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TOPIC: New theatre in college town

New theatre in college town 06 Jun 2004 23:48 #8391

Hello everyone, my name is Joey. I'm 21 years old and I live in Orlando, FL and will be looking into reopening an old first run theatre as a second run. Now before you dismiss this as a dream that will never be reached, please read this:

In high school I wrote a business plan to reopen a 2 screen movie theatre in my small hometown. It won 1st prize in my district in the Future Business Leaders of America (FBLA) competetion, and then won 6th place in the state competition in Orlando, FL. Keep in mind I wrote this plan in under one day by myself, when the winners of the competition had teams of five people and months to work on it. 6th place out of over 75 school districts.

My management team for the theatre I wish to open includes myself, with the business plan and supervisionary/cash handling experience in a bank, two friends who were assistant managers for over 4+ years at movie theatres, a supervisor at a movie theatre, and my brother, the top ad sales/phone marketing pro in Central Florida.

Across from the University of Central Florida is an old seven screen theatre that went out of business after a Regal 20 screen theatre opened up under five miles south and another Regal 22 screen opened up under five miles north.

I want to make this old theatre in a strip mall into a second run theatre.

The closest second run theatre is near downtown, about 15 miles away. Orlando is populated enough that this will barely be competition, since the majority of our customers will be from the university.

We have the manpower and will to make this dream become a reality, all we need now is the money, and we dont exactly know how much.

I will be contacting the leasing agent of the strip mall soon for a price, but could anyone estimate a monthly lease price for me? It's 7 screens, not stadium seating.

How much would utilities be per month for a seven screen theatre? I would assume this would be the same at almost any theatre of its size in the country, not counting the varying energy costs. Orlando also has one of the lowest energy costs in the state.

Water? Wholesale popcorn/candy/soda syrup? 4 Cash registers and 7 projectors?

We are looking to receive a business loan for this venture, and the five of us are looking forward to this more than anything else we have done.

Any help would be greatly, greatly appreciated from anyone who has experience in the business. I look forward to hearing your thoughts/criticisms/suggestions. Thank you!

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Re: New theatre in college town 07 Jun 2004 02:12 #8392

  • rodeojack
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Hi, Joey.

Whooo boy... what an opportunity for a brain-dump. Well, here goes.

I'm wondering if I may have seen that theatre. We travel to Kissimmee each February for a drive-in owners' convention. I saw a closed 'plex in a strip mall... maybe the one you're thinking about?

As a way to get more dialog going here, I'll toss some questions your way, as well as a laundry list that I'd be thinking about, were I in your shoes. Hopefully, others will add ideas that are important from their perspectives.

First, what's the deal with this theatre? How long has it been closed? More importantly... and maybe one of the most critical questions you need to know the answer to... WHY is it closed? If it was viable for the previous owner, why would they have shut it down, and why do you think you can make it work when they could not... or chose not to?

Is this place an old Cineplex Odeon outlet? If so, I think I know where it is. What condition is the rest of the strip mall in? Are the rest of the shops leased? What kinds of businesses are in there now?

We have an indoor theatre in a strip mall, and believe me... the business makeup of mall will have a huge effect over whether the theatre itself is worth having. Ideally, you want to see other businesses in the mall that compliment the theatre... businesses that attract the same kind of customer you'll be looking for as well. I have a tavern, a casino, a casual labor dispatch center, a bike shop, a liquor store, a laundromat and a pizza shop in my strip mall... all very divergent businesses that do not compliment each other at all... and it does make a difference. The people that attend our businesses are there only for that purpose, and will not be patonizing other businesses in the mall before, or after their experiences in our places. Effectively, we are individual operations that share a parking lot. Bottom line on this one... empty office space can be turned into almost anything. A big building with sloped floors is very difficult to turn into something other than a theatre. This can be made to work for you, but you have a challenge on your hands if the mall doesn't currently attract people that would be inclined to patronize a theatre to begin with. You'll be developing a client base from scratch.

Is the theatre equipped? Projectors? Sound systems? mono, stereo, SR, digital {not likely) amplifiers? Speakers? Screens? Seats? Lighting dimmers? If so, what condition are these items in? Can you get by with what's there and upgrade out of cash flow... or do you need to infuse capital to get this place up to some kind of reasonable state-of-the-art?

