Craig Paschich is the former president of Alamo Drafthouse Cinema, and is now one of its franchisees in Arizona.
Winner: Alamo Drafthouse Cinema
Do you have $10 million to spare? If so, have we got a deal for you as the Courtside Seats category is all about high-investment, high-profit-potential franchises—the inverse of last year’s Cheap Seats category that was won by Pinot’s Palette.
This year’s winner, Alamo Drafthouse Cinema, is riding a wave of revived enthusiasm for an impeccable movie-going experience, with high-end food and drinks beforehand. It’s a major investment, an ongoing operational challenge and an intriguing opportunity that looks even stronger when diving into the brand’s FDD and talking to two fast-growing franchisees.
In our financial research of the brand, there’s no escaping an all-in investment that can reach $20 million. Its Item 19, where franchisors provide the all-important financial data, covers a large number of units, which is reassuring compared to brands that keep numbers closer to the vest or cherry-pick the most successful units.
Alamo charges its franchisees 0.5 percent of gross sales for marketing expenses, a fairly standard 5 percent royalty fee on gross sales, and the brand has only closed a single location in recent years, as its new-unit openings heat up.
While Alamo’s investment is high, that doesn’t mean this top-shelf franchise is out of reach for newcomers willing to put together a robust business proposal with an equally strong financial plan.
Bill DiGaetano first started writing his business plan while he was in the military and stationed in Afghanistan. He considered going solo and attracting investors on his own, but his father caught the fever and they decided to go into business together.
“There are no other movie theaters that franchise, so we did a comparison from a profitability and top line revenue standpoint,” he said of his research once he was back in the U.S. “Alamo was as good or better than anything out there, and we liked the unique aspect of the business.”
They first looked at the Waco and College Station markets, but ended up building their first unit in Dallas-Fort Worth because there were no other Alamos in the area and they quickly saw potential for multiple units.
DiGaetano had a background in marketing and finance before he joined the military, but neither knew the restaurant game, which they quickly realized would be a vital part of their opening team.
“We’re combining a restaurant, bar and movie theater all under one roof, and that requires a specific skill set from an operations standpoint,” he said. “We brought on one of Alamo’s senior general managers from Austin and he came in as our director of operations and today he is our president.”
Aside from the eye-watering investment, he added that competition was their biggest fear before pulling the trigger. At the time, Dallas had little competition for dine-and-drink theaters, but today there are 9 or 10 similar offerings. That hasn’t been a bad thing, but instead has shown the potential for expanding a market with better choices.
DiGaetano’s plan is to build approximately two every year, although they are poised to open four units this year, including their first in the Twin Cities—roughly a thousand miles north of their home turf.
“At this point, we’ve built the machine and our strategic staff,” he said. “As long as the theaters continue to do well, we have every intent to continue expanding.”
With more inside information than almost any franchisee could possibly uncover, Alamo’s Arizona franchisee, Craig Paschich, is the former president of the brand. After joining the company in 2010, he secretly harbored dreams of opening his own Alamo—and when his family relocated to Arizona in fits and starts, he and his wife decided to join the party and dive into their dreams of joining the system as franchisees.
“I had been in the restaurant business 34 years, and Alamo was the only brand I ever worked for that I knew I wanted to be a franchise partner,” he said, listing his knowledge of the brand’s leadership team and his own love of the experience. “I have two young kids, and the fact that I can go eat and drink and see a movie in one place instead of five makes it more available for me.”
Beyond concerns about the investment, Paschich said the brand relies heavily on Hollywood and the movies it produces for success as an owner. He also worried about off-brand competition coming into the market, which he hoped would be minimal given that steep upfront cost.
He has one location open in Chandler, Arizona, a location opening in May, and is about to start construction on his third this spring. Now that he’s all-in on Alamo, perhaps as much as any one person could be, his day-to-day stress points center on high staff turnover and maintaining customer service that’s good enough to keep people coming to his theaters, rather than more traditional (read: cheaper) choices down the road.
“Getting people to understand what our points of differentiation are, and making sure that once they experience them, that’s when we get them for life,” he said.
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