David McLoda

Matthew DuPlessie

November 3, 1998

The Director's Cut is an innovative concept in themed dining. Guests will enjoy their meals in a spacious dining room that has been designed in great detail to reflect the theme of the major movie blockbuster at the time. Decorations will include props from the actual movie sets, and custom made decorations to turn eating out into an all encompassing experience. Diners will be served a menu that matches the theme by an appropriately costumed wait staff. The theme will change, along with the decor and menu, periodically, in accordance with the current trend in the movie theaters. The price of a dinner at The Director's Cut will be competitive with other theme or "middle priced" restaurants. Special promotions will take place from time to time to herald the coming of a new movie and corresponding theme. The Director's Cut will open with an initial restaurant in the Los Angeles area, and hopefully expand into multiple other major US cities within a couple of years.

The market for theme restaurants in particular is not presently measured by any known reputable organization. Restaurant theming, like that of Planet Hollywood and the Rainforest Café, is a relatively recent phenomenon. Since research for theme restaurants similar to the Director’s Cut is scarce, we will use research for movie theater, bar, and restaurant participants to correlate segmentation and formulate analysis.

By examining the typical movie-goer, those who would show the most interest in a movie themed restaurant, we have identified some primary markets. The segmentation assumes that there is a strong correlation between the demographics of movie-goers and the demographics of those most interested in a movie theme restaurant.

1. The Baby Boomers, at age 40 and above, with empty nests and more disposable income, are rediscovering the movie-going experience. The convenience of having both the theatre and restaurant under one roof should appeal especially to this older crowd. Many tourist also fit this segmentation as well. This age 40 and over movie-going audience increased from 15% in 1986 to 36% in 1994.
2. The children of the Baby Boomers who are now in their teenage years and have exhibited significant spending power will continue to make up a large portion of movie-goers. There are currently over 30 million North Americans in the 12-17 year old age group and the number is predicted to swell to 55 million by 2005.¹
3. Finally, the age group 21-34 are typically dating age, newly married, or newly parents. The Director’s Cut fits the needs of these groups as well. The Director’s Cut is a great date place, has a fun and interactive bar atmosphere for the bachelor, and provides an easy, non-strenuous activity for the new parent.

The market targets these age groups within households whose incomes are over $30,000.

We have chosen Los Angeles as the city to host the first Director’s Cut. A more specific location has not yet been chosen. We expect that the Director’s Cut will draw from a larger radius than a typical restaurant. The value added to our restaurant experience by having original sets and props can easily draw from a radius of 40 miles.

The Los Angeles area has been chosen for two main reasons:

1. It has a pool of individuals described by the target demographics above, including a sizeable tourist base.
2. Transporting props from nearby studios is much simpler.

Data taken from the 1990 Census Bureau for Los Angeles County:

Age Ranges People Income Ranges Households

12-17 704,363 $30,000 to $34,999 216,805

18-24 1,058,648 $35,000 to $39,999 190,045

25-29 904,261 $40,000 to $44,999 180,131

30-34 872,870 $45,000 to $49,999 148,107

35-39 724,975 $50,000 to $54,999 142,168

44. 610,360 $55,000 to $59,999 112,665

Total 4,875,477 $60,000 to $74,999 264,227

$75,000 to $99,999 223,273

$100,000 and up 235,323

Total 1,712,744

Total number of people, all age groups = 8,863,164

Total number of households, all income groups = 2,994,343

55% of L.A. county residents fall inside our target demographic based on age.

57% of L.A. county households fall inside our target demographic based on income.

There is a great deal of competition in the theme restaurant industry. The 1980s and ‘90s have produced a nation of thrill seekers and in response a myriad elaborate restaurants with themes ranging from movies, music, to sports and the rainforest. However, we will base most of our competitor intelligence on Planet Hollywood since it is the closest match to the Director’s Cut concept.

The first Planet Hollywood opened in New York in 1991. Since then, 83 Planet Hollywood restaurants have been built all over the world. Grand openings of Planet Hollywood restaurants have become major media events.

