May 1, 2020: Most operators said “No.” He used the “There’s a place for you here” approach. Let’s all become pandemic-ready for reopening.
When Texas Gov. Greg Abbott authorized pandemic-closed movie theaters to reopen at 25% occupancy on May 1, 2020, most operators said “No.” Forget about hosting a superspreader. The economics didn’t add up, with no fresh releases and few customers.
Mitch Roberts disagreed. He controlled 57 screens, 38 bowling lanes, complete dining service, 200 arcade games — and a $42 million debt. His immediate feeling was fear when he had to shut down. He was more than ready for reopening, pandemic or no pandemic.
To fill empty seats, Roberts started playing cult favorites such as “Grease” and “The Goonies” to small indoor groups and renting empty auditoriums to gamers. Aside from painting two multiplexes white to serve as drive-in screens, he turned nine acres of cow field into paintball courses and packaged margaritas and movie night food packages for pickup and delivery. Roberts even opened a July drive-in film festival and a fake pumpkin farm with scary movies and spiked Halloween milkshakes.
Others, he claims, battened down the hatches. Roberts used the “There’s a place for you here” approach.
Nonetheless, 2020 sales decreased 60% to $20 million. Roberts only survived thanks to his bank’s temporary forbearance and subsequently $21 million from the federal government’s fund for abandoned entertainment facilities. “A miracle,” he exclaims.
Thanks to Roberts’ hustle and Texas’ prior loosening of Covid-19 limitations, his business came back quicker than other facilities. Sales were 15% lower in 2020 than in 2019, and the business was profitable again by the second quarter. Roberts owns 60% of the company and his sisters the remainder.
Pandemic Pivots Garner Results
As the pandemic continued, several businesses declared permanent closures, while others, like Austin’s Alamo Drafthouse, restructured in bankruptcy.
The owner expanded by buying four gloomy Texas buildings, including Southlake Town Square in Dallas, renovating a flagship with seven dine-in cinemas, heated recliners, laser tag, bumper cars, and an indoor ropes course.
Roberts sought the help of 43-year-old millionaire Bryan Sheffield to invest $30 million in improvements and expansion on his four properties.
The third-generation oilman says he first felt he was insane. The “crowd business” will survive Covid-19, streaming, and inexpensive 65-inch TVs, he determined after months of deliberation.
The Experience Pandemic Economy
Experiencing is a thing people want to do together, says Roberts, a Forbes 30 Under 30.
Sheffield’s family office agreed to spend up to $125 million renovating and buying houses. Evo (Roberts’ company) will earn a 2.5 percent management fee on Sheffield-funded homes and, if profitable, equity.
That is learning and leadership in a winning combination.
It’s no surprise Sheffield and Roberts clicked. Both entered family enterprises but went their way. In 2008, Sheffield founded Parsley Energy by taking over 109 of his grandfather’s old oil wells and acquiring drilling rights. Parsley was bought out for $4.5 billion in shares by Sheffield’s father’s competitor Pioneer Natural Resources.
Roberts is a fourth-generation movie theater owner. His maternal grandfather, Lee Roy Mitchell, created Cinemark and still has a 9% share (worth $150 million) in the 5,897-screen company with 524 theaters. Roberts used to sweep popcorn and refill pickle jars at his parents’ theater. That season made him despise pickles and seek action.
Upon receiving a costly Big Buck Hunter Pro two-shooter arcade game from his grandfather, he relocated it to his parents’ theater and divided the profits 50/50 with them, using his part to acquire other money-making arcade games. Pandemic thinking, some now call it.
By 17, Roberts hoped to elevate entertainment facilities like Dave & Buster’s.
He begged Grandpa Lee Roy for money while fishing. However, he agreed to assist him in refining his 50-page business plan. Roberts’ connections and Grandpa’s guidance benefited him. Strangely, Capital One refused to grant him $15 million to acquire 10 acres in Kyle, Texas, 22 miles south of Austin, and develop his first complex there.
Roberts dropped out of Texas State in 2014 to develop a 70,000-square-foot complex, which has 11 screens, 14 bowling lanes, a video game arcade, and a complete restaurant serving burgers, pizza, and even teriyaki fish.
On top of that, he’ll shortly upgrade the cinema seats to $600 recliners with trays. It’s all purposeful luxury.
Evo utilizes movies to entice customers to buy higher-margin goods such as popcorn and big sodas like conventional movie theaters. Roberts gives the studios 55% of box office earnings but gets all money from bowling, arcade games, popcorn, beer, and margaritas, with gross margins of 90%.
Following Grandpa’s advice, Roberts filled Evo’s executive staff with industry experts. “If you’re the brightest guy in the room, you’re in the wrong room.” Pandemic reaction, it could be called.
Roberts was on time. From 2015 to 2019, blockbusters like “Jurassic World” and “Star Wars: The Last Jedi” helped the U.S. box office collect over $11 billion.
A 10-screen site in Schertz, 22 miles outside San Antonio, required another $25 million from Capital One. It was the second-highest earning film of all time, giving Evo its largest income weekend ever. In 2019, Evo booked $50 million from 2.5 million customers or $20 per ticket. His greatest sites yielded over $25 per head with operating margins of 20%.
A year later, it climbed to $4.5 billion in 2021. In December, it worked again when Evo sold 62,000 tickets for the opening weekend of “Spider-Man: No Way Home,” beating even “Avengers” in 2019. Despite the rogue Omicron variety, there are no vaccines, no temperature checks, and no capacity limitations in Texas.
Meanwhile, the pandemic raged.
The Roberts-Sheffield team closed its first significant transaction on Christmas Eve, with Sheffield paying an estimated $70 million for Roberts’ maternal uncle’s nine-location suburban Showbiz company. “So enjoy seeing a new high school created,” Roberts adds. They are first looking for agreements in Texas, Florida, and Colorado.
No one buys cinemas or concert halls. But they won’t go away.
After the lockdowns, the demand will be serious. Roberts estimates over $125 million in revenue this year with 16 locations, 148 screens, and 108 lanes. Also, he’s still modifying the pandemic model. “We’re testing pods,” he adds. That’s a couch for two, away from other moviegoers, for Covid protection or other reasons.