Having entered the industry in 2010, Rich Daughtridge came into his newfound role as an exhibitor as a seasoned marketer. Daughtridge learned the ropes of his new trade throughout his first decade by operating two independent locations. He sold off his original stake in those investments before 2020, returning to the industry with a new concept for an independent chain: Warehouse Cinemas. With three locations in Maryland, Daughtridge spoke with Boxoffice Pro about his plans to expand the circuit—and the latest priorities in his role as President of the Independent Cinema Alliance (ICA).
How did you first come into the exhibition business?
I’m an entrepreneur at heart and was looking for opportunities to diversify my holdings as a small business owner. The 10-screen Leitersburg Cinemas came up for auction in 2009. It was a rundown location. Regal had already built another theater seven miles away with stadium seating, and this 10-screen site was literally in the middle of a cornfield, five miles outside of town on your way to Pennsylvania. It was an excellent facility that RC Theatres had expanded to a 10-plex. I went to the auction without any real intention to bid on it. The bid started at a million dollars; I didn’t have a million dollars. No one bid, and I walked up to the owner and asked: “Hey, does this thing make any money? And how does the cinema industry work?” That was the start of it. We ended up doing recliners in two of the auditoriums back in 2010, slowly working to bring that cinema back to life. We were hooked after that. We took over a single screen in Pennsylvania. A non-profit that owned the building wanted us to operate, so we operated that for a while. We sold both locations to another outfit in January 2019 and parlayed those proceeds into our first Warehouse Cinemas location, which we were preparing to open in April 2020.
An unfortunate target date for the grand opening of a movie theater—how disruptive was the pandemic to your plans?
It was bad timing. We started a total $7 million project in late 2019 using the funds we had from our sale. The Frederick, Maryland, community supported us regardless, even when we had to play retro films through the second half of 2020. Warehouse then had an opportunity to buy back the Leitersburg Cinemas, which was in foreclosure from the previous operator. We repurchased it from the bank, giving us our original location. We branded it, put money into it, and installed recliners in all the auditoriums.
We opened our third location at The Rotunda in Baltimore in May of this year. We’re a small circuit with 27 screens that focuses on the food and beverage side. One thing that makes us unique is that we’re a fast-casual model, leaning on quick-serve food you can take to your seat with you. We also lean heavily on alcohol service: cocktails, beer, and wine. We integrate experiential elements into our food and drinks, eventizing movies so the food and beverage become part of the experience.
You entered the business as an investment, sold your interest in that investment, and had the chance to walk away. What brought you back to exhibition and made you invest even more with the launch of Warehouse Cinemas?
Leitersburg Cinemas, a movie theater in the middle of a cornfield, was doing about 60,000 admissions back in 2009. It was a rough couple of years when we took it over, to be honest. We learned that after we developed a superior food and beverage offering and eventized the experience, it would drive attendance. We had over 350,000 admissions in the year before selling it. What brought me back into this business is that if you deliver a great experience, you’re not as reliant on Hollywood delivering content. There are two parts to the equation in exhibition: great content on the Hollywood side, and on our end, the challenge is to create a brand, market effectively, and deliver a unique experience to drive attendance. What we found and experienced in Leitersburg, we applied to Frederick. We like the idea that we’re a cinema that acts like a marketing agency.
You mentioned the renovation in Leitersburg, having the opportunity to return to your original location and integrate it into your current circuit. How did you approach that task?
Our motto in bringing Leitersburg back to life was, “Sometimes the sequel is better than the original.” We plastered it on billboards and sent it out to our email list. The opportunity was there when the bank took over the property. We found out who the bank was and pitched them by chance. One day [Warehouse Cinemas co-founder] Greg Mills and I were driving by the theater and noticed someone had smashed in the door—glass was everywhere. We called them and offered to fix their door. We didn’t own it at that point—it was the bank’s—but Greg showed up anyway and put up some plywood where the door was. Then we started negotiating. The industry was still coming back in 2021, and with some uncertainty. I think timing was on our side. We made an offer, and the bank accepted it. We put between $2 and $3 million into that location to completely renovate it. We wanted to bring the same industrial look and feel, the same level of food and beverage that we had launched at our flagship location in Frederick, Maryland, which opened in 2020. The previous Leitersburg iteration didn’t have that; we phased it in, and today that cinema is almost back to its 2019 attendance levels.
What were some of the early lessons you learned about this business that you still keep top of mind?
The one I always get made fun of for is the popcorn bar. I thought it would be a good idea to have a dedicated station where you could take your popcorn and add from a selection of seasonings to put together a unique flavor profile. No one bought it. We offered it as an upcharge, and no one bought into it, so that was a bad idea. We’ve just focused on traditional popcorn since, making sure it’s always fresh and offered with real butter.
