Family entertainment facilitators: How to make more out of your real estate
Thanks to very much alive sporting events, big-screen gaming and even bigger arias, rocking concerts and stand-up comedy, offering more at the movie theatre has become a well-reported trend. In order to compete with in-home and other out-of-home options, exhibitors and their content partners have been upping the ante beyond showing films. Becoming a buzz-worthy and buzzed-about “entertainment destination” nowadays requires a plethora of food and beverage options too. Whether in-theatre, at fully integrated restaurants or as part of the latest-in-luxury lounges, moviegoers see their options multiply.
This month, Film Journal International presents a trio of experts who are setting out to make even more changes to benefit your business. According to Sheldon Oxner of National Commercial Builders, the “strategic partnership” that he recently forged with the architects of Paradigm Design and feasibility experts at BeauMar Entertainment Group can offer ways for exhibitors and developers to “reinvent their real estate” as a Family Entertainment Center.
“I know you have been doing research and articles about food and beverage,” Oxner says, acknowledging the ongoing coverage in these pages, “but we think there are many locations that would benefit from a total or partial conversion to an FEC, as we like to call them.”
At ShoWest 2010, introductions were made by Joseph Greco of Paradigm, Oxner explains. “Both of our companies have worked with Paradigm on various projects independently for about 12 years or so. We felt it was beneficial to get acquainted.” In early May, “we started talking about some specific ideas and, given that our team has a lot of contacts and information, [the first outreach to exhibitors] created quite a bit of interest.” During this ShowEast, the partners in the new “Cinema Entertainment Concepts” venture can be found at Paradigm booth #807.
According to Dave Beauregard, the partners are using his BeauMar Entertainment Group to structure the deals. “If a client approaches us, we are doing a market feasibility study first to establish what works and what won’t,” he elaborates. “For 35 years on the site selection, deal-making and financing side, I have been putting movie theatre deals together, working on family entertainment centers and running market studies. My job is to go in on the front side and do all that.” Similarly, “Paradigm has designed every prototype out there,” Beauregard enthuses.
“We have been involved with the design and construction of movie theatres since the early 1990s,” confirms Joe Greco, corporate director at Paradigm and third member of the team. (For an overview of their work as reflected in FJI, go here.) “While we have completed over 200 new and remodel projects, our firm has also worked on the Family Entertainment Center concept since 2006, resulting in design work on over a dozen such projects.”
In addition to a similar track record and construction expertise that Oxner brings to the table, Beauregard shares what he believes “makes this such a unique group: We come together under one banner but at the same time we are independent. So if a client should want us to find a site only and stop there instead of delivering the full package, we will do that. We are flexible and very deep in experience. We can give them design, construction and financing.” And, as we all know, “financing these days is critical,” of course.
After Beauregard checks out the market under consideration, the team gets together for joint analysis, he details. “We go back to the client with a first floor plan and cost analysis, preliminary income and expense statement, the results of our market study and development analysis. It’s time to get real, we tell them and start looking at financial ability. How strong are you and can you stand up to an 80% loan on a six-million-dollar project? Do you own the land, where is your equity coming from?” If all checks out, Greco and Oxner “come into the market to refine the site-design plans and to work out construction costs in more detail.”
Asked about what design features to include, Greco names openness as “a key consideration in all of our FEC designs. With the exception of some spaces that are geared more to adults, we try to incorporate visual interconnectivity between spaces to the extent possible. The restaurant is a key component that, along with an entrance from the entertainment area, must also have a separate exterior entrance that allows the restaurant to stand on its own. Our philosophy is that the restaurant needs to be a desirable destination to patrons that are just looking for a good meal.” In any event, “a good design starts with a good market analysis that defines the program requirements.”
Meanwhile, Beauregard “is preparing the package that goes to the lenders that we will be working with and the leasing companies.” The reason for all that attention is about “not leading them on some journey,” he assures. “We don’t want to take our clients too far down the road and have them invest too much money if we really can’t get it done.”
