Lights, Camera, Action: How to Open a Movie Theater

Here is what you should focus on when starting your movie theater:

1. Location — Choose a convenient and accessible location with high foot traffic and ample parking. Consider proximity to restaurants, shopping centers, and public transportation.
2. Facilities — Design a comfortable and welcoming facility with high-quality seating, sound, and projection systems. Ensure your theater has a spacious lobby, concession stands, restrooms, and accessible entrances and exits.
3. Franchise — Choose one of the following franchises: Alamo Drafthouse Cinema, Cinépolis, or Movie Tavern. 
4. Licensing — Establish relationships with film distributors to obtain the necessary licenses to screen films. Understand the terms and costs associated with film licensing agreements.
5. Equipment — Invest in high-quality digital projection and sound systems to provide an excellent viewing experience. Consider 3D or IMAX capabilities for added appeal.
6. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
7. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
8. Ticketing — Implement a reliable ticketing system that allows for online, mobile, and in-person ticket sales. Offer reserved seating options to enhance customer convenience.
9. Concession stands — Equip concession stands with efficient food preparation and storage equipment. Offer a variety of snacks and beverages, including traditional items like popcorn and soda, as well as healthier and gourmet options.

Step 1: Decide if the Business Is Right for You

Pros and cons

Before you decide to start your own movie theater, it’s important to consider the pros and cons.

Movie Theater industry trends

Industry size and growth

• Industry size and past growth – In 2022, the US movie theater industry is worth $12.1 billion. The industry dipped during the pandemic, but it’s now making a full recovery. ((https://www.ibisworld.com/industry-statistics/market-size/movie-theaters-united-states/))
• Growth forecast – Globally, the movie theater market is expected to grow at an annual rate of 4.7% through 2028.((https://www.verifiedmarketresearch.com/product/movie-theaters-market/))
• Number of businesses – There are 2,525 movie theater businesses in the US in 2022.((https://www.ibisworld.com/industry-statistics/number-of-businesses/movie-theaters-united-states/))

Trends and challenges

Trends within the movie theater industry include:

• Some theaters have pivoted to offering private events where families, friends, or organizations can reserve their own screenings. They’re also thinking outside the box and renting out their space for fantasy football draft parties, pay-per-view sporting events, and more. 
• Tech innovations like Magic Screen enable audiences to interact live with movie characters. It’s still in development, but pilot testing has shown promising results.

Challenges within the movie theater industry include:

• Before the pandemic, new releases typically stayed in theaters for around 90 days. Today, that time has been cut in half, which means fewer tickets are sold. There are also less movies being released. 
• With many new releases heading straight to streaming, people can now view these films right from their couches. More people are now choosing to stay home and save money instead of heading to the theater.

How much does it cost to start a movie theater?

Startup costs for a movie theater range from $135,000 to $325,000. Major costs include theater rental, equipment, labor, and the cost to license the films you feature. You may be able to keep costs low by renting equipment or purchasing used items and licensing older films instead of new releases. 

You’ll need a handful of items to successfully launch your movie theater, including: 

• Theater
• Digital projector
• Projector screen
• Film licenses
• Concessions

Start-up Costs	Ballpark Range	Average
Licenses and permits	$100-$300	$200
Insurance	$100-$300	$200
Marketing and advertising	$500-$1,000	$750
Website	$1,000-$2,000	$1,500
Software	$500-$1,000	$750
Theater Rental	$5,000-$10,000	$7,500
Digital Projector & Sound Equipment	$125,000-$300,000	$212,500
Film Licensing Fees	$300-$2,000	$1,150
Employee Wages	$2,000-$5,000	$3,500
Concessions	$1,000-$3,000	$3,500
Total	$135,500-$324,600	$230,050

How much can you earn from a movie theater?

The average cost of a movie ticket is $15. Movie-goers often purchase concessions when they’re available and spend an additional $10. After costs, your profit margin should be around 30%.

In your first year or two, assuming a two screen theater, you could show two screenings per week to 75 patrons each. You could charge $15 a ticket and sell $10 worth of concessions to each person, bringing in $195,000 in annual revenue. This would mean $59,000 in profit, assuming that 30% margin. As your movie theater becomes more popular, you could draw 200 people per screening, bring in $520,000 in annual revenue, and make an impressive profit of $156,000. 

What barriers to entry are there?

There are a few barriers to entry when starting a movie theater. Your biggest challenges will be:

• Securing a viable theater location
• High startup costs
• Drawing viewers away from established theaters

Step 2: Hone Your Idea

Now that you know what’s involved in starting a movie theater, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research movie theaters in your area and online to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a theater with a full-service restaurant or arcade. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

At your movie theater, you’ll be selling tickets to the films you decide to feature. Due to licensing fees, blockbuster new releases are more expensive to show than older films. Offering concessions or a full bar with alcoholic beverages would increase revenue. 

Some theaters also have arcade games onsite. You could also consider renting your theater out for corporate events or private screenings. 

How much should you charge for movie tickets and concessions?

Movie tickets typically cost between $12 and $20. You can charge a discount for a matinee show or a premium price for weekend showings. In terms of concessions, you could charge anywhere from $5 to $12 for candy, popcorn, and sodas. If you decide to offer alcoholic beverages, you can charge between $10 and $20 per drink. 

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be individuals and families who enjoy viewing films in a theater. Movie-goers come in all ages, shapes, and sizes, so spread your marketing efforts across social media platforms like TikTok, Facebook, and Instagram. 

