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How To Open a Drive-In Movie Theater

Drive-In Movie

Drive-in movie theaters are making a resurgence. Outdoor movie theaters offer customers a nostalgic, social experience they can't get in a traditional movie theater. As more theatergoers seek new and diverse outlets to experience cinema, owning a drive-in theater can be a smart business venture.

Drive-in theaters are niche markets. They can make a profit, but success is not guaranteed. You must carefully research the market and consider all financial and legal aspects before opening your own drive-in movie theater.

This article will guide you through how to start a drive-in movie theater business.

See FindLaw's Small Business Center for more information and resources for small business owners.

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1. Evaluate Your Business Idea

First, thoroughly evaluate your options. You may want to contact a small business attorney or financial advisor to assess your long-term business outlook.

Do market research to ensure your area can support an outdoor movie business. Also, consider whether you will buy an existing theater or start a brand-new business. If you buy an existing business, thoroughly review financial records and assess the condition of the property and equipment. Consider the costs of any upgrades you'll need to do to meet customer expectations.

If you decide to proceed with your business, continue with the following strategies.

2. Draft Your Movie Theater Business Plan

Your movie theater's business plan is like your project's script. It conceptualizes your business and stages out the big sequences so you can execute them later. For this step, you should research every aspect of the theater industry.

The most critical questions to address in your business plan include:

  • Where will you open your drive-in movie theater?
  • How much space will you need for your drive-in movie theater?
  • What equipment do you need?
  • What is your pricing strategy for tickets and concessions?
  • Are you the sole proprietor or working with other owners?
  • Which legal business entity will you elect when you register with a state?
  • How will you secure financing?
  • Who are your competitors, and is there a market demand for a drive-in movie theater in your area?
  • What industry trends can you use to set yourself apart from the competition?
  • What is the business name for your drive-in?
  • How will you market and promote your new venture?

Once you've finished researching, it's time to start drafting your business plan. Online templates can help.

Your business plan will be the backbone of your business. You will also use it when approaching lenders and investors for financing.

3. Get Financing for Your Startup Costs

Drive-in movie theaters need a large budget. Consider the following costs:

  • A significant amount of open property for your movie screens and customer parking
  • Projector screens
  • Ramps in your parking area to ensure all viewers can see the movie screens
  • High-end projectors that can cast images on your big screens
  • Restroom facilities
  • Concessions and cooking equipment like popcorn makers, deep fryers, and soda fountains
  • Payroll for staff to run projectors, concessions, and parking
  • An agreement with an FM station to provide audio for your showings
  • Portable FM transmitter radios for customers to rent

Securing equipment for your site will be a significant part of your startup expenses. For example, a new top-of-the-line projector screen can cost up to $150,000.

New drive-in owners can expect to pay upwards of $1 million. But this is where a comprehensive business plan pays off — a detailed plan that clearly outlines your business's potential has a greater chance of success securing funding from lenders and investors.

4. Choose a Legal Structure and Register Your Business

Next, register your movie theater business with your state's business authority (usually a Secretary of State). During this process, you should also choose a legal structure (or business structure) for your movie theater:

  • Sole Proprietorship
  • Partnership
  • Limited Liability Company (LLC)
  • Corporation

If you don't choose a structure, the state will recognize your business by default as a sole proprietorship (if you are the sole owner) or a general partnership (if there are multiple owners). These structures do not protect your personal assets from the business's debts and liabilities.

Conversely, LLCs and corporations offer liability protection. This means your assets are not at risk should someone sue your business.

LLCs protect your personal assets and provide useful tax options. LLCs can have one owner or multiple owners. These legal entities keep business and personal affairs separate. They also protect your non-business assets in a lawsuit.

Corporations are generally larger ventures that take on many owners and outside investments. Corporations tend to be more expensive and regulated than LLCs. A business can begin as an LLC and change to a corporate structure as it grows.

Business registration is subject to both application fees and renewal fees. Check with your state's regulatory business authority to determine specific fees and how to register. A local small business attorney can help with this, advising which structure is best for your business.

5. Get an Employer Identification Number

Once you've registered your business with the state, you will need a federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS). EINs are like Social Security numbers for your business. They identify your business with the IRS so you can pay taxes.

You will also need your EIN to hire employees and open a bank account. You can get your EIN instantly and at no cost on the IRS website.

6. Open a Business Bank Account

Your EIN allows you to open a business account. This helps to further separate your personal assets from your business funds. Be sure to make all theater transactions through your business bank account.

Consider taking out a business credit card to cover expenses. This also helps build your business credit.

Track all money that goes in and out of the account. Keen financial records will help you determine your profit margin to maximize your operations.

7. Find a Commercial Location for Your Theater

Decide where to locate your theater business. Drive-ins generally need 10-14 acres of flat, open land. The bigger the space, the more vehicles you can fit. You'll also need space around the property for barriers.

Consider either buying your own property or leasing commercial real estate. Check the area's zoning regulations as well.

