These two theaters are both in the type of town that is relatively small compared to most metros, but are somewhat large compared to all the surrounding towns. Two movie theaters, including real estate for sale. There was a line around the block to buy them before COVID, which obviously sank that. But now it seems like there is a good amount returning to the theaters. I am going to be getting more details in the next week under an NDA, and have my accountant go over the books. Supposedly net cashflow is in the 400-600k range. Price is 4mill, a large part of which will just be taking over an existing loan.
Opinions, does anyone think going into this industry in this day and age is just too risky given to combination of coming out of the Covid era plus fact that we are now in the era of streaming?
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Are they movie theaters or performance theaters?
I’d be concerned about the current actor’s strike. You’re almost guaranteed to have a rough first few quarters with nothing new releasing.
True but could rerelease favorites. There’s so many movies out there. But yes it’s the couple of big ones ppl care about.
It’s a declining market, which isn’t very appealing from an investment perspective - but one that’s unlikely to ever fully vanish.
A key question to find out is: why are they selling? If it’s because the current owner is retiring, that’s not an issue. If it’s because they no longer have confidence that it’s viable business in the long run, that’s a big red flag. And you should also be asking why the big chains haven’t swooped in and bought up these two theatres. What do they know that you don’t?
You also need to look very closely at that loan - not just the the terms and obligations, but also the reasons behind it. Was that a big investment in the business that added real value? Was it to keep the business afloat? How much has the previous owner taken out since that loan was made (i.e, have they loaded up the business with debt, taken a load out in dividends, and are now trying to sell the remnants on to you)?
Are they getting first run films? (Did they run Barbie, Oppenheimer, and The Eras Tour?) You want to make sure you’re taking over a theater that is already able to pull tent pole movies. It can be a slog to go from second rate slop to A-List content (source: worked at new theater in college that struggled through that)
10x EBIDTA? Run don’t walk. Never assume someone else’s debt. Do an asset purchase. I wouldn’t bother with a theater these days, I didn’t even see Top Gun at the theaters, and don’t think we’ve been since Covid.
There is a huge lag in Hollywood productions going back to COVID and now the strikes. They won’t be releasing any big movies for quite a few years.
Attendance at theaters has been down as portion of America since 1920s.
I love the movies and am seriously worried for their future. The experience in a theater is so much better than at home. There no way to debate in that. Streaming/rental are easier that’s the issue.
Streaming is on its way to becoming more expensive than cable ever was. If you want all the big streamers that is. So it might be that Disney movies so ppl can’t see for instance.
Also everything I read/see is commercials will slowly be coming to all streaming more and more. It’s a much easier model to make money from.
Question can you use those things to compete?
Could it be repurposed? Live shows?
Myself and friends have a monthly movie pass through AMC. $25/month. Why not do the same at your location. Could even just offer in slow times.
Best of luck!! I’m rooting for you if it makes sense!
For what it’s worth: two more have closed around me recently leaving only one that I can think of in the area. There are around 300,000 people in the area.
Personally, I wouldn’t pay much more than the real estate is worth. I absolutely love movies. There was a time when I was the guy that had seen every single movie in theater. I would travel to distant art house theaters. I was a member of a film society and frequented film festivals. I own roughly 2000 DVDs (lol). I have seen three movies in a movie theater in the past three years.
This is actually my strategy. My worst-case scenario would be that the bank takes the property. I don’t intent to have a significant amount of debt that isn’t secured by the business itself.
Where you at? We used to rent out our small 2 screen theater and have shows in them. EDM on one side and jam bands on the other. Vendors in the lobby. Wed keep the door, venue would sell candy, popcorn and pop like a regular movie and we’d have vendors selling art, jewelry and clothes in the lobby. Show video
I don’t want to post the location on here. But it’s a smallish midwest town that is about an hour away from the nearest Metro area.
If you do do it, which I personally wouldn’t.
But if you’re like, I have to own movie theaters, its my dream!!!
Then you have to put money into to update the experience and make it a destination event. Make it better than just food and drinks and recliners and maybe show indie movies that other theaters aren’t showing and you can’t get streaming.
But if you show indies you have to market them hard.
There are plenty of other great investments out there, that have a higher long term probability of success.
Make sure you in an opportunity on the upswing, not down.
Good advice. Definitely proceeding with caution.
Price seens too high and the loan you’re taking over as part of this what did it go too? Was it an investment in the business or used to pay bills?
All questions I’ll ask when meeting the owner. Thank you!
Interest rates. Check the viability of servicing the debt.
High priority question to answer as I go over the financials.
Isn’t the clear trend shorter and shorter exclusive theater runs before movies stream? I would want to research this very thoroughly before going ahead.
8-10X cashflow for a shrinking market is stupidly high pricing. At that price I wouldn’t even touch it with YOUR 10-foot pole.
Thanks. Something to think about.
Real estate is included so it makes the price not as bad as 8-10x cash flow
We have a 3 screen small movie theater in our town. I have been there 2 times in the past 4 years.
They seem to do ok. They serve craft beers and cocktails, and have a restaurant/bar off to the side.
Ever since Covid …. Our family as a whole does not have much interest in sitting in a theater.
Thanks for the feedback.