The movie theater industry in the United States is hovering around $2.28 billion dollars generated by nearly 5,000 theaters across the country. Most of these movie theaters belong to well-established national chains like AMC and Cinemagic. But there is a sprinkling of independent theaters in cities that are making a comeback.
The average cost to open a movie theater in the United States is at least $1.5 Million. There are a lot of individual expenses that factor into the overall price tag. Monthly operating costs for a movie theater range from $30,000 – $180,000, depending on the scale of the operation.
Franchise fees average $150,000, real estate is up to $30,000 per month, and professional services can range between $5,000 and $15,000.
- How Much Does it Cost to Open a Movie Theater?
- Breakdown of Key Expenses to Open a Movie Theater
- Factors that Affect the Cost to Open a Movie Theater
- The Bottom Line
How Much Does it Cost to Open a Movie Theater?
Are you a cinema nut looking for a way to turn your passion into a profitable business? Opening a movie theater could be the right move, but there are a few details to work out first. For example, how much does it cost to open a movie theater? Let’s take a look!
Breakdown of Key Expenses to Open a Movie Theater
The average cost to open a moderately-sized movie theater operation is around $1.5 Million to open the doors. You will need additional capital to hire staff and make payroll until the business starts bringing in some money.
To legally operate a business, you must register with your local and state governments. The fees vary by jurisdiction but are typically between $500 and $1000 for a single business license.
You will need legal support to open a business. From advice to business structure and obtaining permits, a business lawyer can help protect your investments. A retainer for a business lawyer is typically between $1,000 – $5,000 and $250 – $500 per hour, billed in 1/10 hour increments.
An accountant will help you manage your cash flow and pay your taxes so that your business operations remain squarely in the definition of a legal enterprise. You can expect to pay around $5,000 for accounting services at startup, plus an additional fee for ongoing service.
At a minimum, you will need a point of sale software to handle movie ticket and concession stand transactions. This provides a method for tracking your inventory and sales, as well as collecting payments from major credit card vendors. The upfront cost of software can range between $5,000 – $15,000, and there may be recurring fees for annual licenses as well.
Developing a Business Plan
Consultants and technical writers can help you draft a compelling, thorough business plan that provides all of the details needed to secure funding for your fledgling business. Expect to pay between $2,500 and $5,000 for these services.
As a business, you will need to pay for several different types of insurance. A general business policy typically covers liabilities of doing business, like having customers on your property. Workers compensation insurance is required if you will have employees.
Your location and the size of your business will factor into the premiums, but on average, you can expect to pay around $30,000 – $60,000 in premiums in your first year.
You will need to lease or buy commercial property suitable for movie theater operations. A triple net lease is most common where the property is owned by a real estate company and leased to a business with all renovation and maintenance costs belonging to the tenant.
Building leases vary significantly depending on location. Even locations within a particular city can be more or less desirable. Commercial leases range from $5,000 to $30,000 per month and renovations can cost between $250,000 and $500,000.
90 Days Overhead (Operational Costs)
You will need enough capital to cover the costs of running the business for at least 90 days. This will provide enough cushion for your business to start bringing in enough money to cover expenses. Keep in mind that most businesses take an average of two years to become profitable.
Overhead expenses include payroll, utilities, inventory, and similar expenses. The cost of overhead depends on your business plan, but consider allocating between $20,000 – $60,000 per month. This would be a minimum of $60,000 – $180,000 to cover the first 90 days.
Before you can open the door, you will need to stock your theater with popcorn, soda, candies, napkins, and various other commodities.
This inventory is sold to or otherwise consumed by theater patrons, contributing to income-generating activities. And, don’t forget the significant expense of royalties paid to film companies for access to new releases. The average cost to stock a theater with inventory is around $150,000.
Marketing & Signage
A marketing budget includes the cost of advertisements to promote your business, signage to promote your shows, commercials, and other activities. You can control the marketing budget by choosing to engage in more or less promotion. And with the widespread adoption of digital marketing, costs are easier to control.
The average cost of a movie theater marketing budget is in the millions for large chains. For a small, local business, your budget will fall between $7,500 and $25,000.
The theater will need screens and projectors in order to play movies. You will also need stereo equipment, cash registers, and optional immersion or arcade equipment. The concession stand will need a popcorn machine, soda fountain, and ice machine. The total cost of equipment is typically around $350,000.
Theater seating and benches for the lobby are necessary to keep patrons comfortable. You can expect to pay around $150,000 per-theater room for furniture. If your venue will operate two theaters, budget $400,000 to furnish both theaters, the lobby, and offices. For six theaters, budget for $1,000,000.
