The Story Continues: Studio Movie Grill CEO Ted Croft on the Dine-In Chain’s Emergence from Covid-19

Image courtesy Studio Movie Grill

“Opening hearts and minds one story at a time” is the mantra of Studio Movie Grill. The Dallas-based chain, founded in 2000, has quite a story of its own. In 2019, Studio Movie Grill was the 13th-largest exhibitor in North America, combining a dine-in movie experience with numerous community initiatives—including its “Movies + Meals” program, providing free screenings and meals to local nonprofits—to build a powerful brand that entered 2020 set to expand.

In April 2019, Studio Movie Grill received $100 million in strategic growth investment from TowerBrook Capital Partners L.P. In January 2020, they announced plans to open five new locations through the first three quarters of the year. In March, the Covid-19 pandemic shut down North American cinemas. In October, Studio Movie Grill filed for Chapter 11 bankruptcy.

But the story wasn’t—and isn’t—over. April 2021 saw Studio Movie Grill emerge from Chapter 11 following a restructuring. With a new CEO at the helm—former COO/CFO Ted Croft, who’s been with the company since 2011—Studio Movie Grill is poised to exit from the pandemic period leaner and focused on providing the best possible guest experience—even if that means something a little different now than it did in the pre-Covid days. Boxoffice Pro spoke with Croft; Ted Low, V.P., brand and marketing; and Tearlach Hutcheson, V.P., film, on SMG’s emergence from a challenging 2020 and the next chapter in its own ongoing story.

Studio Movie Grill’s Arlington, TX location. Photo courtesy of Studio Movie Grill

Studio Movie Grill was one of the chains that filed for Chapter 11 during 2020. Could you talk a bit about the restructuring process that SMG went through and how it will enable you to emerge stronger from the pandemic?

Ted Croft: As you can imagine, Chapter 11 is tough on all parties. It’s tough on the company, tough on your vendor partners, tough on everybody. If you turn it around and find the glass half full, what it does enable you to do is restructure. The lending partners we had, Goldman Sachs and Crestline [Investors], were our partners prior to the filing, and they stuck with us. They believed in this leadership team, believed in the brand, funded our way through the bankruptcy, and will be funding us post-emergence, which happened in April.

Today, we have 19 of our strongest locations. We’ll have two more that will open this fall. We were able to, I’d say, recast a lot of our contracts. So you’re able to review every single contract in the company, and you come out with a much stronger balance sheet.

The smart thing that Goldman and Crestline did during that time, during the pandemic and even during the bankruptcy, was that they kept the top performers. And I don’t mean just the stores. I mean our top performers in the field and our top performers at the home office. They funded that. Keeping folks around set us up for a much more positive exit and emergence. I think it positioned us extremely well to be ready for the guests who are coming back to the theaters. I think that was a very smart decision that they made, way back when. We wouldn’t be sitting here today without them. The balance sheet is stronger. We have our top-performing locations, and we have our top team performers, as well. So I think we’re set up for success.

In the months prior to the pandemic, Studio Movie Grill had gotten some investments and was planning a pretty substantial expansion. Given that, the pandemic was particularly unlucky timing for you.

Ted Croft: It was very unfortunate. When [the pandemic] hit, I think it was 32 [theaters] open, five under construction, and—as you referenced—we had others that we were close to signing. The timing was unfortunate because we were just rocking along. Five under construction. We had a remodel in progress. We had other remodels scheduled for the year after.

You had money out there, and then Covid just shut everything down.

Ted Croft: That’s exactly right. It hit like a ton of bricks. That’s one of the unfortunate casualties of the pandemic and the bankruptcy, is that unfortunately some of those sites that we had under construction are no longer going to be part of Studio Movie Grill.

Corporate social responsibility is a big part of Studio Movie Grill’s brand. Coming out of the pandemic and the restructuring, what will that look like moving forward?

Ted Low: You mentioned corporate responsibility, and we stand behind “Opening hearts and minds one story at a time” to do that. That doesn’t change with respect to the circumstances of 2020. We look at that through a “Win 5” stakeholder model [in which five groups—guests, investors, team members, communities, and vendor partners—benefit from SMG’s success], and we’ll continue to stay focused on that stakeholder model. One of the biggest things that we noticed [during the pandemic] was just how important our teams and our vendors were through the last year. As Ted mentioned, in the absence of key investor partners, in the absence of high performers, and in the absence of the communities that really stood behind us, I’m pretty confident we wouldn’t be on this call with you today explaining what our future looks like. We’d be reflecting on what the past was.

I don’t think that in any way we have any intention of deviating from that responsibility. As a matter of fact, we’ve stood it up in a lot of different ways through some campaigns in 2021. Our “Now Open, Now Hiring” campaign [in the spring] was really driven around looking for high performers to join high performers—again, doubling down on the team member piece. And we’re actually going back to resurrect some of the programs that we had to suspend in 2020 as we look into 2021 and 2022, just to try to continue to solidify that position in the market.