When scouting locations for drive-ins, look for areas that customers can easily access. But you don't want to build a drive-in near a high-traffic area with many other businesses. Those businesses likely have lights that will affect screen brightness and distract from the movie.

Many drive-ins set up shop just outside of large towns. They are close to commerce but far enough away to take advantage of darker, quieter conditions.

8. Secure Your Distributor Deal

You must get a license from a film distributor to show the latest movies and new releases. Consider hiring someone with industry experience, like a booking agent. Your booking agent will work with film distributors to bring quality, in-demand content to your drive-in.

A booking agent can also help select new movies and programming that appeal to your target audiences and attract repeat customers.

9. Understand Regulations, Licensing, and Permits

There are various business licenses and permits your theater may need. Most states don't require a general business license but review your local business laws and regulations to know for sure.

Concessions are the most lucrative part of your business if you serve the right products. But selling concessions comes with federal regulations governing food sales. The U.S. Food and Drug Administration (FDA) oversees these regulations. There are several rules on what food you can serve, how you maintain food quality, and labeling laws.

Alcohol sales also offer potential profit, but they come with more regulations. If your theater sells alcoholic beverages, you need a liquor license.

Your theater must also follow the Americans with Disabilities Act (ADA). Your theater's parking, restrooms, and other areas must be accessible.

Other legal licenses and permits you may need include:

  • Sales tax permit
  • Building permit (if you need to make renovations)
  • Zoning permit

You will likely need a certificate of customer occupancy limits and emergency exit access. Local fire marshals issue these.

10. Get Commercial Insurance

Accidents happen, and business insurance protects you from potential financial losses and unforeseen events. Consider the specific needs of your business and potential liabilities when deciding on insurance coverage.

There are two specific kinds of business insurance you need:

  • General liability insurance protects you in the event of theft, property damage, and personal injury claims.
  • Workers' compensation insurance is likely needed if you hire employees. Workers' compensation protects your business if an employee suffers an injury on the job.

Another option is a Business Operations Policy (BOP) that bundles general liability, business interruption, and property insurance.

11. Hire Employees and Staff Your Theater

Besides a booking agent, you'll need to hire staff for the following roles:

  • Ticket-takers and representatives to work concession stands
  • Projection specialists to manage the projector
  • Groundskeepers to maintain the property and clean up after showings

You may also need professional support for accounting, marketing, or legal help.

When recruiting potential employees, look for people with a background in customer service or a related field. All your employees should want to provide customers with a positive, memorable movie experience. Use online job platforms, your own social media, and LinkedIn to attract candidates.

Before you hire your first employee, refresh yourself on hiring and employment laws. For example, you can't ask certain questions in the interview process. You also must verify each employee's identity and eligibility to work in the United States.

12. Market your Movie Theater

Start generating buzz about your new business before you open. Use the research on your target audience from your business plan to inform your marketing plan and the strategies you use.

A solid digital strategy can help spread the word about your new business. Consider tactics like:

  • Creating a user-friendly website
  • Maintaining a social media presence by posting consistent, engaging content
  • Using search engine optimization (SEO) strategies like keywords and good metadata
  • Employing email marketing and text (SMS) marketing

Traditional marketing channels are still effective, too. Consider direct mail, generating publicity with local news outlets, and print advertisements.

Partner with other local businesses and get involved in your community. Take part in neighborhood events to connect with customers and build awareness about your new drive-in.

You could also create a loyalty program for your theater. Reward regular customers with movie discounts, free popcorn, or other perks. Most loyalty programs are entirely digital, so there is no need for a physical card.

13. Open Your Theater for Business

Now, you're ready for your first showtime. Consider a grand opening party or a special event to celebrate your new theater with your customers. Invite local news media, schools, or local celebrities to boost your media coverage.

Challenges of Drive-In Movie Theaters

Every type of business has its strengths and disadvantages. But preparing in advance can help you weather any business obstacles better. There are particular challenges you may face as a drive-in theater owner.

When you host new blockbuster movies, you must allot a share of every ticket sale to the studios that produce the movies. Because of this, the bulk of profits for most theaters is through concession sales. This can be challenging for drive-in theaters where customers are more likely to bring in their own food and drinks.

There are also environmental concerns. Depending on the weather, moviegoers may have to run the heat or air conditioning in their vehicles for the evening, which can produce exhaust fumes and noise pollution.

Drive-in theaters also tend to be a more seasonal business. Depending on where you operate, the weather could significantly impact your business operations.

Need More Help With Your New Business? Speak With an Attorney

Drive-in movie theaters can be fun, rewarding businesses. But that doesn't mean owning and operating one is easy. Opening any business takes extensive planning, grit, and attention to detail. Factor in the laws and regulations that affect your business, and it's easy to get overwhelmed.

Some entrepreneurs benefit from getting professional legal help. A small business attorney in your area can take on your new drive-in's more complicated legal aspects. This can save you legal issues and free up your time and energy to focus on the parts of your business you're passionate about.

Another option is FindLaw's trusted, simple-to-use online business formation tool. This DIY tool guides you through the steps of creating your business. It also helps ensure you meet all the legal requirements.

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