Occasionally, you'll trip over a theatre that's been largely abandoned intact. It's very time consuming to dismantle a theatre, and they frequently do not have equipment that's worth moving to another place... sometimes, but not often. IF there's anything left, expect the best parts to be gone. I had CP65 processors, projectors, lamphouses and platters in the place I opened... but the SR cards had been removed and there were other problems that had to be remedied. Granted, it was "strategically disabled", but it cost me less to bring the systems up to date than it would have to replace them altogether. I had current model lamphouses, but the reflectors were shot. The projectors were there, but it took a lot of parts & TLC to get the image settled down. The platters and rewind bench needed parts, and the makeup table had been taken out. The digital equipment had been removed, but the amplifiers and speakers were still there. So.... any equipment up there can potentially work for you... especially if you have a technically inclined person on your staff. If not, you might need to consider stripping the place and installing new or used packages... maybe on a lease, if the numbers add up.

Take a good look at the screens. Are they in decent shape as they are... or will you need to replace them soon? They're not that expensive. However, scaffolding and labor can easily add up to more than the cost of the screen itself.

Seats? Is the manufacturer still around? Can you get parts? Is the upholstery in reasonable shape, or will you need to fix cracks & cuts? Can you get this material, or will you need to get patterns made locally? Include this in your plan. Same goes for wall coverings, draperies and masking materials

Anything left of the concession area? Things like counter warmers & vendor-supplied equipment may still be there... possibly even usable. Vendors will provide equipment... like pop machines and POS displays. You will need to provide a suitable popcorn popper, butter dispensers and things like condiment and napkin equipment.

Don't forget POS sales equipment. You can go anywhere from "cigar-box" accounting to full-fledged computerized POS systems, with accounting controls and reporting flexibilities commensurate with what you decide on. I'd suggest you look into systems like the RTS system or maybe Sensible Cinema (I'm a big fan of RTS). This will involve capital expenses for registers or computers, monitors, printers, credit card wedges, cash drawers, possibly fingerprint readers for employee login. In any case, don't forget to include this in your initial plan.

You'll likely want to consider a burglar alarm system (including monitoring). Fire alarms may be part of the building. If not, who will install this stuff, and at whos cost? The fire department will want this set up to their satisfaction before you'll be allowed to open.

Remember telephone, fax & movie-information lines. Will you need to arrange pay phones? Some phone companies are becomming very picky about where they'll place a new phone, because more people have their own cell phones nowadays, and the traditional payphones aren't making the money they used to. If you decide you need one, consider whether having your own might be a good idea. Some chains go so far as to operate their own payphone divisions. At least, consider this.

How about video games? If you have the room for them, there's additional income potential there. Make sure any games you place don't eliminate space you need for pre-show customer holding. They will also generate and attract a certain amount of noise. Can you place them where they won't distract people in the auditoriums?

Look at things like carpeting, doors, panic hardware, emergency lighting, restroom fixtures, stall walls, outside lighting, signs, etc. Much of this will be considered part of the leased property. If any of this needs updating (remember that the fire department will likely inspect the emergency hardware, either before you open or soon after) get as much of it taken care of before it becomes your responsibility.

Have the HVAC systems evaluated by competent technicians. Heating and air conditioning equipment starts wearing out after 15 years or so, and maintenance can be a real expense. Pay special attention to the economizer units. That stuff is all mechanical, and they'll be among the first components to go out on you. You need that stuff, because it meters the fresh air into your auditoriums AND acts as an initial cooling stage before electricity-hogging refrigeration systems kick in. This stuff can cost upwards of $15,000 PER UNIT to replace... and if one is bad, chances are they all need to be serviced or replaced. The thermostats should be electronic, whether the stats are in the rooms or are remoted to a central part of the building. Mercury tube stats have a 5-7 degree differential, which will generate customer complaints, where the electronic stuff will maintain your rooms within 1-2 degrees. This is owner-stuff. Don't get locked into keeping junk going just because you really want to get into the theatre business.

If you get that far, pay attention to areas in your lease, such as whether the landlord claims ownership over any present contents. Sometimes, the lease is for the square footage only, and the landlord could care less what the former tenant left behind. With this sort of situation, you can upgrade what parts you feel are suitable for your new operation, and discard what you think is past considering. However, if the lease does include contents, make sure you have a detailed inventory, including enough description to identify your stuff from theirs... make, model, serial number, etc. In this case, if you dispose of anything on the list, you may be required to leave behind a replacement in at least as good a condition as what you tossed.