The unanimous feedback from a lot of the candidates [to the “Now Open, Now Hiring” campaign] coming through our H.R. teams and our ops teams was, if they were going to come back to work, they wanted to come back to work with a brand that stood on a stakeholder model or stood for something that was bigger than itself. I think that’s evidence of what the brand represented in the market. What we were working so hard to build pre-pandemic helped us stand up a little bit faster post-pandemic. That was the sentiment coming from a lot of these candidates as we looked to onboard them.

It seems like you really do enable and encourage local G.M.s to take initiative with their own theaters.

Ted Low: [Senior Director, Public Relations and Outreach] Lynne McQuaker was a key component to creating that localization effort, so that a general manager can say, “Hey, I want to do a fun run,” or, “Hey, I want to support this philanthropic effort in my community. It’s important to what I stand for.” Our “Chefs for Children” program was created by a chef outside of Chicago that had a special needs child and wanted to come up with a way to leverage the brand and the brand’s resources to benefit that group of people that he was directly impacted by. Those localized efforts, Lynne certainly deserves some credit for instituting that, and we’ve maintained that into 2021 and in the future.

On a different subject of localization—Tearlach, how much does SMG tailor its programming to individual theaters and the communities they serve?

Tearlach Hutcheson: Any time that you’re programming a theater, you’re looking for what the audience wants to see. Anyone who’s buying film for a chain is looking at each individual theater. If you’re not doing that, you’re not doing your job properly. But I think on top of that, we often do events [and screenings] for local filmmakers. We don’t necessarily take the approach of charging a large fee. We work out a deal where we split tickets or things like that, so they can have the people who are in the film and the people who are supporting them come in and be part of that event. Being a place where [people turn] up to support the local community is important to us.

Over the back half of 2021, the schedule’s just jam-packed. How does SMG approach that from a programming perspective? It has to be quite the jigsaw puzzle.

Tearlach Hutcheson: I think the difference between pre-pandemic, during the pandemic, and post-pandemic is we’re really focusing more on how our pre-pandemic models were and how that worked. I don’t see it as a jigsaw puzzle. I see it as a lot of great films coming out at the end of the third quarter and the fourth quarter. The dam is right there, and we’re waiting for that dam to release.

With all these great films coming out, we’re going to really have to focus on giving them the legs that they deserve and making sure that they stay on-screen as long as they possibly can. I think that’s one of the biggest dilemmas that we’re going to have with this onslaught of films.

How do you handle the marketing angle of that?

Ted Low: I’m actually going to be the one that’s excited about too much content. There was a lot of anticipation for Tenet last September. There was a lot of anticipation for Wonder Woman 1984 in the holidays. There was an eagerness to try to figure out how to get back to the movies, but they obviously just didn’t hit like they needed to. We started seeing an uptick in attendance as early as Tom and Jerry back in February, and so we started trying to map the trend.

If you look at how we run our strategies internally, with respect to marketing and marketing communication to our guests, we’ve got a pretty good grip on who our customers are by location, like Tearlach mentioned. While it may be a jam-packed slate, some of those titles may not always be appropriate for every one of our stores, and/or some may have longer legs than others. The marketing strategy is kind of Marketing 101: We’ve got acquisition strategies, and we’ve got retention strategies. To answer your question: The more the merrier. We run a very strategic film rollout schedule, from advanced ticketing to “now showing” to chase campaigns.

[For example], The Suicide Squad opens for us tomorrow. We’ve got paid media campaigns going for The Suicide Squad. We’ve got featured beverages going. We’re in a great relationship with Warner Bros. for that title. To continue the legs on that movie, we’ll still run chase campaigns next week and the following, but we’ll move on to the next titles that are up. We’ve got them in a sequence that sets us up to serve up content to our different constituents, because our guests have a pretty broad makeup of movie preferences.

For Ted Croft, what’s your personal vision for SMG moving forward, and how is that informed by your former roles as COO and CFO?

Ted Croft: In my former roles, there was a lot of support of the vision of the brand. A lot of the focus was on interaction with investors. Now, in a new role—and it’s not just me, it’s the entire leadership team—we’re all taking a much more enhanced awareness of the guest experience.

Our lending partners are the same [as before], and we know each other so well. That was a big part of taking on this role. They know the brand. So that frees up time and space to be able to focus on the day to day.

Our role is—it’s a little bit cliché—but we’re protectors of the brand. They stuck with us because they believe in the brand. That’s why they’re putting more money into Studio Movie Grill. And so, I don’t think we’re here just to maintain. We’re in a great position to be able to accept all these guests as they come back and give them a great experience. [But the goal is] not to just maintain. I’ve been asked to spend a portion of my role looking at potential growth opportunities for Studio Movie Grill. We do believe very strongly that those opportunities are going to present themselves in the near future, and so that’s what we’re going to focus a lot of time on. [We’re going to be] really focused on the guest experience and opportunistic growth opportunities and giving our leadership team every tool that they need to deliver that guest experience.

Your brand is strong, so you’re not in a place of needing to make fundamental changes.

