Texas on tap: Alamo Drafthouse expanding cinema eateries beyond heartland

“We have changed quite a bit since we last spoke,” notes John Martin, president and chief executive officer of Alamo Drafthouse Cinemas, Ltd. And “we’re not talking about girth here,” he quickly adds with a chuckle, no matter how tempting the meal options his company provides.

We first interviewed Martin in June 2004, a few servings ahead of the exclusive “Dinner at the Movies” series that our readers have been noshing on for the last two years. And now it’s time to revisit the cinema-eatery concept that has grown to seven Drafthouses since debuting twelve-and-a-half years ago with a single screen in downtown Austin, Texas. (Tim League, founder and creator of that original Alamo location, was profiled in our December 2007 issue.)

In addition to three corporate locations (one in Austin and two in the Houston, Texas area), Alamo has three Drafthouse Cinema franchises operating in Austin and one in San Antonio. On the horizon, and revealed here for the first time (“You’re on my speed dial for names and deal confirmation,” Martin assures FJI’s readers), is an agreement with a “well-known multi-unit operator and restaurant group” which is “taking down the rest of Texas” and building out the state beyond already confirmed Alamo locations. The latter encompass two more locations in San Antonio (scheduled for October 2009 and fall 2010, respectively) as well as Austin #5 (summer 2010) and, coming this fall, the franchise’s first venture outside of Texas.

As with the eight-screen, 40,000 square-foot (3,716 sq.m.) facility for Winchester, Virginia, “these are all new-construction theatres,” Martin advises, and with the exception of Austin #5, franchises to boot. “We go through all their plans, and as a cinema eatery, those are very specific in terms of layouts of kitchen, bar, lobby areas and, of course, the auditoriums.” Based on their experience over the years, which has led to tables, seats and server aisles on stadium rakes, among other practical applications, Martin and his team “are very, very much involved with the architects, whether it is our cinemas or a franchisee.” (For more information about joining the only franchise in the industry, see our sidebar.)

“The Winchester Alamo is a brand-new construction from the dirt up,” Martin notes. “Economically speaking, the dark theatres are optimal. But closed theatres in a great market are harder to come by. Fortunately for us, however, and not so fortunately for the likes of Circuit City and Linens ’n’ Things, there are a lot of dark retail boxes out there. We’re very comfortable with—and have done—such four-wall box conversions.” As for the all-new facility in Winchester, “Alamo is creating its own market from the ground up. We’re comfortable with all three [options], but the most readily available are those with other previous uses.”

Austin’s Alamo South Lamar is one such example, “with six stadium screens constructed from a 28,000-square-foot [2,600 sq. m] former supermarket. While we kept the beautiful terrazzo flooring, we added risers on top. Every level has table sets and seating, though no rockers so as not to bump the servers.”

Martin considers the fact that the wait staff is bringing food and beverages from in-front and “naturally below, at the guest’s head-high level” a great help. “You don’t have the obtrusiveness. It’s not supposed to be disrupting anyway, but stadium seating makes it even less so.”

Other “tried-and-true” lessons learned include “going away from cloth seats in favor of pleather materials, easily maintainable and with our logo embroidered there. We’ve done both laminate table tops and thick, hardy wood, but decided to go with the former in all of our new builds.” As for potential mess and spillage, Martin says Alamo “doesn’t use the waxy kind of cardboard soda cups, but hard plastic that looks like glass and doesn’t break. All of our beers—30 to sometimes 40 varieties on tap—come in glasses and pitchers, and the wines are only served in glassware as well. We don’t skimp on the production or the enjoyment of what you are drinking and eating.”

The response has been enthusiastic. “We’ve had the best year in our history,” says Martin. He “absolutely” believes that the “Dinner at the Movies” concept offers a particularly strong value proposition to the consumer in this time of economic difficulty. “2008 was up 8.7% at Alamo. People are definitely going out to enjoy dinner, drinks, movies and popcorn. No matter what age you are and no matter where else you go, during those two-and-a-half hours everybody is still getting the best bang for their buck at our place. We have not seen a dip on the customer counts and people still want to see the movies and eat out.”

