AMC Empire 25 near Times Square as movie theaters reopened in New York City for the first time in a year following the coronavirus lockdown, on March 5, 2021.
Angela Weiss | AFP | Getty Images
Cinemas have struggled to fill seats during the Covid pandemic, but some are facing another problem – what to do with their menus.
In many movie theaters, popcorn and soda appear alongside flatbreads, grilled cheese, lobster, and elaborate cocktails. But with debt burdens and a shortage of box office winners, theater chains of all sizes have had to shake up menus and launch creative food initiatives to boost revenue.
said Rolando Rodriguez, president of the National Association of Theater Owners and senior advisor to the National Theater Owners Association Marcus Theatres. “They’re really looking at the experiences they’re having in terms of movie-related meals. Expanding … into food and beverage is absolutely a must.”
Since 2019, before the pandemic, the number of North American screens has fallen by more than 3,000, according to Comscore. Market research firm Mintel said only 54% of people went to the theater between April and October 2022.
People are more inclined to wait to see a movie, said Mike Gallinari, senior travel and entertainment analyst at Mintel, than streaming services in theaters. This has forced some theaters to up their food game.
“Things like compromises and how that fits into the broader cinema experience are things that cinemas need to focus on and focus on,” Gallinari said. “Not only is it part of the experience that they can control, but it’s also more revenue that they can control since the movie theater box office. [performances] Variable based on the movie.
There are not enough movies
Theaters have struggled to keep their doors open during the pandemic. cinemaworld, which operates Regal Cinemas, filed for Chapter 11 bankruptcy protection in September, reporting $8.9 billion in net debt. Regal Cinemas will decline leases for 39 theaters beginning February 3. 15.
AMC Entertainment, the world’s largest movie theater chain, exited the third quarter with more than $5.3 billion in debt. AMC stock is down about 50% over the past 12 months. The company announced on Monday that it will change ticket prices depending on seat location.
Eric Wold, an analyst at P. Reilly Securities, said AMC, which operates dozens of AMC Dine-In Theatres, is unlikely to make free cash flow positive until 2024.
He added that the lack of content is the theaters’ biggest problem. Compared to 2019, Wold said, there was a 50% drop in films shown in theaters last year. Box office sales fell by more than 30%. He predicted that the industry would not return to pre-pandemic movie release numbers until 2025 due to delays and production backlogs.
Studios have certainly been more specific about which films get shown in theaters, and have favored blockbuster-style releases. “Avatar: The Way of Water,” released in December, and “Spider-Man: No Way Home,” released in late 2021, are among the 10 highest-grossing films of all time.
Tom Holland is Spider-Man in the Sony-Marvel movie “Spider-Man: No Way Home”.
Sony
“A restaurant can open if it can get food and cooks. A theme park can open if there is electricity and people to play games. But if there are no movies, a movie theater cannot open and show,” Wold said.
While competing with declining attendances, Marcos Theaters reduced menus at Zaffiro, Reel Sizzle and Take Five Lounge concepts, as well as their Movie Tavern locations. Now, listings are mostly back to where they were before the pandemic as consumer spending grows.
“There’s a kitchen in everyone’s house, but people still go out to eat,” said Marcus CEO Greg Marcus.
“At the end of the day, humans want to be among themselves,” he said. “They want to go out. They don’t want to be home and they don’t want to sit on their couch.”
Franchise economics
According to Wold, revenue from ticket sales is about a third greater than from franchise sales. But theaters make much more profit from franchises than from ticket sales.
About half of the money from ticket sales goes to studios, Wold said, while all franchise margins, which are typically more than 80%, are kept by theaters. Marcus Theaters draws 44% of its total revenue from franchises, compared to 39% in Marcus Theaters Cinemark theatres and 36% at AMC.
“No matter how great a flatbread is or how a theater can make a great cocktail, if a movie is bad, no one will come to the theater,” Wold said. “If you can make better food while someone’s already there and give them one more reason to want to go to the theater to see a movie…that’s definitely an attraction and can be an additional source of income.”
According to data from the research firm EntTelligence, the average price of popcorn in local movie theaters is $8.14, while the average price of a drink is $6.20. Those items typically have margins in the mid-90%, Wold said.
