How to Start a Movie Theater

Turn your love of cinema into a full-time job with this guide for aspiring entrepreneurs

Co-authored by Keila Hill-Trawick, CPA

Last Updated: March 27, 2023 References Approved

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 will be a popular success. While there are many challenges to opening and sustaining a theater, this type of business has the potential to be a thriving part of a community’s identity and peoples’ lives.

Part 1

Part 1 of 5:

Gathering Information

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Get familiar with the exhibition industry. Learn everything you can about the movie theater industry. There are books and magazines devoted to the business of movie theaters (also known as exhibition), databases with information like moviegoer demographics, and other resources available.^{[1]
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Learn about different types of theaters. There are a lot of different venues and styles for showing movies. These include:
- Mainstream, first-run theaters: These 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: These specialize in films that have already been shown in first-run theaters.
- Independent theaters: These 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. These may also be theaters that open up in a bar or restaurant.
- Drive-in movie theaters: These 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.^{[2]
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- You can also set up a very simple theater that might be 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.
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3
Conduct market research. Find out what movie theater offerings are in your area. If you live in a large city, there will likely be multiple theaters. If you live in a small city or town, there may be one theater or none at all.
- Talk with the other theater owners to see how well their businesses thrive. Just because you’ll be a competitor doesn’t mean that you can’t have a friendly professional relationship.
- Conduct a survey of the local community to determine what kinds of films people watch. You’ll want to make sure you’re playing movies that people will actually watch. If you live in a really conservative area, for example, you probably won’t have a lot of success showing really racy, edgy films.

Part 2

Part 2 of 5:

Starting Your Business

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Decide which kind of theater you want to open. Each kind of theater has specific concerns. Some options may be more successful than others, depending on your community and audiences. This decision will also be dependent upon your start-up capital and potential investors. Choose from among the mainstream, first-run theater; second-run theater; independent theater; or drive-in theater.
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Look into theater chains that offer franchise opportunities. Some movie theater chains have franchise opportunities, in which you put up the money to open a theater in the chain’s name.^{[3]
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Research source} 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 have a franchise.
- Some major chains do not offer franchise opportunities.^{[4]
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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.^{[6]
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- You can also start a nonprofit movie theater. For this type of operation, you’ll need a mission statement, bylaws, and a board of directors.
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Tally up the costs. Aside from any standard costs for starting and running a business, there are also expenses that are specific to operating a movie theater. These costs will vary depending on geographic location, and size and type of theater and films shown. Estimate the costs to run your theater. These costs include:
- 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. Most movie theaters need to have digital projection capabilities, since movie distributors primarily distribute their movies on digital formats now. The upfront costs for digital projection can be expensive, with a digital projection system for one screen running $60,000 or more. If you have multiple screens in your theater, your costs will be much more expensive.^{[7]
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  - You might also consider offering certain specializations, such as 3D capabilities, D-Box motion seats, or IMAX (large-format, high resolution screenings).
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Select 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.
- Think about parking as well. If your customers have trouble finding parking spots, they may be less likely to come to your theater.
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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.
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Pick a name for your theater. Choose a name for your theater that is attractive to customers. Many theaters have classic names or some version thereof, using words like Bijou, Metro, Pickford, Star, and so on.
- If you have an angel investor or benefactor, you might consider naming the theater after this person.
8
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.^{[8]
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Trustworthy Source
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Go to source} There are numerous sample business plans available online that are specific to starting a movie theater. Your business plan will need to include information such as:^{[9]
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- Mission or objective of your business
- Market research and audience analysis
- Costs of initial start-up and maintaining the theater
- Pricing for tickets, concessions, etc.
- Projected costs and revenues
9
Secure funding. The start-up costs for running a movie theater can be expensive, but don’t let that discourage you. With a solid business plan, you may be able to attract investors who are willing to put up money in exchange for a financial interest in the business.
- You might also look into getting a business partner. Look for someone who has connections with the local business community and who has experience raising money and running businesses.
- Some small organizations run crowdfunding campaigns to raise money. These are appeals to people who are especially interested in your theater, asking them to contribute money to your business. Some independent theaters have successfully run crowdfunding campaigns to raise money to purchase digital projection equipment.

