On February 27, 2000, Michigan-based Goodrich Quality Theaters Inc. filed for bankruptcy. Based in Grand Rapids, Michigan, the chain ran 281 screens across 30 locations as of the end of December 2019, making it the 16th-largest chain (judging by screen count) in North America the prior year. The future of the then-90-year-old chain was in question—until, five months later, a rare bright spot in the news cycle of 2020: Goodrich Quality Theatres would be coming back, with new investment, new ownership, and a new name: GQT Movies.
Despite the struggles still faced by the cinema industry—premier among them the intermittent flow of content—GQT Movies seems poised for a strong second act. The goal of 2020 was “survival,” says Matt McSparin, COO, GQT Movies, and 2021 was the “year of putting our program into place”—a program that generated an overall profit by year’s end, with all but three theaters operating in the black. This, says McSparin, “without one dollar of SVOG or other government assistance.”
Boxoffice Pro spoke with McSparin to hear the story of GQT Movies—how industry veterans, industry outsiders, and New York investors bought in, slimmed it down, and brought a chain back to life amid the most pressing crisis in our industry’s history.
From Goodrich to GQT
The story begins with a different theater chain: VIP Cinemas, run by longtime industry veteran Mark McSparin (brother of Matt) and his son Jeff, the chain’s EVP. Mark, president of VIP and GQT Movies, had a connection to real estate investment firm Namdar, which held the lease for one of VIP’s Illinois locations; it was through this relationship that New York investors became interested in the Goodrich Quality Theatres bankruptcy auction. Matt McSparin, an outsider to the cinema space—his background is in “professional sports events, business ownership, and the family entertainment center world,” he says—was asked by Mark to run GQT Movies as its COO. “I was in the position that I was available to do that, [because] my business ventures essentially run themselves,” said McSparin. “So I committed myself to full-time management of the new company.”
GQT and VIP are “completely separate [entities],” says Matt “There’s no financial connection. The only connection is that Mark’s a part of both. Completely different management teams, completely different resources.” Matt does note, however, that if you combine the companies—a proposition that’s currently off the table—it would be one of the top-ten largest chains in North America.
Money Matters
“We are truly excited to be acquiring and reopening the GQT theaters, and we remain optimistic about the future of the industry,” stated Mark McSparin when announcing Goodrich’s new ownership on July 17, 2020. “We will reopen with the main objective of maintaining quality operations for our guests through cleanliness, customer service, and value. The Goodrich name has been in the theater business for 90 years, and we believe that it is important to keep the name going for many more years to come.”
But, in order to do that, some changes needed to be made. First: “Our preference, and I think it works for our model, is to own whatever we can,” rather than leasing, says Matt. He cites one particular theater, formerly a lease, that GQT “bought at arguably 50 percent of what I would call normal market value. So that was a no-brainer. We would be paying double in our lease [compared to] what we now have as a payment. Each situation brings its own unique characteristics to the evaluation.”
Where owning wasn’t a possibility, the numbers had to add up for a lease to be taken on. “We went in hoping to achieve 10 percent to no more than 15 percent occupancy costs,” says McSparin. GQT Movies owns 15 of its theaters and leases six (including an upcoming location in Forsyth, Illinois), of which four are “in the family,” that is, owned by investment partners Namdar.
Slimming Down
The deal is done—Goodrich Quality Theaters is now GQT Movies, with the proper real estate and financial agreements in place to hopefully produce a long-term return on investment. But what then?
“Lean management was our approach,” says McSparin, noting that Goodrich’s 50-person corporate office went down to being staffed by twelve. “We literally looked at every single contract, every single arrangement for providing services, and reviewed those,” down to how much they were paying for the internet at their cinemas. Contracts were reassessed and, if need be, renegotiated, a process that still continues. “We just took a really hard look: Where was the money going? And were there some things that we could do to make that side of it look good?”
Project Renovate
Running a “lean and mean” cinema operation, to use McSparin’s phrase, means being ready to get your hands dirty with things that aren’t necessarily part of the on-paper job description. This was true for McSparin, literally: “I spent three weekends in a row over in one of our theaters, pulling wallpaper off and repainting. We put in new carpeting. We’ve been doing some re-tiling work. Some low-cost facelifts, if you will, to our theaters,” along with deferred maintenance.
With the basics out of the way and more money starting to flow into theaters, “We’re just now able to look at investments in new things.” Those include new seats for three different theaters and further investment in GDX, GQT Movies’ premium large-format offering. In the fall, they plan to begin overhauling a new Pittsburgh location, adding a GDX theater with laser projection and Dolby sound.
Aside from the screens, the speakers, the seating, and the general work of zhuzhing up a cinema, McSparin also took a hard look into the vendor partners that could best help GQT in their goal of running smoothly, efficiently, and with an emphasis on customer service. His search took him to CineTrain, which helps theaters streamline their training process and make it consistent from theater to theater. On the customer side of the equation, GQT has partnered with Showtime Analytics, using data to “help us drive marketing decisions and [give us] a deeper understanding of our numbers and our guests.”