Digital Presence (Website, Social Media)
Businesses today invest a lot of money into custom designing their digital presence. This begins with a website that serves as the hub of their online presence and includes social media channels, ad banners, blogs, and more, which all funnel traffic back to the website. There are two costs associated with a digital presence: the initial design and continual maintenance.
A certain amount of buzz comes from launching a new business. Many theaters choose to take advantage of that buzz with a grand opening event which gets the community out to see the new business.
A grand opening event can provide an immediate infusion of income as well as a ripple effect of repeat business in the first few months. But these events need to be classy and well-done, or they can damage your brand reputation. Expect to spend at least $10,000 on your grand opening event.
There are many other little costs associated with opening a business, and you can quickly feel like you are being nickeled and dimed. Set aside at least $10,000 to cover odds and ends.
Factors that Affect the Cost to Open a Movie Theater
A movie theater is a bit of a broad definition. These businesses come in all different sizes. Bootstrap theaters in art districts operate with a single showroom and favor artistic or historical equipment.
By contrast, entertainment theaters have dozens of showrooms with luxury seating and state-of-the-art technologies and retail district leases. The price tag varies quite a bit between these two types of theaters. Let’s take a look at what other factors might affect the cost of opening a movie theater.
- Size of the Theater
- Local Requirements (licenses and permits)
- Type of Facility and Renovations Needed
- Investment in Branding, Marketing, and Consultations
- Quality of Furnishings and Decorative Elements
- Sourcing Inventory
- Cost of Providers and Policies (Insurance, Legal, Accounting)
- Investments in Human Resources (recruiting, training retention)
- The scale of Grand Opening Events
The average cost to open a simple one-room theater in the arts district of a small town to show classic films and appeal to a sense of nostalgia is less than $950,000. These types of theaters can often operate with minimal staff.
If you are a movie buff, you might even be able to pull it off by yourself. However, the income potential of this size of business is limited by the space and type of movies available.
Most large-scale and high-tech theaters featuring multiple screens, IMAX, and 4D experiences belong to franchises. These theaters require a significant capital investment in the millions, and their success depends largely on their participation in the film industry.
With the rise of home technology, these types of movie theaters are becoming a less common choice of entertainment. The average cost to buy a franchise is $150,000 plus all of the startup costs mentioned. Franchises also have strict agreements that control details like marketing activities, building locations, and movie availability.
Where the theater is located will have a major impact on the cost of opening a movie theater. Commercial real estate leases are readily available with high price tags in major cities. Medium and small cities have fewer building options but cheaper rents. You will also have to balance your choices between shopping districts, art districts, and other areas of a city. High traffic usually means a high price tag.
Many of the other business decisions, such as what professional services to use and how much they cost, are variable. Regional factors may influence some pricing, but a lot of it comes down to your negotiation skills. You can choose to prioritize some areas of spending and negotiate other services to manage your costs.
Low Budget Options
While it is pretty hard to bootstrap a movie theater, there are some choices that can help you work towards achieving a low startup and operational budget. For example, you can take over a former movie theater building and reduce your renovation costs significantly. These buildings have specialty uses and may even be leased for a lower monthly rent compared to other types of commercial real estate.
Choose a secondary location in a small to medium-sized city for the most economical storefront. You can invest more in digital marketing campaigns to reach your target audience and bring them in the door. Prime real estate space helps visibility, but billboards and effective email marketing can get the job done too.
Start small with few employees and scale bigger as your business becomes established in the community. If you do rent a big building to accommodate future growth, consider sub-leasing some of your square footage to complementary businesses like an arcade or novelty gift shop.
Mid-Range Budget Options
If you have access to capital around the $1M mark, you are probably looking to start a mid-size movie theater. Aim for somewhere between two to six screens to offer a variety of showings. You should be able to find decent real estate in a medium-sized city or secondary real estate in larger cities to fit your budget.
A theater of this size will require a full concession stand and at least two new release options per movie cycle. You can expect to keep a small staff of fewer than ten employees, but you should be able to get by with a single manager.
High Budget Options
Working with a national franchise is the best bet for visibility and brand recognition if you can foot the bill. Franchise options offer packages that take care of marketing, building selection, and movie choices for you so that it is almost a turnkey operation. As a franchisee, it is smart to retain a separate lawyer for handling business between yourself and the franchise.
The Bottom Line
The cost to open a movie theater can be significant. Investing in technology, movie rights, and physical space are no small investments. A small to medium-size operation will take at least $1 Million in startup capital. Smaller operations might be able to open the doors for a little less, but movie theaters continue to be expensive operations to maintain. You may be interested in the cost to open a skating rink.