Six-million sounds like a rather large amount to get done indeed. What about projects on a smaller scale? “Everything is market-driven,” Beauregard replies. “We’re looking at a two-screen theatre in Upper Michigan right now, to convert to an FEC. The market dictates what will go into the 8,000-square-foot facility [740 sq. m.]. In this particular case, the restaurant and bar component won’t work, but the former projection mezzanine allows for a very nice boutique billiards lounge. In helping our clients, we try to be as smart as we can possibly be. You don’t ever want to overbuild,” he cautions.
Building too much of a good thing is another scenario under investigation currently. “We’re working on a sloped-floor nine-plex in California that was built about 15 years ago,” Oxner details. “It’s a great location, but when the big-boy stadium came in nearby, that completely shut them out income-wise.” With an entertainment center conversion that looks at keeping one auditorium “for live events and corporate presentations, video conferencing, sports broadcasts, and more,” Oxner envisions giving owner and tenant “an alternative way of generating income.”
In a second example, “the exhibitor is on the east side of town and all the retail has moved to the west side, making the existing theatre too large. We can help the average 12-plex, let’s say, to convert four to six screens with a bar and restaurant, game options and any other piece necessary.” Oxner also foresees this kind of “shifting the emphasis on food, beverage and entertainment” will be reflected in new cinema and retail construction going forward.
Not unlike the big-box conversion in Blue Oaks, Calif., featured in FJI last month, the partnership is working on complete overhauls of a shuttered Food Town in Alabama and a former Wal-Mart/Kmart type building. In Oxner’s first example, “We’re converting 30,000 of a total 45,000 square feet [2,800 of 4,200 sq. m.] into an FEC, with the remainder going to drive up retail. Keeping the retail makes it easier for lenders to fund the project,” he has observed. “For the other situation, which has become very common, we have drawn up numerous plans. On one end, you go to full stadium for eight to ten screens on some 40,000 square feet,” he suggests, “and raise the roof if necessary to accommodate the risers. The balance of the roof line and building would remain ‘as is’ for bowling, laser tag, arcade games and the like.”
The equipment needed to make this and any other center entertaining “can go one of three ways,” Beauregard adds. “Whether one does a lease, a 50/50 revenue split with the equipment owner or a full purchase” depends on the operator’s preferences and capabilities. “If you buy it outright, you have a greater income return because you are getting all the nickels. In a 50/50 split, you don’t have the cost upfront, but neither the full income on the backside. We have a leasing department here that can help with that option. Again, we analyze each phase of the development in all directions and depending on the borrowing capabilities of our clients.”
Many theatres already have smaller game rooms and, of late, have added dedicated party rooms as well. What do the experts suggest for them? “Some of the older theatres because of design are limited on the space and there is not much that can be done,” Beauregard feels. “They’re better off having their equipment on a lease basis and rotating it often. Someone in a smaller market, where birthday parties and the arcade become a good portion of the income, really needs the flexibility that this affords.” Beauregard’s recommendation in most cases is “to take a single auditorium and bring it to all entertainment, because you have to be able to do the masses in there. In most of our locations we rent as many as a hundred birthday parties on a Saturday and Sunday. They are very profitable. The reality is that they cannot do much in small theatre venues to improve their income other than expand either on the building or by converting one or more of the auditoriums.”
Talking with theatre owners about these options, Oxner was not surprised that managing the entertainment side turned out to be a very important issue. “Some of them resist change because they do not want to take on operations of a restaurant or otherwise expanded entertainment facility. It is foreign to their business. Being able to take that monkey off their backs is critical.”
To assure “excellent day-to-day management,” Beauregard explains, “we have a partnership with FB&F Entertainment Management, who has 25 years of experience operating multiple restaurant locations, entertainment and bowling centers.” Conversely, should a developer require someone to run the cinema part, BeauMar, NCB and Paradigm would go to Phoenix Big Cinemas Management. “Phil Zacheretti is a good friend of all of us, and we do business back and forth with him. So we have that component covered as well. We can bring design, construction, management and financing to the exhibitor—all of the pieces in one contract that he or she needs to be successful.”