Harrison's Reports (1950)

Entered as second-class matter January 4, ia21, at the post office at New York, New York, under the act of March 3, 1879. Harrison's Reports Yearly Subscription Rates: 1270 AVENUE OF THE AMERICAS Published Weekly by United States $15.00 (Formerly Sixth Avenue) Harrison's Reports, Inc., U. S. Insular Possessions. 16.50 v L 9A 1M Y Publisher Canada 16.50 Wew York n *■ p. s. HARRISON, Editor Mexico, Cuba, Spain 16.50 A Motion Picture Reviewing Service Great Britain 17.50 Devoted Chiefly to the Interests of the Exhibitors Established July 1 1919 Australia, New Zealand, India, Europe, Asia .... 17.50 Us Editoria] policy: No problem Too Big for Its Editorial Circle 7-4622 35c a Copy Columns, if It is to Benefit the Exhibitor. A REVIEWING SERVICE FREE FROM THE INFLUENCE OF FILM ADVERTISING Vol. XXXII SATURDAY, JANUARY 14, 1950 No. 2 A GUIDE TO THEATRE BUDGET CONTROL From time to time this paper receives from exhibitors requests for a breakdown of theatre operating costs to guide them in setting up a form of budget control that will enable them to operate their theatres profitably. Because of the fact that no two theatre operations are identical, any cost schedule of the different phases of theatre operation, or a percentage breakdown of the differ' ent items of expense that must come out of each box'office dollar, exclusive of admission taxes, cannot be accepted as a recognized standard. In some instances, for example, the rent and depreciation may be top-heavy, or salaries may be unusually high. It follows, therefore, that any theatre cost schedule devised is at best theoretical. From information obtained from several experienced theatremen, this paper, taking a consensus of their opinions, has formulated the following cost schedule, which is pub' lished, not as a perfect example of theatre budgeting, but as a guide to which the exhibitor should adhere as close as possible to keep the different phases of his operation in balance: Film Rental including shorts 25% Advertising 5% Payroll 21% Administration 5% Rent 15% Heat, Light and Power 4% Taxes and Insurance 5% Depreciation 3 % Other expenses 7% Profit 10% A more detailed explanation of what the above items include is as follows: Film rental. It is the unanimous opinion of the theatremen from whom this information was obtained that film rental should not exceed twenty-five per cent of the gross receipts. There are, they agree, some theatres that can afford to pay forty to fifty per cent for film and still be left with a handsome profit because of their ability to garner huge grosses. On the other hand, some theatres cannot exist at even twenty per cent for film rental. The twenty-five per cent figure covers the average theatre operation, and the exhibitor whose film bill runs beyond that figure endangers his profit possibilities. Advertising. This item of expense includes newspapers, theatre fronts, trailers, accessories, billboards, heralds, valances, mailing lists, programs, and any other items chargeable to publicity and exploitation. Payroll. This item includes salaries to the manager, assistant manager, ushers, doormen, watchmen, cashiers, porters, maids, and any one else employed at the theatre. If, for example, you, as the exhibitor, perform the duties of the manager, you should set yourself down for a commensurate salary. Wages in these times being rather high, it may be difficult for an exhibitor to hold this expense to twenty-one per cent of the gross receipts. But if it goes beyond that figure economics must be made on other items of expense in order to meet the condition. Administration. This item includes general office expenses, traveling, booking and buying costs, telephone and telegraph, bookkeeping, and all other expenses that are factors in the operation of an office. The percentage cost of administration expenses is, however, flexible, depending on the size of an exhibitor's operation. If, for example, he owns only one theatre and does his own booking and buying, his administration expenses can be as low as three per cent, or less, of the gross receipts. On the other hand, a circuit operation, which has home office overhead, such as office rent, film buyers and hookers, secretarial help, stationery, light, telephone and telegraph, traveling, etc., may require as much as seven per cent of the gross receipts for administration expenses, which would include also officers' salaries hundreds of if the yearly gross receipts ran into many thousands of dollars. Rent. The rent figure should not exceed fifteen per cent of the gross receipts. If you own the property, the rent figure should include interest on the mortgage, if any, all taxes, realty and otherwise, that are assessed against the property, and depreciation of the building. Heat, Light and Power. This includes fuel oil or coal, and electric power required to operate the theatre such as booth, lights, marquee, motors and cooling system. Taxes and Insurance. This item of expense includes social security and unemployment taxes, theatre license, and different insurances such as public liability, fire, workmen's compensation, fidelity bonds, burglary, etc. Depreciation. This item covers all equipment such as projectors, seats, carpets, marquee, screen, cleaning equipment and including decorations. Other expenses. This includes miscellaneous repairs; painting; sound service; film delivery; carbons; light bulbs; organization dues; equipment maintenance; legal fees; charity contributions; tickets; uniforms; cleaning supplies, etc. Although ten per cent is shown as a fair profit in the cost schedule, it may be more than fair in some cases and insufficient in others, as will be shown later on in this article from comments made by Mr. Leo F. Wollcott, chairman of the board of Allied Independent Theatre Owners of IowaNebraska, whose organization has adopted a weekly theatre expense form to help its members determine their actual costs of operations so that they may pay for film no more than they can afford. This expense form, when completed, makes it a simple matter to arrive at a percentage schedule of costs. If the exhibitor wants to determine whether or not he is keeping the different phases of his operation in proper balance. Its real value, however, lies in the fact that it helps an exhibitor to know exactly what his overhead costs are each week, thus enabling him to set a limit on how much he can pay for film so that he will be left with a profit. Mr. Wollcott first devised his weekly expense form in 1944, and it was published in this paper in the November 25 issue of that year. He has been good enough to send us a copy of the latest printing of this form which, though slightly modified, is basically the same as the original. Because of the great interest shown in this form when we first reproduced it, Harrison's Reports is reproducing it again in the belief that it will be of great benefit to our subscribers, especially those who operate small theatres: THEATRE WEEKLY OVERHEAD EXPENSES Date Exchange City (/ Prepared Area State Period Covered Theatre Average per week Shorts and News $ Salaries Social Security and F. O. A. B. . Newspaper Advertising . Other Advertising .... Light and Power Heating and Cooling .... Supplies Film Transportation .... Telephone and Telegraph . Repairs. Painting, Etc. Sound Service Travel Contributions Rent Insurance Taxes (excluding income taxes) . Depreciation Other Expenses Total Expenses $ Less Sub-Tenant & Misc. S Net Expenses $ Cost per Unit (Divide Net Expenses by 10). . $ (Sunday 3 tenths; Saturday 2 tenths; each other day 1 tenth) (Continued on bac\ page)