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That’s Entertainment

[ 0 ] Jan. 1, 2009 | SBO Editor

Austin-based Alamo Drafthouse Cinemas is expanding outside the state’s boundaries for the first time with an outpost in Winchester, Virginia – 75 miles west of Washington, D.C. in the Shenandoah Valley. Alamo currently has seven Texas locations: Austin (4), San Antonio, Houston and Katy. The four Austin theaters include the Alamo Village, South Lamar, Ritz and Lake Creek. Three of the seven locations are company-owned: Houston, Katy and Lake Creek in Austin.

Martin said Alamo expects to open an additional franchise location in 2008 in McAllen, Texas, this summer and a second venue in San Antonio in mid-2009.

John Martin, CEO of Alamo Drafthouse Cinemas, says, “We are excited to now offer the Alamo Drafthouse Cinema experience to the rest of the country.” Martin said, “After 11 years of multi-unit operations inside Texas, we are franchising numerous other locations outside the state, with our first being Virginia. I’ve personally come full-circle in the industry.”

John Martin has had a love affair with the movies for as long as he can remember – a passion so deep that it led him to not only conquer Hollywood but to become the president and CEO of Alamo Drafthouse Cinemas and spearhead the cinema-eatery’s ambitious expansion across the country.

After graduating from the University of Texas, Martin went west to Hollywood in 1986 with hopes of working in the production and development side of the movie industry. Martin got his start where many Hollywood careers have launched – in the mailroom – where he worked for Orion Pictures for $200 a week. Thankfully, luck was on his side: In 1988, a 22-week writers’ strike ensued and Martin was called on to fill in as a script reader for no additional pay. Readers are individuals hired by studios to read, summarize and assess the strengths and weaknesses of scripts.

He caught the attention of Orion co-founder Mike Medavoy – who himself had started in the Universal Studios mailroom in 1964 – and never looked back. Martin soon became responsible for finding new talent – whether writers, actors or directors – and helping take a film or television project from development into production. Martin also worked at Sony Pictures, Paramount Pictures and Jersey Films. At Orion, he worked in development on Dances with Wolves, the 1990 Academy Award-winning film starring Kevin Costner, as well as various films with directors Alan Parker, Jonathan Demme and Paul Verhoeven. At Jersey Films, he worked behind the scenes on such films as 8 Seconds and Reality Bites.

Martin ended up spending 11 years in Hollywood before returning to Texas to serve as Director of Broadband for frog design, inc., an international design and media company where he helped identify online entertainment opportunities for clients that included some of his former employers such as Sony Pictures. While living in Austin, Martin became an avid customer of the Alamo Drafthouse Cinemas, a unique combination of theater and restaurant. He approached the original founders about joining the concept as a franchisee. When they said they were no longer interested in expanding, they asked Martin if he wanted to purchase the entire company. He did: The sale included an existing location in Austin, with the founders becoming licensees of the others in town.

Within 18 months, there were three corporate locations and four licensed or franchised venues in four cities.

Alamo Drafthouse Cinemas is not only the nation’s oldest cinema-eatery concept that shows first-run films, but it is also the only franchised movie theater chain and the only franchise concept that offers the unique combination of theater and restaurant. The cinema-eatery concept is growing in popularity throughout the country. Some consider it the future of the movie industry and Alamo is well positioned to become the predominant brand because of its unique niche as the industry’s only franchised brand. While movie ticket sales were flat in 2007 – 1.4 billion tickets were sold in the United States and Canada, only a marginal increase over 2006 sales of 1.395 billion – Alamo Drafthouse Cinemas saw same store sales increase 14 percent in 2007. Systemwide sales are $31 million and the average unit volume (all stores open 2 years+)is $5.5 million.

“Our peers at the largest cinema chains in the world are saying the cinema-eatery concept is what is going to propel the industry forward,” Martin said. “There are a lot of people who are trying to dip their toes in the water with the concept, but we are the oldest cinema-eatery concept in the country when it comes to showing first-run films. You’re getting the best of both worlds at Alamo Drafthouse Cinemas, whereas the popcorn-and-soda theater dynasties are suffering.”

The majority of franchise growth is expected to be generated by multi-unit area developers that have the resources and capability to open, own and operate five to 10 locations in an exclusive territory during a three- to five-year period. Because of its unique niche as a cinema-eatery, the Alamo Drafthouse concept is particularly well suited for individuals or investment groups who have prior or current experience owning and operating multi-unit restaurant concepts, as well as those with prior or current theater experience. The Alamo concept can be to retrofit existing theaters or build new.

The concept fits in well with open-air lifestyle centers, the latest trend in shopping center development. Because cinema-eateries have only half the seating capacity of traditional theaters – rows of seats alternate with bench-style tables – they don’t require as many parking spaces. Developers get an attractive entertainment tenant that doesn’t require an excess of valuable real estate.

“We are a developer’s dream,” Martin said. “We don’t take up that much space and we can either be front and center or in the back of the development and still be a main draw,” said Mortin.

The Alamo Drafthouse Cinema menu stands far apart from the standard fare offered at traditional theaters. Some locations have as many as 30 handcrafted specialty beers on tap and 120 to 150 total beer offerings, as well as a great selection of wines. The wide array of mouth-watering appetizers, salads, pizzas, burgers and sandwiches are all made-to-order to satisfy every appetite.

The typical Alamo Drafthouse Cinema derives 70 percent of its revenue from food and beverage sales and 30 percent from box office sales. Martin said ticket prices are the same as other theater operators in Alamo’s markets, while the average customer spends between $13 to $14 on food and drink.

“We are a first-class movie theater experience combined with a high-volume restaurant,” Martin said. “We believe we have strong appeal for multi-unit restaurant operators because they have the wherewithal, know-how and depth that is required to succeed in the restaurant business. We will support and educate them on melding the film aspect into the restaurant part.” •

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Category: Magazine, Small Business Opportunities, Small Business Opportunities Jan 2009