Planet Hollywood stock is currently trading at an all-time low. Quite simply, the Planet Hollywood concept is quickly losing the novelty that once attracted customers interested in the glamour and glitz of the Hollywood mystique. As more and more Planet Hollywood restaurants open, the less trendy they become. We believe that customers remain fascinated with Hollywood and movies, that they are simply bored with Planet Hollywood’s stagnant collection of movie memorabilia. The Director’s Cut periodically offers a NEW theme with new and original sets/props coming directly from blockbuster new releases.

Another source of competition is emerging from a newly formed partnership between Planet Hollywood and AMC Theatres. "Planet Movies" is a theme restaurant much like Planet Hollywood except they are to be housed under the same roof as an AMC Theatre Megaplex. Planet Hollywood’s current financial troubles are slowing the progress of the first Planet Movies that is scheduled to open in the Spring of 1999 in Easton, Ohio. Also, seven existing AMC theaters are to be renovated to incorporate the Planet Movies concept. Even though there appears to be a major slump in Planet Hollywood’s sales, theatre owners recognize the growth opportunities in bringing more restaurant serviced inside their doors.

One of our goals concerning sales is to have the majority of movie-goers who would have normally only purchased movie tickets, also purchase something from The Director’s Cut (an entrée, a drink, or T-shirt for example). We expect merchandise sales to account for at least 30% of total sales. The sale of alcohol at The Director’s Cut bar will also account for a significant portion of sales. The Director’s Cut menu prices will reflect the perceived "value added" by the customer. Prices will not be exorbitant, but we expect that customers are willing to pay for the "total movie-going experience" that The Director’s Cut will provide.

The themed dining sector has grown dramatically to over $2 billion in 1997 from $300 million in 1992. While this is an indication of increased competition, it also points toward a healthy trend in theme industry growth that is likely to support the further expansion of The Director’s Cut into other major U.S. cities.

We believe that most cities that are able to support large theatre complexes (such as the new AMC 30 theatre complexes) could also supply a sufficient market described by our target demographics. We do not plan on expanding into the international market since each restaurant requires a rather unique and skilled staff.

 Overall Marketing Strategy

Our marketing strategy will emphasize The Director's Cut as much more than a restaurant--it is an experience. One of our patrons will find himself immersed in a make believe world that matches the theme of the current blockbuster film. While the majority of our efforts will cater to the "dinner and a movie" crowd who has just watched or is planning to watch the featured film, the enjoyment of The Director's Cut dining experience will also attract dinner-only patrons, who simply enjoy the quality of the ambiance, service, and food. The restaurant will be set up to provide entertainment for the eyes and ears while the food will satisfy both taste and smell, all for a price competitive with other, less unique or engrossing themed dining options. The menu will offer several options based on the current theme with the goal of pleasing every taste and almost every wallet.

The initial marketing campaign for the first (and each subsequent) restaurant will be quite localized. As the Director's Cut is a service providing business that requires the customer to actually visit the restaurant site, advertisements on a national scale achieve very little more than local and regional ads, which cost a fraction of the price.

There are several strategies for pricing that would allow for lucrative operation. The first is modeled after the majority of our theme restaurant competitors, including Planet Hollywood and the Hard Rock Cafe. It calls for simply rolling the expenses of the theme decor into the overhead that is taken into account when determining food prices. Basically, the cost of the food, supplemented by large amounts of theme product merchandising, funds the whole operation. A burger that would cost $4-$5 at a corner diner costs $7.25 at Planet Hollywood. Typical prices for a Director's Cut entree will be $10-$25 per plate with appetizers costing in the neighborhood of $6-$7. Naturally, these prices will vary as the menu adjusts to match the newest theme. In general, the goal is to keep prices competitive with middle class restaurants, enabling the large majority of the local population to afford a visit. The perceived value of a dinner at The Director's Cut will be high, as it is marketed as an experience, not just a meal. Conservatively, the average total gross revenue per customer will be in the neighborhood of $20, not including alcoholic beverages (which add a significant source of revenue due to their extremely high margins). Food is the only bill a customer will pay; all visual entertainment and scenery is free with dinner.

