How to Start a Movie Theater

There are many options for opening a movie theater, including large corporate or franchise multiplexes, drive-in theaters, smaller and more specialized movie houses, and neighborhood theaters. Whatever type of theater you are interested in opening, you want to make sure it is profitable and/or a popular success. While there are many challenges to opening and sustaining one, a movie theater has the potential to be a thriving part of a community’s identity and peoples’ lives.

Part One of Three:
Gathering Information

1
Decide which kind of theater you want to open. Each kind of theater has specific concerns. If you aren’t sure yet which kind you want to develop, you can decide this after gathering general information about the movie theater business.
Main-stream, first run theaters typically show major films at their time of release. They are often corporate or franchise operations, but not always. These usually show a number of different films at one time in individual theaters housed within the building.
Second-run theaters specialize in films that have already been shown in first-run theaters.
Independent theaters may show independent films, specialized features, classics, major-release films, or some combination of these. These are more likely to have only one or a few screens.
Drive-in movie theaters are open, outdoor areas which show films on large screens to viewers who park and watch from their vehicles. They need special projection and sound equipment, and ramps for cars to park on. Drive-ins can often only be used in warm months of the year. They can be repurposed during other times, for as flea market spaces, etc.[1]
Theaters can be enhanced with specializations like 3-D capabilities, D-Box motion seats, or IMAX (large-format, high resolution screenings).
A “theater” can be technically be as simple as a homemade screen set up in someone’s yard, or a consumer-grade projection system set up indoors. This could be sufficient for your needs if you are just interested in showing films to fairly small groups of people, such as for non-profit community events.
2
Consider joining the National Association of Theater Owners (NATO). This is an organization that represents cinemas in the United States and around the world.[2] Its members include large corporate theaters as well as independent movie houses. It can be a useful source of information and support.
3
Attend an industry convention. There are a number of conventions devoted to the business of running a movie theater.[3][4][5][6] These can provide information and ideas about opening your movie theater, as well as opportunities to network.
4
Research sources with specific information about opening a movie theater. There are books and magazines devoted to the business of movie theaters, databases with information like moviegoer demographics, and other resources available.

Part Two of Three:
Founding your Business

1
Understand the regulations for starting a business in your area. If you are interested in a theater as a profitable business, much general information about starting a business will apply. Your movie theater will need to be founded and operate in accordance with the regulations regarding businesses in your area—including any permits, building code requirements, taxes, etc.[10]
If you find it difficult to find local information specific to starting a movie theater, you may want to ask current movie theater owners in your area questions about their business.[11]
2
Know the costs. Aside from any standard costs for starting and running a business, expenses specific to operating a movie theater include (costs will vary depending on geographic location, and size and type of theater and films shown):
Building rental or purchase
Staff
Concessions overhead
Licensing fees for showing films. These can be very expensive, especially for first-run, major motion pictures. Movie brokers can be hired to assist with the process of attaining films and approval to show them.
Equipment. This can include projection systems, lighting, seating, soundproofing, decoration, concession areas, etc. The particular equipment you need depends on the type of theater you want to operate.
Major motion picture companies have now largely switched to DCP (Digital Cinema Package) format instead of physical film. This makes it easier and faster to distribute films (since there is only a digital file to electronically transfer, rather than a physical roll of celluloid to distribute). However, the costs of equipment associated with DCP can be very expensive.[12][13]

3
Look into special incentives for your business. Research the incentives and tax breaks that may help you, such as incentives for Green businesses, those owned by women and minorities, and independent businesses.

4
Develop a business plan. A business plan will be helpful when seeking financing from lending institutions or independent finances. The plan will show your specific insight into the theater business.[14] Your business plan will need to include information such as:
Pricing for tickets
Costs of initial start-up and maintaining the theater
Projected profits
5
Hire a consultant. If you are serious about opening a profitable movie theater, it will be helpful to have the services of a consultant. The expertise of a consultant will help when it comes to choosing a location, pricing, feasibility, etc.[15]
6
Consider opening a movie theater franchise. Some movie theater chains have franchise opportunities, in which you put up the money to open a theater in the chain’s name.[16][17] Benefits and drawbacks to doing this can include:
Having the brand and name recognition of a major chain, which will draw moviegoers who are looking for a standard experience.
Ease of setup—the franchise terms will probably determine many decisions that have to be made in opening the theater.
The financial backing and resources of the chain, including contacts to film brokers.
On the other hand, you may not have as much control over the details of your theater if you franchise.
Some major chains do not offer franchise opportunities.[18][19]

7
Select and secure a location. Location is one of the most important aspects of any business, including movie theaters. You will want to have your theater located in a place that will be accessible to many people, easy to find, and near other businesses and attractions that will draw people. Having a good location means a better chance of drawing customers and staying profitable.
8
Prepare for opening. You will need to purchase equipment, prepare the space, hire and train staff, secure films to be shown, and advertise your theater well before opening day.

Part Three of Three:
Operating your Theater

1
Advertise. Movie theaters compete with many other forms of entertainment for the time and attention of customers, so you will have to work hard and do everything you can to draw people in. Market your theater in a variety of media, focusing on how it will provide moviegoers a unique experience.
Conversely, profits from local businesses buying on-screen advertising at your theater can be another source of revenue.[20]

2
Pay attention to concessions. If you sell concessions at your theater—popcorn, candy, soft drinks, etc.—these can be major profit earners, and in many cases the largest source of profits.[21]
Concessions can be big earners because their prices can be marked up significantly.[22] For instance, popcorn itself is relatively inexpensive for a movie theater owner to purchase, but can be sold to moviegoers at many times its wholesale value.
Popcorn, candy, nachos, soft drinks and other snacks are standard in many theaters. You can choose to include more specialized food, or even alcohol, depending on local regulations.
3
Consider a subscription model. A subscription model allows moviegoers to buy passes valid for a certain amount of time (a month, six months, a year, etc.) that will allow them entrance to a number of movies at your theater. This model allows you to compete with home video streaming services, and is likely to result in repeat customers while still being profitable.[23] Subscription models can be especially beneficial for independent theaters.
Your subscription model can offer passes valid for unlimited movies, or for a limited number, within the time period.
You can also offer multiple levels or “perks” with different passes. A standard subscription might include just the cost of admission, while a premium package could include cost of admission and a popcorn, etc.
4
If you operate an independent theater, consider using it for other purposes. You can generate more revenue by renting your space out for events, like birthdays parties, group meetings, etc.[24]
You will have to decide on pricing for rentals, as well as policies regarding use and clean-up. The scheduling for such events will also have to work so that they don't interfere with the movie run schedule.