Leases almost always are "triple net" affairs, including such things as the landlord's insurance, property taxes and grounds maintenance... all pro-rated according to the square footage of your theatre. As the theatre is likely the largest business in the strip mall, with the lowest income to hours open/square footage ratios the triple-net charges can be substantial. This figure is IN ADDITION to whatever they want for rent. Plan to ask them what that charge is. If they're legit, they should have no problem with you asking them for verification of their taxes, insurance and expenses... and how that is applied to the theatre area specifically. Make sure you have language in the lease that allows you to verify any triple-net increases.

As for whether the idea is viable in the first place:

Figure up your lease, triple-net charges, taxes, insurance, payroll, utilities, administration, accounting and repair and maintenance costs, then double that figure. That will give you a very rough idea what you need to make on average in order to pay for your film and concession "costs of income" and take care of the rest. Your personal efficiencies and booking practices will likely have an effect on this number, one way or the other, but it's a place to start. Also remember that this business runs in cycles. June-August, Thanksgiving and Christmas are major release times for the studios. There are some serious dead spots inbetween, where everything seems to be junk and nobody's interested. You'll be running behind those cycles, being sub-run, and you'll have to plan for the good times (if any) and bad.

The first-run multiplexes in your area will have a huge influence over when you get film for your theatre. If a first-run house is running Harry Potter at first-run prices, the studios won't give you the same show so you can sell it at sub-run rates. This means it's very possible that you won't get film titles until they're nearly tapped out in your market... possibly even very close to their video/dvd release dates. Considering how often new releases are sent into the market, a 20-plex can hold onto a title for a long time. You may be scraping the bottom of the barrel by the time the first-run house lets a film go. Will sub-run prices be enough for you to pay the bills AND yourself?

Personally, my speculation is that the area has too many first-run screens as it is. That alone is enough to keep film out of your place until it has whiskers.

If everything else adds up... get language included in your lease that allows you an out, given an appropriate notice... 90 days, maybe. This will give you a way out if market conditions develop that make it impossible for you to pay the rent. The margins are likely to be thin at best, and it won't take much to make a good thing bad.

Anyhow... some things to think about. You might have found a jewel in the haystack... but it's best to be sure before you commit to anything.

Good luck! Let us know how it works out!

[This message has been edited by rodeojack (edited June 07, 2004).]
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Re: New theatre in college town 07 Jun 2004 03:54 #8393

Rodeo Jack
What a GREAT reply to a newbie.It should be included in all advice we give to people looking to go into this crazy business!
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Re: New theatre in college town 07 Jun 2004 10:31 #8394

Reply to RodeoJack:

Thank you very much for your reply, here are some answers to your questions:

It was a first run theatre, (independent at that...) with only seven screens. Over the past 6 years, two big company multiplexes opened up within 5 miles on either side of it. Stadium seating, more screens, malls, etc....It was bound to happen if the independent theatre management didnt do anything about it, and they didnt. That was about 3 years ago that they closed.

That is why I would make it into a second run theatre. Keep in mind this theatre is in walking distance from UCF, with over 50,000 students. Also within 5 miles is Seminole Community College and Valencia Community College, with a combined total of about 80,000 more students.

This strip mall is directly across from the main entrance to UCF. I would say about 1000 from a kid's dorm to the front door of the theatre. There are a few nightclubs or bars in the plaza, an independently student owned hippie pizza place, a UCF student book store, an apartment finder place for students, etc...All shops are mostly frequented by the students, who would be our customer base as well. The surrounding area is also heavily populated by regular families too, and theyre the working middle class, nothing fancy, no I think a cheap theatre will appeal to them as well. Keep in mind Orlando's population is over 3 million including all the students, and that doesnt count Seminole county either. (UCF and the theatre are right on the border).

I do not know about equipment, I will be contacting the leasing office soon to find out about that. If not though, how much do you think 7 projectors and a handfull of registers will be? I am almost positive it is still equipped with seats, screens, and sound. Hopefully the projectors are there. We would definately be able to make do with whats there, if it is there. Upgrades will definately happen too. But in the event nothing is there, could you please estimate what these pieces of equipment would run?

I honestly do no think this theatre was strategically disabled. I have heard of bigger multiplexes doing that (in this area too...), but this was a very independent theatre.

As far as the equipment goes, I have two friends who were both projectionists for long periods of time and know exactly what would be needed if certain equipment were not there.

