Reclining Seats and Premium Cocktails: New Obstacles for the Remodeled Movie-Theater Industry

Aside from major movie-theater chain consolidation and industry mergers, news headlines over the past decade have regularly highlighted modern in-theater enhancements that focus on maximizing the entertainment experience. From 4D simulation effects to full reclining loungers and premium cocktail menus, the movie-theater industry has been steadily undergoing vast remodel of what it means to enjoy “dinner and a movie.” With the millions of dollars spent on physical remodels, the most drastic and noticeable change for any moviegoer still appears to be the enhanced concession foods and alcohol beverage menus now available at hundreds of theaters throughout the country. It is this enhancement in concession offerings that has likely caused the most headaches, but greatest opportunities, for theater operators and movie studios.

While food sales remain dominant at any concession counter, the integration of alcohol service adds to the overall appeal and social experience for audiences of all ages. Movie-theaters are no longer just a place to drop off the kids while the adults go out to dinner. The new movie-theater model combines all the good attributes of a night out in one venue. The merger seems long-overdue as the alcohol and entertainment industries share a long-intertwined history. The two powerful industries often feed off each other and grow either through superstar development of boutique liquor brands (we all heard about George Clooney’s sale of his tequila brand for $1 billion last year), well placed brand promotion in major motion pictures or now with themed cocktails during major motion picture premiers. This merger of industries however has not been without significant regulatory obstacles and ongoing investment in compliance as alcohol features make their way onto concession menu boards throughout the country.

The major food and alcohol licensing obstacles of the past decade have been met with changes in law or creation of new license categories designed for movie-theater uses and in-theater amenities. These legislative efforts on both the state and local level by theater owners and operators throughout the country have paved the way for more streamlined licensing and integration of alcohol products to traditional concession offerings. However, alcohol licensing in the United States is still an area of law dominated by varying state-to-state laws and regulations including municipal ordinances that can impact when, where and how alcohol is served. This system of laws has therefore required flexibility by theater owners as well as state regulators in creating service models that can reasonably fit within enacted laws and the diverse business needs of an evolving industry. While some states like Delaware and Washington have created specific license types for movie-theaters, others like Florida have allowed movie theaters to fall within more traditional license categories after amendment of more rigid regulations.  Theater owners and operators have modified business models to account for increased food service requirements and modified hours for the sale and service of alcohol beverages as well as operational controls for preventing overconsumption and sales to minors.  As licensing for movie-theaters has become more widely accepted and approved, some of the more common operational requirements imposed by regulatory agencies for consideration in business planning include:

• Server age requirements and restrictions;
• Hours/days of sale restrictions;
• Staff training requirements;
• Designated driver programs;
• Surveillance camera and security monitoring restrictions; and
• Maximum drink sale limitations

Overall unfortunately, the licensing process remains one of the more complicated aspects of adding alcohol service to a movie-theater establishment and varying state regulations can be the most significant impediment to profitable integration of alcohol products. Theater operators with locations spread across jurisdictional boundaries find it difficult to develop uniform operational policies or even plan major premiers around the diverse set of hour and service restrictions imposed by state and local jurisdictions. Aside from the day to day operational controls, marketing restrictions, in an industry dominated by aggressive marketing promotions, also impact the full integration of alcohol service unlike any other product or amenity. Some jurisdictions restrict signage and advertisement placement as well as the use of reward points and coupons for the purchase of alcohol products.  Accordingly, theater operators that have succeeded through the licensing process then need to shift their attention to the regulatory maze that can guide compliance policies and innovative marketing that helps promote responsible sale of alcohol products with loyal consumer following and significant mark-up potential. To help guide that journey, below are a few critical areas for investment and attention before and after the licensing process:

• Licensing Obstacles: Explore potential licensing options, food service requirements, timeline, cost and potential benefit of lobbying efforts to create special license types;
• Purchasing & Record Keeping Requirements: Alcohol purchasing in the United States must flow through the three tier system of manufacturer to distributor to retailer with few exceptions. These exceptions however can provide new product opportunities and incentives for carrying local or craft brands.
• Marketing & Promotion Regulations: Most states regulate brand incentives, sponsorships and promotions with limited exemptions that can still provide for some retailer support and cooperative advertising initiatives with manufacturers and distributors. Many local jurisdictions also regulate signage placement and advertising of happy hour or drink promotions.
• Social Media Compliance: Although social media is not tied to a bricks and mortar locations or clearly regulated within the grasp of a specific jurisdiction, social media and the use of app ordering systems can nonetheless run afoul of regulations restrictions the advertising, promotion and sale of alcohol beverages to minors or in any manner that may run afoul of cooperative advertising restrictions.

The innovations in the in-theater experience and integration of alcohol service has not been met with overwhelming support or accommodation from many regulators and administrative officials. However, the laws and regulations previously preventing the addition of alcohol service have given way to allow for varying levels of integration provided theater operators remain focused on compliance and responsible service.

Marbet Lewis

About Marbet Lewis
Marbet is a founding partner of the law firm LewisFox based in Coral Gables, Florida. Lewis started working with the alcohol industry prior to graduating law school in 2004. She works with all there tiers of the alcohol industry including manufacturers, importers and retailers on various licensing and permitting projects, license transactions, mergers and acquisitions and assists with development of marketing, social media and regulatory compliance programs that promote long term business objectives.