What people order hasn’t been affected either, as “our per-caps are still on the rise,” he observes. “So, we’re not getting more people coming in just to watch the movie.” The Alamo menu consists of an 80/20 mix, with the majority of product choices going to “our core Alamo-branded items. The remainder will be special to each of our markets. In San Antonio, nachos are a heavy, heavy seller,” he exemplifies. “Obviously, we’re putting some items on the menu there that you wouldn’t find elsewhere.”

Across all Drafthouses, “the best-selling item is the Alamo Burger, with our spin featuring crumbled blue cheese and hot sauce. The largest category is our pizzas.” Of the ten different kinds, for which all “the dough is made fresh daily, every morning so it has time to rise,” Martin’s personal choice is the “Raging Bull” with “just everything” on it. “I probably shouldn’t have it as often,” he laughs, “but that’s just my favorite item on our menu.”

The concessions menu board features and “does sell lots of candy, with our bottomless popcorn and bottomless soft drinks performing as you would expect them to everywhere else. One price point to consider here is that an entrée and two drinks—and I mean beer and wine—at an Alamo has the same cost as a large popcorn and a large sodas at many of the popcorn palaces. Now that’s a huge differentiating factor.”

Although “you must show first-run films, as they are the bread and butter” (no pun intended), further ambiance and novel ideas are necessary too. “True to our Alamo heritage and the name brand, we have to show independent films and obscure ones that may not see the light of day anywhere else but at an Alamo. Not only are we proud of that, but we want to! We have been showing digitally a lot of product by independent filmmakers who need a screen, who need them thrown up on a screen—and I mean that in the good sense,” he laughs, “along with sporting events, television shows…you name it.”

As all this has happened so far—and will likely continue to do so—on lower-grade digital projection equipment, Martin anticipates a major announcement of technology and integration providers for big-D cinema to be made soon. “This will include a significant number of our existing ‘retro’ locations and, as they are going up, all of our new builds. We’re still dovetailing 35mm, however. Not everything is going to be digitized and we’re a movie house showing movies, so we’ll always have 35mm film projection.”

On the food-prep side of the cinema-eatery equation, there are always many innovations to be implemented. “In every kitchen that we put in, at every bar…we are looking at new things. We are always switching out equipment for even better preparation and to further streamline operations. It’s all about speed, timing and quality.” These criteria have been an integral part in assuring Alamo’s success. “We have been focusing on building a brand,” Martin declares, addressing the competition that has been upping the ante as well. “We do want everybody in this concept space to be successful. We don’t want to be known as ‘Oh, that must be one of those places that serves not-so-great food and it disrupts the movie.’ There are some operators—and we can’t name any names—whose primary focus is on getting the beer out and all the operations follow behind that line. At Alamo, our emphasis is on the full consumer experience including film presentation and food service.”

Franchise Facts
“We’re encouraging anyone who’s interesting in running an Alamo to go to one near them or, more specifically, come to Austin, where we can show them all the Alamos and how they have developed over the course of the company history.” —John Martin

The estimated initial investment for a single Alamo Drafthouse Cinema is between $1,275,000 and $2,025,000, including a $75,000 “everything to get you going” franchise fee. Area developers pay an initial fee of $10,000 for each venue that is credited to the franchise fee due for each additional venue. Royalties are five percent of gross sales, with a half-percent contribution to a marketing fund.

Alamo Drafthouse Cinemas are typically located in commercially zoned shopping or entertainment areas in major metropolitan markets and college towns. Though venues vary by size, the typical Alamo has seven to nine screens, with auditoirum seating capacities from 65 to 325, and requires 25,000 to 35,000 square feet (2,322 to 3,250 sq. m).

The majority of franchise growth is expected to be generated by multi-unit area developers who have the resources and capability to open, own and operate five to ten locations in an exclusive territory in a three- to five-year period. Because of its unique niche as a cinema-eatery, the Alamo Drafthouse concept is particularly well-suited for individuals or investment groups who have prior or current experience owning/operating multi-unit restaurant concepts as well as those with prior or current theatre experience.

Alamo expects to have ten theatres open nationwide by the end of 2010 and 30 locations within five years. Initial target markets include additional Texas markets, the East Coast, Georgia, Florida, Oklahoma and Arizona. (adapted from company information)