For more upscale items, the margins are much smaller, which means theaters can’t throw away the classics, but instead seek additional revenue from sandwiches or entrees.
“Throughout the pandemic, I’ve seen the average benefit per beneficiary go up exponentially,” Wold said. “This is a combination of getting more from each patron by increasing the basket size of what they order at the counter, but also getting more people to the counter who would otherwise have skipped it.”
Ahead of fourth-quarter earnings, Wold said theaters haven’t seen pressure on consumer spending concessions despite the rate hikes. The concessions, he said, were “very much a depression-proof tranche.”
A Cinemark employee serves popcorn to a customer at a Century16 concession stand at South Point Hotel and Casino on August 14, 2020 in Las Vegas, Nevada.
Ethan Miller | Getty Images News | Getty Images
However, theaters with larger menus are facing similar problems as those in restaurants, according to Mintel’s Gallinari, with some raising prices in response to the increase in the price of eggs and meat. Some are embracing healthy foods and bakeries, as well as partnering with local businesses.
“With cinemas and franchises already notorious for being overpriced, succumbing to the will of the market in this way can really work against the good of cinema,” Gallinari said.
Theaters have used the pandemic to make franchise sales more streamlined, Wold said, amid a labor shortage. Pre-pandemic, some theaters adopted a dining model where servers bring food from a central kitchen into the auditoriums, though many have shifted toward pick-up apps and reserved seating.
Marcus Theaters recently launched an online ordering application that more efficiently handles high volumes of orders. He said the app was more effective in increasing consumer sales and reducing the number of lines.
If it takes you a minute or two, take a minute and a half off [ordering] Process and multiply that by 15 million transactions, that’s a meaningful number if you can figure out how to structure yourself from a business perspective to go from taking order to just fulfilling orders,” Marcus said.
Hungry for long term success
With some menus exceeding 50 items, Wold said, theaters are becoming more methodical about staffing and prepping food for the slower, heavier nights.
Some theaters, such as the Dallas-based Studio Movie Grill, predict attendance weeks in advance.
“We have enough history with enough analysis to say we know, whether it’s a horror movie or a romantic comedy, how they’re going to perform based on national projections and based on our own locations,” CEO Ted Croft said.
Studio Movie Grill, which takes orders at customers’ seats, recently shortened menus to focus on burgers, pizza and alcoholic beverages, which the team can quickly implement to seat more than 1,000 at times. About 25% of the total field team, Croft said, are kitchen staff.
After returning operating hours to pre-pandemic levels — and introducing themed drinks to films like “Black Panther: Wakanda Forever” — Croft said individual franchise averages continue to increase.
“The fact that we’re outperforming pre-pandemic KPIs gives us more confidence that if we get more movies, we’ll continue to grow,” Croft said.
Angela Bassett plays Queen Ramonda in Marvel’s Black Panther: Wakanda Forever.
Disney
Rich Doughridge, president and CEO of Maryland-based Warehouse Cinemas, has noticed a similar trend. About two-thirds of the staff at theater locations, he said, are in the kitchen or behind the concessions, whipping up mouth-watering grilled cheeses, hot dogs with homemade beer cheese, and classics like nachos and seasonal popcorn mix.
Daughtridge said the menu stays away from more perishable, low-margin items like steak or seafood.
A selection of craft cocktails, 32 craft beers, and ciders are available on the self-serve beer wall. This month, the theater will be presenting a themed cocktail for the movie “Winnie the Pooh: Blood and Honey.”
said Doughridge, who is also president of the Independent Film Alliance.
Cinépolis, a Mexican theater chain with 25 US locations, updates its menu twice annually and serves lobster tacos and mushroom-truffle pizza, among other funky theatrical meals.
For an advance screening of the bloody satirical film “The Menu”, Cinépolis has launched its “Movie and a Meal” initiative to sponsor seasonal screenings of the film. The company will do another iteration of “Cocaine Bear,” which includes two drinks, two appetizers, a main course, and a dessert.
“As our founder used to say back in Mexico, we’re building theaters to sell food,” said CEO Luis Oloki.
– CNBC Sarah Whitten Contribute to the preparation of reports.
Disclosure: “Cocaine Bear” is distributed by Universal Pictures, which is part of CNBC’s parent company, NBCUniversal.