How to Start a Movie Theater Business & Obtain a License

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Although streaming services have taken a bite out of the movie theater business, there are still plenty of people who enjoy the cinema experience with a huge screen and surround sound. There's also the social aspect of a night at the movies that just can't be duplicated by sitting at home and watching television.

The Market for Independent Movie Theaters

As the owner of a small independent movie theater, it's difficult to compete with chain multiplexes. That's because of the high cost of doing business with major studios. For example, when "Star Wars: The Last Jedi" was released in 2017, Walt Disney Studios set forth a number of conditions for theater owners, including a 65% take on ticket sales (compared to the usual 50%) and the guarantee that the movie would be shown in the largest auditorium on the premises for a minimum of four weeks.

What a small movie theater business can offer audiences is the opportunity to see independent studio productions and foreign-language films that aren't profitable enough for large chain theaters. Like indie booksellers, you can open an indie movie theater to cater to a niche market, providing people with an experience they can't get anywhere else.

Develop a Business Plan

It's likely that you'll need financing to open a movie theater, and a written business plan is a major component of the process. Lenders, investors and grantors want to know that you have done your research and thought through the various aspects of owning and operating a successful business.

Look online for free business plan templates. You can find some that are specific to opening a movie theater. Included in your business plan should be details about the structure and management of your business, market research and marketing strategies, financial statements and projected balance sheets for at least two years into the future.

Seek Professional Advice

Local offices of the Small Business Administration and the Small Business Development Center exist to help entrepreneurs navigate the process of starting their own business. For industry-specific information, look to The National Association of Theatre Owners (NATO). The organization has developed relationships throughout the industry, from federal policymakers to distributors to the creative forces behind movie-making. Membership in NATO provides many networking and educational opportunities for theater owners.

Movie Theater License

There are two different kinds of licensing you must obtain for your small movie theater business. You need a business license as well as a license for a public showing of a film. Failure to get a film license can result in stiff penalties for violation of copyright laws. Visit IMDbPro for a list of film distributors as they're the ones you'll negotiate with for licensing on a per-film basis.

Register Your Business

Next, you'll need to obtain a federal tax ID number (also called an Employer Identification Number or EIN). Visit the website of the Internal Revenue Service (IRS) to apply. The application process is free and you'll get a unique number within one to two business days.

Visit your local governing authority at city hall or the county seat to find out about licensing requirements where you are. You'll need to have your movie theater inspected by the building and fire departments. You may also need an inspection by the health department if you prepare and serve food on the premises.

The Cost to Get Started

Startup costs vary widely, largely because there are different options to consider when choosing the venue to show movies. Renting a space, rehabbing a building, purchasing an existing theater and building from scratch all have their own associated costs, as well as advantages and disadvantages.

Expect to spend at least $350,000 for equipment and furnishings when planning to open a movie theater. You'll need insurance for general liability, workers' compensation, and property and casualty; the cost will depend on your location and the size of your operation. It's a smart investment in the long run to hire an accountant who can help you determine startup and operating costs for your movie theater.

References

About the Author

Denise Dayton, M.S., M.Ed. is a freelance writer specializing in careers, education and technology. In addition to writing for corporate clients, she has published articles in Library Journal and The Searcher.

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