket prices would be through the roof and nobody would go to the movies. You may read further: Good reason exists for movie theater concession prices
Last Edit: 09 Mar 2012 05:24 by HarveyHG.
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Re: Normal markups and concession per capita 09 Mar 2012 17:42 #38014

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Harvey,

Absolute bs. The lie that has been allowed to perpetuate is that we (the exhibitors) make no money on the ticket sales. 90% to the studios is often quoted on the Internet.

The truth is that we pay on average 55% to the studios. So if your average ticket is $7 (below nat. Ave) the exhibitor keeps $3.15. average $4 per person in concession sales with a high gross margin of 85%, theater keeps $3.40. Pretty damn close and far from the narrative that goes on. Of course 85% is pretty high. That would be the theaters charging $5 for a 32 oz soda.
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Re: Normal markups and concession per capita 09 Mar 2012 20:54 #38017

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rufusjack wrote:
Harvey,

Absolute bs. The lie that has been allowed to perpetuate is that we (the exhibitors) make no money on the ticket sales. 90% to the studios is often quoted on the Internet.

The truth is that we pay on average 55% to the studios.

Hey Jack: Back in '06 when I managed a 248 seat single screener sub-run and made more than $1,000 for the week on a Disney film Disney charged me 90%.
Bob Allen
The Old Showman
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Re: Normal markups and concession per capita 09 Mar 2012 21:29 #38018

  • BusyBee
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Rufusjack,

This is seriously getting old. Yes, you are absolutely right that the 90% figure is mostly myth. The most I have ever paid on a film rental is 70%. Last year we paid 62% of our ticket gross for our film rental and shipping costs. But for chrissakes, do you not have a mortgage on your theater? Do you not have payroll? Are you tax exempt? Have you purchased your digital equipment yet? There is so much more involved in the cost of doing business than film rental. The other 39% does not go straight to my pocket. We're a busy little theater, our attendance and concessions sales are solid, but we're not rolling in cash! The fact is that a movie theater is an expensive business to run. Maybe not for older owners who have their properties paid off, but most don't. Especially now that we all need to invest in digital.

I just don't understand what you're trying to prove.
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Re: Normal markups and concession per capita 09 Mar 2012 21:57 #38019

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revrobor wrote:
rufusjack wrote:
Harvey,

Absolute bs. The lie that has been allowed to perpetuate is that we (the exhibitors) make no money on the ticket sales. 90% to the studios is often quoted on the Internet.

The truth is that we pay on average 55% to the studios.

Hey Jack: Back in '06 when I managed a 248 seat single screener sub-run and made more than $1,000 for the week on a Disney film Disney charged me 90%.

Bob,
Where your ticket prices $1? Disney has always said that they are not in the cheap-free movie exhibition business. Which is why you will not see Disney movies in any summer kid's movie promotion. What was your total film rental cost (as a %) for a whole year?

Busybee,

I believe in honest dialogue. To allow a significant lie/misrepresentation/or whatever when you want to call it is just not right. You do not have tell people what you pay or make but you very well should be honest with them when it comes up.

You cannot very well differentiate the other costs in running a business. Do not have a concession stand? You need very little labor, lobby space, trash pickup, etc. If you paid 62%, you need to hire Slap as your booker because you are paying way too much. My shipping cost was less then 2% and I rank in the 3100-3300.

I agree that this is no longer a average man's business. You need some access to money. I also agree that very few are out there getting rich. But just stop with that 90% or we make no money. You pay the most that I have heard of and you still pay a third less than the lie.
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Re: Normal markups and concession per capita 10 Mar 2012 19:46 #38022

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Why you should care:

Let me first say that I believe 90% of the forum is not the problem. I doubt many of you are charging $7 for a 32 oz. soda.

Many theater goers have changed their behavior to the point where they just do not buy any concessions. Many also sneak in their own snacks. They then keep their same behavior when they come to our theaters. Now maybe some of you have absolutely no competition for 20 years and charge reasonable concession rates and do not the before mentioned problems. I could see why you would not care.
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Re: Normal markups and concession per capita 13 Mar 2012 12:16 #38039

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My film rental runs in the low 50% as an average. However, some new tentpole pictures could cost up to 70%. The week(s) that movies are at their higher percentage are often the most attended week(s), i.e. the least profitable due to film costs.
The higher prices at theatre snack bars makes sense if you want to stay viable.
Have combos or use Facebook coupons to lower prices when it makes sense.
Don't put yourself out of business pricing yourself too cheap.
AllenD
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Re: Normal markups and concession per capita 19 Mar 2012 20:19 #38098

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revrobor wrote:
rufusjack wrote:
Harvey,

Absolute bs. The lie that has been allowed to perpetuate is that we (the exhibitors) make no money on the ticket sales. 90% to the studios is often quoted on the Internet.

The truth is that we pay on average 55% to the studios.

Hey Jack: Back in '06 when I managed a 248 seat single screener sub-run and made more than $1,000 for the week on a Disney film Disney charged me 90%.

This is just another reason not to listen to revrobor.
He obviously didn't know what he was doing.

Elin
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Re: Normal markups and concession per capita 19 Mar 2012 20:31 #38099

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Elin TW wrote:

This is just another reason not to listen to revrobor.
He obviously didn't know what he was doing.

Elin

What's your problem Elin? I've owned three single screeners and managed multiplexes for a total of 25 years in the business. About the only thing I don't know a lot about in the exhibition field is digital.
Bob Allen
The Old Showman
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Re: Normal markups and concession per capita 19 Mar 2012 20:37 #38100

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revrobor wrote:
Elin TW wrote:

This is just another reason not to listen to revrobor.
He obviously didn't know what he was doing.

Elin

What's your problem Elin? I've owned three single screeners and managed multiplexes for a total of 25 years in the business. About the only thing I don't know a lot about in the exhibition field is digital.

Digital. That's my problem, Bob.
You spout off about digital and tell people not to convert (oh...wait...that there isn't a rush) when that is just, quite frankly, sh*tty advice. Several on this board have told you to be quiet about digital because it's moved fast and your 5 years out of the industry are like a lifetime. Yet, you don't listen. You continue to go on and on and claim it's just "opinion". Yet, it's a terrible opinion. People look to this board for real advice and people in the industry know that the advice you are giving is awful. It's convert or be left behind paying for the cost of your print plus film rental. And, in reality, film may not be available after this year.

So, this comment about paying 90% film rental just adds further credence to my impression of you. In 18 years in exhibition, I've never ever never never ever never paid 90% film rental on any title. If you did, it's just another example that feeds my impression.

Nothing personal, but I wish you'd stop talking as an authority when you aren't.

Elin
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