A second model for pricing is the package deal system. As each Director's Cut restaurant is located in or adjacent to a movie theater complex with the intention of appealing to the "dinner and a movie" crowd, a packaged deal including dinner for two or for a family along with movie tickets for the feature film will be offered. This has several advantages for the consumer, for the theater, and for The Director's Cut. We will be able to purchase tickets at reduced rates, because we can buy in large quantities from the theater. This allows the consumer to see the film of choice less expensively and with the convenience of having a ticket provided instead of needing to wait in line at the ticket counter. The theater will benefit from the advertising financed by The Director's Cut for the latest hit film theme by

increasing awareness of the movie. It also increases the draw for the movie theater by providing a more "comprehensive" experience option--having dinner match the movie's theme effectively lengthens the duration of the entertainment, therefore increasing its value. The ability to offer a package including theater tickets will increase the interest in dinner at The Director's Cut due to the perceived benefits of cost savings and convenience. Consumers like groupings of related products, as evidenced in the fast food industry by the proliferation of "Extra Value Meal" deals that offer a complete meal for one price. The Director's Cut goes beyond offering the entire meal for one price to including the entire nights entertainment for one discounted rate.

The details of a package deal would need to be worked out with the individual theater involved at each Director's Cut location. Here are two likely sample packages:

Package 1: Dinner and a movie for two. $49

- One appetizer

- Two entrees and beverages from a special menu (eliminating some higher priced entrees)

- Two tickets to the that evenings showing of the Director's Cut featured film

Package 2: A family night out. $59

- Two entrees and beverages from a special menu as in Package 1

- Two dinners from a "Kid's Menu"

- Four tickets to that evenings showing of the Director's Cut featured film

Package 2 could have the option to add additional children for $10. There are many combinations that may be tailored to fit the demographics of the neighborhood surrounding each individual Director's Cut. Other discount prices will be made available to groups. For example, 10% discounts for parties of 12 or more, in order to attract large, organized groups like birthday parties.

Initially, before the chain of Director's Cut restaurants stretches across the country, only local/regional advertising will be used. The basic publicity campaign will involve a high profile "grand opening" followed by a consistent stream of basic print media advertisements designed to remind people that The Director's Cut should be an option for their entertainment in the near future, as well as herald the latest theme and any special promotions or events.

The grand opening will be a highly publicized event. There will be free/cheap food, notable Hollywood celebrities, especially those from the first theme (as can be arranged within the budget), and plenty of promotional materials for both the movie and the restaurant itself handed out. Special attention will be taken with the initial theme decor, to make certain it is of superior quality. The goal of the grand opening is to establish a very positive reputation early on, so that later advertisements may serve as maintenance. Media exploited for this grand opening will include newspaper ads in all the local papers, posters in the major commons areas of the neighboring cities, a hand-out campaign of small flyers distributed by paid "picketers," and possibly even advertisements on local cable television. The balance of these methods can be determined for a specific area with the help of demographics information and the input of local advertising agencies. The budget for a grand opening, including the ad campaign, will be in the neighborhood of $50,000.

The long term publicity campaign will include posters and picketers in front of the host theater and possibly other, nearby theaters. These will advertise promotional specials and hand out strategic coupons. Each time a new theme comes into The Director's Cut, there will be a brief media blitz consisting mainly of newspaper ads to proclaim the new theme, and all its wonderful features, including the menu and special props or visual effects in the restaurant.

A main advertising thrust will also concentrate on tourists to the area.

Hotels and travel agencies will be given promotional pamphlets (sometimes containing coupons). The travel agents and hotel concierges will also be given complimentary dinners at The Director's Cut in an effort to have our reputation passed on by word of mouth by these influential people.

Web based advertising is also proving to be increasing successful, with a very high return for a relatively small input price. Links from pages that promote the movie would be helpful, even if they target an unnecessarily large audience.

Special promotions will be scheduled periodically. These may range from

visits from movie stars to showings of special videos or "The Making of..." clips. The purpose of these events is to have The Director's Cut known as a dynamic and popular place, and to hopefully capture so local media attention (resulting in free advertising).

This ad/promo campaign is consistent with most existing theme restaurants. The primary means of bringing in new business will be word of mouth. With a grand opening of significant scale and a steady stream of inexpensive ads announcing the new themes and special promotions, word will work its way around town. The key will be to maintain a consistently high quality experience for a reasonable price, so that no one goes away unsatisfied. When we achieve that, there will be more business than we can handle.