Part 3

Part 3 of 5:

Preparing to Open the Theater

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Plan your timing. Figure out when you would like to open the theater. Aim for a time when there will be lots of people in town. Don’t schedule your opening night for a time that competes with a major concert or other event that will attract a lot of people.
- If you are planning to open with a certain new film, you’ll need to schedule your opening for when the film is available.
2
Pay licensing fees to show movies. If you are showing films to a paying audience, you need to make sure you have secured licensing permission from the film’s distributor. There are copyright laws that determine how films can be shown to a public audience.^{[10]
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- Contact the film distributor to find out fees for screening a film.^{[11]
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- If a movie is in the public domain, this means that no entity holds copyright. Therefore, you don’t need to pay a licensing fee. Check to see if a movie is in the public domain at the Library of Congress’ website.
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Hire your staff. Depending on the size of your theater, you will likely need at least a few employees to help you run the theater. At the very least, you’ll need a projectionist and a ticket-taker, as well as someone to sell concessions.
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Schedule your screenings. You’ll want to offer several showings of each film. Make sure you have a decent range of screening times in the late afternoon and evenings, on weeknights and weekend nights.
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Promote and advertise the theater. Movie theaters compete with many other forms of entertainment for the time and attention of customers. 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.
- Invite the local media for a tour of your theater. Be available for interviews. If the local newspaper or TV station does a piece on your business, this will be invaluable for your business.

Part 4

Part 4 of 5:

Operating your Theater

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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.^{[12]
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- Concessions can be big earners because their prices can be marked up significantly. 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.
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Offer on-screen advertising. You can sell screen space to local businesses who want to advertise to your audiences. This is another important source of revenue, especially for smaller theaters.
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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. 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.
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Offer theater rentals for other events. If you operate an independent theater, consider using it for other purposes. You can generate more revenue by renting out your space for events, like birthdays parties, group meetings, etc.
- 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.

Part 5

Part 5 of 5:

Building Your Business

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Consider joining a trade association. A trade association brings together similar businesses in order to share information and secure favorable conditions for their business operations. The National Association of Theater Owners (NATO) is an organization that represents cinemas in the United States and around the world.^{[13]
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Attend an industry convention. There are a number of conventions devoted to the business of running a movie theater. These can provide information and ideas about opening your movie theater, as well as opportunities to network. Some of the major industry conventions include:
- Arthouse Convergence is an annual gathering of independent theater owners.
- CinemaCon is the official convention of the National Association of Theater Owners (NATO).
- ShowEast is another convention, held in Hollywood, Florida, on an annual basis.
- CineEurope and CineAsia are international industry conventions for movie theaters and theater chains across the globe.
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Run joint promotions with local businesses. Continue growing your business by partnering with local restaurants, cafes, bookstores and other businesses to offer promotions for your audiences.
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Partner with other local organizations. As your theater becomes more popular, think about ways to grow connections in the community. Partner with a local university to offer a series of screenings on a particular topic. Host a film festival. Hold benefit screenings for local nonprofit organizations.
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Anticipate changes in the market. As your business grows, you will need to stay on top of industry trends. The market is constantly changing, especially with the growth and prevalence of personal entertainment devices. As the market changes, you must adapt your business in order to survive.

Community Q&A

Question

How do I get a license to open a movie theater in my city?

Community Answer

Call your local licensing office or city hall to ask about city-specific laws and regulations.
Question

Is any license and permission required to open a theater, and how to get it?

Community Answer

Most cities will require certain licenses, like an occupancy license. Talk to your local city business department and they'll tell you exactly what you'll need. They also may require you to pay taxes on revenue, so double check that. You don't have to have permission, but you will need to pay royalties on the movies you show.
Question

Can I screen NC-17 Movies?

Bryson Thompson

Community Answer

Yes you can, although you will have to strictly advertise the rating and possibly require IDs from patrons.