We learned a good trial-and-error lesson when we launched a “Dinner and a Movie” special. We had two auditoriums with leather recliners that had removable trays. On Fridays and sometimes Saturday nights, we would do these “Dinner and a Movie” screenings for four showtimes across those two auditoriums. The Point-of-Sale providers couldn’t execute that then, so we would set those showtimes up through Eventbrite and have a third party cater it. The margins weren’t significant, and the catering cost would drive the price point too high for the consumer, so I made a deal with a local bistro to buy sandwiches and chips at scale on Friday and Saturday nights.
I would drive about 15 miles to this bistro—they had the order ready for me in tubs—and I would load it in the back of my car and drive back to the cinema. I’d have an eight-foot table where we would set up each order. It was either a ham or chicken sandwich and chips. It would take me about two and a half hours to plate all these meals, and our runners would take them to the consumers while the movie was starting. We did that for a long time, and it sold out almost every time. I would come home exhausted to my wife and three kids, but I think we learned the cost of goods for our food and beverage business. We needed to make a margin, not just sell food and create experiences. Those sandwiches helped us reach those margins; we just had to hustle and serve it ourselves. I remember friends and family buying tickets and waving at me on their way to the auditorium as I’m plating all these ham and chicken sandwiches.
Like many independent theater owners, there are nights when you’re managing the day-to-day of your theaters while working the concessions stand at one of your locations. It’s a very hands-on business. How did you come to get involved in the Independent Cinema Alliance (ICA)?
I remember meeting folks like Bill Campbell, Gina DiSanto, Mark O’Meara, and Byron Berkley at trade events. They presented it to me as a complement to NATO that serves independents. I connected with the organization’s mission: to grow and strengthen independent cinemas. I joined the committee and went to Dallas for a board meeting. I wasn’t on the Board; they just invited me to attend. I flew in and spent a couple of days with everyone there, immersed in the ICA. I joined the Board shortly after that. A couple of years later, Byron Berkley was ready to step down and retire from the ICA. They asked me to step up and be president. I brought a level of entrepreneurship and a decent amount of hustle to the role. We organized ourselves by organizing strategic objectives, and I think we’ve made tremendous progress.
Now that the pandemic is behind us, what are your ambitions with Warehouse Cinemas for the coming years?
If you can call three locations a circuit, we’re looking to grow our circuit. We have a good reputation in the industry for quality locations that gross well, with great food and beverage. We’re learning how to operate that at scale. We’re looking at locations four, five, and six—but we’re highly disciplined about what locations we take on. There are several empty boxes; some were owned by large companies that went away. Our goal is to grow intelligently. We love what we do every day. I also sit in the marketing seat at Warehouse, in addition to my leadership role. Greg Mills is our COO and sits in the finance seat. We’re still a very small organization and nimble at everything. The sweet spot for us has been layering in an innovative marketing piece in everything we do, balanced with a strong discipline around the financial side of the business. We’re going to grow, but we’ll do it smartly. If it takes us two or three years to get our fourth location, that’s fine.
It’s something we keep hearing: the contraction of major circuits is acting as a catalyst for independents and mid-sized players to expand.
I’ve seen that as well. Some of the majors are also buying up or taking over locations. On the independent side, I would put us in the category of those looking for more locations to grow and expand.
What are your future priorities for the ICA?
There are three pillars we talk about consistently. Number one is studio relations. Our goal is really to give independents a voice in Hollywood. We’re having great inroads to good conversations about strengthening and growing independents. So we’re looking for those win-win scenarios with studios across the board. The second one is our ICA marketplace. We’re trying to grow that, finding more deals for our members to save money or increase revenue. The third is the studio marketing partnerships, which also go hand in hand with studio relations. That is trying to uncover marketing opportunities within the independent side of things and doing it efficiently. It’s easier for the studios to go to the big three, top 10, 15, or whatever, and do the marketing. Independents combined represent anywhere between 15 to 20 percent of the box office. My goal is to bring that efficiency together, so the studios can spend money with us to market their films, and we work in partnership.
We set out to do those three pushes early on before I was president. We’re making tremendous progress. The future’s bright for independents if we continue to see ourselves as partners with Hollywood and identify opportunities to work together. It’s harder to work with small business operators on the independent side. That goes back to the idea of efficiency; we’re trying to find ways to make it more efficient for studios to work with us. Our members need to get a good availability of prints and programming flexibility on those, especially if you only have three or four screens. It’s a different part of the industry than the multiplexes with 16 to 20 screens per location; this is a different world. Approaching the industry slightly differently than some majors do is what sets independents apart. We are a part of our local communities and have an opportunity to amplify the message of movies coming out to our patrons. It’s all about getting the right people to discuss ways to improve as an industry.
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