I have thought about the seats. I heard stories of big companies taking out every other seat when they leave, rendering it almost impossible for a new theatre to use the remainders. Although if that were the case I would just take out all the seats from the back and move them to the front and get new seats for that area, maybe others havent thought of doing that. Im going to take a tour of the theatre and make notes of everything I can think of that would need servicing/replacment/repair.

Unfortunately no concession equipment is visible from the door. It could be in the back rooms. I have found places that have reasonably priced equipment though, and 50 lb bags of popcorn for $8 (in bulk). I will check again for the soda fountains, but i dont think i saw them. A friend of mine is a concession manager and knows how to run/fix everything in concession. What a helpful group of friends!

I will definately look into that company you mentioned for credit card processing and registers. I have already factored in that equipment, and was going to ask around for recommendations on equipment. Thanks!

Burlar alarm system still in tact, and seemed to be running when i looked in the window. Carpet looks perfect. Odd, but hopefully the rest besides the lobby is too. The poster frames outside the theatre are still in tact and could be reused! I thought that was amazing, as i know these can run hundreds of dollars.

Thanks for the tip on the a/c. Ill make a note to ask the leasing agent about that. Also about the claiming of ownership of equipment. Note taken.

I have thought about the busy seasons of new releases, and to imitate those in a second run theatre I was planning on getting prints of well known movies that college students take a liking to. Also, if I were open now, I would try to get prints for harry potter one and two, as well as shrek one and spiderman one. Being a cheap theatre, with proper promotion on campus I think this will attract more students and get the word out that the theatre is back open.

I think we can make enough profit off ad sales (to be shown before films, ads in the lobby, etc) and concession so that the small percentage of profit from cheap ticket sales we make that doesnt have to be sent to the distributor will not be a problem. All the numbers have not been figured out yet, and I will make sure I take everything into account in the business plan to see if this theatre is even possible.

Thanks again for all the tips! It is greatly appreciated!
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Re: New theatre in college town 07 Jun 2004 18:52 #8395

  • Mike
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I compliment you both on your questions and your answers.

Regarding "business plans" and plans in general; Eisenhower said: "Before battle there is nothing but plans, plans, plans and once the battle begins the plans are useless." or some such.

In any event: go for it/ with caution.

Michael Hurley
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Re: New theatre in college town 07 Jun 2004 19:53 #8396

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Our booker friends on this forum could probably tell you for sure, but I don't think that Spiderman, Shrek, Harry Potter & The Sorcer's Stone or Harry Potter & The Chamber of Secrets are currently available to you. They are not in current theatrical run right now and would be difficult to book and/or pay shipping on. Having run a second run theater I can tell you that booking them would not necesarily be a bright idea anyway. People tend to be suspicious that you are trying to put something over on them by running the old product while the new one is in release. Now that is not the case if the distributor is doing the special release of all previous prints as a package deal and promoting it as such. Unfortunately, they typically only make the deal available in the top 50 - 100 markets nationally and then only to the highest grossing theater in each market. Not your scenario.

As a second run, at the current time you could be running the likes of: Cold Mountain, Hidalgo, Starsky & Hutch, The Prince & Me, Barbershop 2, 50 First Dates, LOTR 3, My Baby's Daddy, Secret Window, Taking Lives, Twisted & You Got Served while the first runs had the hot summer films. You would be waiting and counting the days until July 4th weekend in which case you might be able to get your hands on Van Helsing or Mean Girls. If you were charging a little more and trying to run just behind the first runs (aka moveover) you might be able to get Kill Bill v2 or 13 Going on 30 right now depending on which multiplex you would have to wait behind. Moveover has advantages in that the multiplexes will quit milking every last cent out of a print whenever distributors release a lot of hot film at the same time and you could get their prints at little earlier whereas true 2nd run will make you wait behind every first run theater in the nation.

I'm not convinced that college students are likely to wait for you to get the films that they want to see. You will also get less respect from them when they do attend your theater and may want to budget extra maintenance money to keep your theater in good condition. Families with kids are the staple income for 2nd run theaters because the cost difference means a lot more to them and they are more willing to wait to see a film. Many of them will have already seen the film once in the first runs but will see it again in your place over long boring holidays. Oftentimes, 2nd run theaters get film when it is 2 weeks from the video release date which is already being advertised. There is nothing more disheartening than hearing teens make comments like "Why should I pay to see it at your theater when I can watch it on video for free next week?"
Just comments for you consideration. You need to know why there are so few 2nd run theaters left.
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