Where? Choose your movie theater location

Ideally, you’ll want to lease an existing theater that’s already designed for showing films. Look for a theater in a desirable location that’s easily accessible with plenty of parking. Theaters attached to malls and shopping centers are convenient for patrons. 

As your business grows or if you acquire additional theaters, you’ll likely need to hire workers for various roles and may need to rent out a separate office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Movie Theater Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “cinema” or “theater”, boosts SEO
• Name should allow for expansion, for ex: “Screen Savvy” over “Horror House Cinema”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Movie Theater Business Plan

Here are the key components of a business plan:

• Executive Summary: A brief summary outlining the movie theater business’s main highlights and goals.
• Business Overview: A concise description of the movie theater, its location, and its mission.
• Product and Services: Explanation of the movies, concessions, and additional offerings provided by the theater.
• Market Analysis: An assessment of the local demand for movie entertainment and demographic trends.
• Competitive Analysis: Evaluation of other theaters and entertainment options in the area.
• Sales and Marketing: Strategies for promoting the theater and attracting customers.
• Management Team: Introduction to the key individuals responsible for running the movie theater.
• Operations Plan: Details on day-to-day theater operations, from screening schedules to staffing.
• Financial Plan: Financial projections, including revenue, expenses, and profit expectations.
• Appendix: Supplementary information, such as supporting documents or additional research.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to movie theaters. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your movie theater will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a movie theater. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Movie Theater Business Licenses and Permits

Starting a movie theater requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your movie theater as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Veezi, JACRO, or Ticketor, to manage ticketing, develop mobile apps, and create digital signage. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• Strategic Partnerships: Collaborate with local restaurants for cross-promotions, offering discounts or package deals that include dinner and a movie, creating a win-win for both businesses.
• Local SEO — Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
• Themed Movie Nights: Organize themed movie nights to attract niche audiences; for example, classic movie marathons, date nights, or family-friendly weekends.
• Loyalty Programs: Introduce loyalty programs that reward frequent customers with discounts, free tickets, or concession upgrades to encourage repeat visits.
• Social Media Engagement: Leverage social media platforms to engage with your audience through interactive content, polls, and behind-the-scenes glimpses to build a sense of community around your theater.
• Exclusive Premieres and Events: Host exclusive premieres, red-carpet events, or Q&A sessions with filmmakers to create buzz and position your theater as a go-to destination for film enthusiasts.
• Student and Senior Discounts: Attract a broader audience by offering discounted tickets for students and seniors on specific days or times, making your theater more accessible to different demographics.
• Matinee Specials: Introduce matinee specials during off-peak hours to entice budget-conscious customers, providing an additional revenue stream during slower periods.
• Local Sponsorships: Seek sponsorships from local businesses to fund special screenings or events, enhancing your community presence while generating additional revenue.
• Mobile App Integration: Develop a mobile app for easy ticket purchasing, personalized recommendations, and exclusive mobile-only promotions to enhance the overall customer experience.
• Customer Feedback Incentives: Encourage customer feedback by offering incentives such as discounts or free concessions, showing that you value their opinions and are committed to continuous improvement.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your movie theater meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your movie theater could be:

• Where Hollywood meets hometown!
• Fantastic film fun for the whole family
• More than just movies – cinema bar and cafe 

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a movie theater, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in the film industry for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in movie theaters. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a movie theater include:

• Cashier – Greet customers, sell tickets
• Concessions Workers – Prepare and serve food, collect payments
• Theater Manager – Manage employees, maintain inventory
• Film Operator – Manage projector and sound, troubleshoot equipment

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Movie Theater – Start Making Money!

As movie-goers head back to the big screen, it’s the perfect time to start your own cinema. It will take hard work, but it’s a rewarding way to make a living, and your movie theater could become everyone’s favorite hang-out spot!  

Now that you’ve done your homework, it’s time to put your entrepreneurial insights to good use and spark up that projector. 

FAQs

Is a movie theater business profitable?

Yes, movie theaters can be profitable. The key to increasing revenue is to offer and upsell concessions to your customers. You might also consider renting out your theater space for private events.

How can I differentiate my movie theater from competitors in the market?

To differentiate your movie theater, focus on providing a unique and immersive movie-watching experience through features like state-of-the-art technology, comfortable seating, enhanced sound systems, specialized screenings (e.g., 3D, IMAX), curated film selections, and offering a variety of alternative content such as film festivals or special events.

How can I identify and secure movie distribution deals for my theater?

Identify and secure movie distribution deals for your theater by networking with film distributors, attending industry events and film markets, utilizing online platforms for industry connections, showcasing your theater’s capabilities and audience reach, and negotiating licensing agreements directly with movie studios or independent filmmakers.

What types of discounts or loyalty programs can I offer to encourage repeat business?

Offer discounts or loyalty programs such as discounted ticket prices for matinee screenings, special pricing for student or senior citizens, bulk ticket purchases for groups, loyalty cards with rewards or points-based systems that can be redeemed for future movie tickets or concessions, and exclusive access to advanced screenings or special events.

What types of food and drink offerings can I provide in my movie theater?

Provide a range of food and drink offerings in your movie theater, including traditional concessions like popcorn, candy, and soda, as well as expanded options like gourmet snacks, specialty coffees, artisanal ice cream, healthy snack choices, and even a full-service dining experience with a menu tailored to the movie theme or audience preferences.