Ted Croft: I think that’s fair. But we are always looking for ways to make it better and make it easier for our guests to use Studio Movie Grill. That’s a challenge we talk about almost on a daily basis.

What are some of the ways you’re exploring by which to do that?

Ted Low: There was a way to SMG, pre-pandemic. I spent a decade telling [guests], “Kick your feet back and push a button, and we’ll do all the work.” I think the environmental circumstances around us affected people’s comfortability with doing that. We, like so many others, took on what I call “catastrophe innovation.” We quickly fast-tracked getting food and beverage onto our mobile app. We quickly fast-tracked a more robust kiosk experience. Do I think those things are fully optimized today, on the call with you? No, I don’t. I think there’s opportunity to continue to make them better.

We’ve expanded our surveys, and we’ve expanded our net promoter score reach, so that we can get more and more transparency into that kind of feedback. And not just feedback from people that didn’t have the experience we wanted, but feedback from people that had the experience they wanted, so that we can learn from both sides. And the feedback that we’re getting is that there’s still a propensity to want to do full service. But there’s also a group of people—that are gaining in market share by every period—that have a propensity for wanting to do technology-based service. The brand is taking a hard look at what we’re calling “high-touch” and “low-touch” opportunities. There are certain points where “low-touch,” i.e., “high-technology,” can service the guest better. And then, in certain places where hospitality really rings out, we still want that customer and team member interaction. We’re balancing that, and I do think that’s part of what that future looks like.

We realize that there are continuous ways to optimize the experience. I think any in-theater dining concept would share the same heartburn, with respect to when we do checks and when we payout, and that’s typically happening during the climax of the movie. That’s not unique to Studio Movie Grill. That’s a reality for all of us. And so we’re constantly taking a look at how to make it better.

In this golden age of content, the moviegoing experience has to be bigger than just going to see the movie. It has to be experiential. If we can’t figure out how to dial into the experience, then we do become an archaic business model. At the end of the day, it’s got to be worth getting you off your couch and getting you into the theater and getting you into an experience that provides that kind of quality-value equation that you were looking for, that makes you feel good about the money you spent and the time that you were away from home. That’s where we’re doubling down. [When Ted Croft] says, we want to get back to basics and keep it simple, we think that’s what the customer wants. We were the first in the [dine-in] space. We want to be the best in the space. We’re just going to get back to doing what we’re good at doing.

As you do customer research and think on adjustments to your business model, are you coming to any conclusions about programming? I’m thinking specifically about non-tentpole content, whether they’re mid-budget films or alternative content. What role will that play in SMG moving forward?

Tearlach Hutcheson: We are always experimenting and trying out different forms of alternative programming. We have, from very early on, been big supporters of Funimation, and we’ve seen them rise in success. We used to do a lot of music alternative programming. The problem that we’re having post-pandemic is that we’re not really being offered that type of content at the moment. But if it was being offered, we would be putting it out there in the marketplace and playing it. So alternative programming is very important to us.

Turning back to the question about the big films and the mid-range films, it depends on what you mean by “mid-range film.” One of the conversations happening in the public sphere in this businesses is that people are only going to come out for the Black Widows, you know, things that have to be seen on a big screen. And I’m going to push back on that. I’m going to say, the best way to experience a great story is in a dark room with a bunch of strangers. The Black Widows of the world, the No Time to Dies of the world, that’s one thing. But a comedy is a lot funnier when you’re with a hundred people laughing. A horror movie: everyone being scared at the same time, everyone taking that big intake of breath. A drama. It’s better when you hear everyone silently crying in their seats, trying to pretend they’re not crying. That’s how you’re meant to experience a movie.

Storytelling has remained the constant throughout this business. The thing that’s always changed this business is technology. We’ve had this influx of streamers. But you go back and think about 1920s radio, 1950s TV: How did that change how things were shown in movies? The introduction of the VHS tape, DVD, now streamers. That definitely changed the way that people are consuming at home. But the story that I’m telling myself about home consumption is that streaming is merely people converting from DVD into streaming. We still have that block coming into the movie theaters and wanting to have that experience. The customer base is still there.

Coming off that idea of storytelling, my final question: As the industry comes out of a challenging year and a half, and as SMG emerges from its own particularly transformative time, what is the story of Studio Movie Grill going to be?

Ted Croft: My initial gut reaction is: We made it. We survived. And we’re still here. We were a great brand going in, and we’re a great brand coming out. And the SMG story is not done. I said it earlier: We’re not here just to maintain. We’re here to continue the story. As we grow, it creates opportunities. Just recently, we’ve had some well-earned internal promotions that have happened. People that stuck with us during this pandemic have been promoted into leadership positions. That’s the stuff that keeps us going. Those are the stories that we love—that the folks that have stuck with us are going to be rewarded because we have a brand that’s going to survive. To see people exceed and enrich their own lives gives us a lot of satisfaction as a leadership team. We’re not done. We’re still here. And the story continues.

Listen to audio highlights from our interview on The Boxoffice Podcast

https://share.transistor.fm/e/29494b17

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