Getting to G.R.E.A.T.S.
At GQT Movies, a change in leadership was met with a change in culture, with McSparin introducing a new service model geared toward exceptional customer service from employees—or, as McSparin calls them, cast members, “because we feel like they’re part of putting on the show. We try to emphasize: You’re 50 percent of this experience. If you’re smiling at people, and you’re treating them nice, and you’re accommodating their needs, and you’re engaged,” you’re doing your job correctly.
“I’m an acronym guy,” says McSparin. One of his favorites, G.R.E.A.T.S. (see sidebar) puts an emphasis on top-notch customer service. “Unfortunately, our world is under attack, and we’re losing the art of customer service,” he says. “You go into a restaurant, and it’s probably an equal [chance] to get snarled at versus a smile. My belief is, if we don’t make [the experience] pleasant, why go to the movies?”
Another acronym that McSparin responds to is the classic K.I.S.S.—Keep It Simple, Stupid—which in the context of GQT Movies means focusing on the basics, like customer service, and refining them so that, when guests enter the theater, “They can’t put their finger on it, but it just feels different. Ultimately, what they’ll probably point to is, right down to the threshold at the entrance, it was clean. The bathrooms were clean. The people were nice, and they took care of [the guest] quickly. All aspects of that experience looked and felt the way they wanted it. That’s how we’re going to win our future.”
A Plan for Pricing
“One thing I did want to share with you,” says McSparin. “I almost hate to tell you about it, because it lets the secret out of the bag, so to speak. We actually significantly reduced ticket prices and our concession prices” compared to what they were in the Goodrich era, when the prices were in line with those of Regal or AMC.
Instituting a two- or three-dollar reduction in ticket prices, coupled with reductions in concessions prices, “actually increased our per-caps as compared to Goodrich per-caps,” with money saved at the box office going toward popcorn and soda. “Right now, year to date for 2022, we’re 80 cents higher on our per-cap than old Goodrich was in 2019 for these same theaters.” On top of that, GQT Movies has a “pretty aggressive” off-peak discount system in place, offering $5.50 tickets for adults on Monday and Tuesday as well as generous, rotating concessions discounts, including (at time of press) all-you-can-eat popcorn and soda on Wednesdays for $9.50 and a $17.95 “golden bucket” that lets customers get $1 (in the morning) or $2.50 (in the evening) refills through the end of the year. “It’s been a working model,” McSparin says, noting that prices are reviewed twice a year and that they’re facing the same bump in cost of goods as everyone else. Still, for now, low prices have shunted money over to the concessions side, where profitability is much higher for the theater.
The Main Event
“I’ve been in the workforce almost 40 years,” says McSparin. “My first job was with the Chicago White Sox right out of college. A big part of work in professional sports is putting butts in seats”—with pre-selling to groups a key part of the equation. In McSparin’s FEC operations, too, 25 percent of business comes from pre-booked, pre-planned, private events.
While the last two years have seen a streamlining of the “private rental” concept across the cinema space, McSparin still sees a lot of work to be done. “I was shocked when I came to Goodrich,” he recalls. “There wasn’t a brochure. There wasn’t even an internal document that said, ‘This is what we’d charge a group.’ There was literally zero platform for events and parties and groups. And so, I went to work, rolled up my sleeves. I built that whole program out. We have a lot of great marketing materials, frankly. We just launched a brochure that’s geared to corporations and companies, businesses.”
There’s one member of the GQT Movies team whose job is seeking out and cultivating relationships with schools and churches to raise awareness of the cinema chain as an events venue. And a prominently placed section on their website makes it easy to see what options are available for private groups—whether a child’s birthday party, a company’s customer-appreciation event, a school field trip, or an office holiday party—how much they cost (here, too, prices must be affordable), and how to request a booking.
“I see [private events] as a huge piece of our future, to keep being the guys with the white hat that are easy to work with,” says McSparin. Customer feedback on that front is encouraging, with some saying they’d tried to call another cinema about a private event and didn’t get a call back. “We’re making it easy to request. We have our people at the theater level trained to [handle those events]. I really want to embrace and grow that area.”
Looking to the Future
2020 was about staying alive; 2021 was about implementing new programs; and 2022 is about recovery, with McSparin hopeful that GQT Movies will end the year with sales as high as 80 percent of what they were in 2019. 2023, then, “has to be our year of vision for how we grow this company,” says McSparin. There are “going to be a lot of deals out there. There’s going to be migration. I don’t think there’s any mystery that we’re expecting some of the big boys to shutter some of their lower performers or vacate bad leases,” leaving the door open for renegotiations and acquisition. There’s continued potential for growth in some of GQT Movies’ existing markets, says McSparin, while in others, “frankly, we have to consider, are they going to be a part of our long-term portfolio? Some of the lower performers, the markets just aren’t the size that would warrant a reinvestment.” Now and in the future, “we’re always going to keep a keen eye on what I would call ‘home run-type’ acquisitions: low cost to buy or low rent to get into, [in a place where] we believe in the market. That’s going to be a big part of it.”
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