How Brian Schultz and Studio Movie Grill created a new market niche

Brian Schultz, CEO, Studio Movie Grill

Brian Schultz has learned some important lessons while leading Studio Movie Grill on its impressive growth path since he founded the Dallas-based company in 1993. Two of those lessons stand out among the others. The first is that if you want to change an entrenched business practice in your market, expect stiff resistance and you’ll need to be extremely tough and persistent in order to see the change through.

The second thing Studio Movie Grill’s CEO has learned is the meaning behind the saying, “Be careful what you ask for because you may get it,” coupled with this corollary, “And then you may find yourself with so much new business pouring in your doors that you don’t know which way to turn.”

“The first big challenge we faced was the need to get first-run movies so we could be considered a real movie theater,” Schultz says. “In our early years, we couldn’t get first-run features. Basically, all of the movie-theater-restaurants in those early days were like us — in older theaters that had one screen, maybe two. And therefore, we were only able to get sub-run movies — movies that had reached the end of their first run and would soon be released on video.”

Then Studio Movie Grill began building its second location in Addison, Texas. It was a larger-capacity theater with five screens in an upscale area. Schultz recognized that SMG might run into difficulty obtaining enough sub-run movies to fill those screens.

“We were looking at film distribution and the number of competitors that were in the area, and we were thinking, ‘Oh, man — we’re not going to be able to get enough movies,’” he says.

So a key challenge presented itself to Schultz: For SMG to realize its long-term growth goals, it would have to persuade the Hollywood studios to let it show first-run features on its screens.

“I saw that as the next evolution for movie-theater-restaurants,” he says. “As a moviegoer, you should be able to have the option to see whatever movie you want to see in this environment. So we began to think about what arguments we could make to break through this established mindset.”

Here is how Schultz got his 2,400 employees in focus for SMG to earn annual revenue of $70 million.

Insist, persist, repeat

Schultz began making rounds asking the studios to let Studio Movie Grill screen first-run movies at its theaters. The response was discouraging.

“I started contacting the people with their hands on the reins to tell them what we wanted to do,” he says. “The reaction was negative — strongly negative. I got doors slammed on me, one after another, for a lot of reasons: because we were too small, because the studios had their traditional system down and they weren’t willing to change, because they wanted to hold on to the way things were.

“But one thing I’ve learned about being an entrepreneur is that, a lot of times, it’s not about being the smartest guy in the room or anything like that — it’s about being able to get back up when you get kicked down.”

So Schultz kept calling and knocking. And calling. And knocking.

“I told myself that I was just going to keep on calling every studio distribution head for as many days as it took to get this thing done,” he says. “So that’s what I did. I would find their home phone number, their home fax machine, all of these different ways to contact them. I’d find out where they were going to be and I would show up at the place. I’d try to call their assistant. I’d try every way I could think of to get through to them. But I didn’t have any success.”

Finally, a gentleman who worked for Disney threw Schultz a bone — a meager one, or so the bone-thrower thought.

“This guy was the regional head for Disney in Dallas,” Schultz says. “I had been working on him for months. He kept saying no. I had annoyed him so much. Finally he said, ‘OK.’ I said, ‘OK what?’ He said, ‘Here’s the deal: I’m going to give you one movie to try. If it does well, we’ll talk. If not, you have to agree to never call me again.’ Then he basically picked the worst movie he could think of, just to get me to shut up.

“There was this no-name actor and this small movie that was supposed to do absolutely horribly. There was no marketing behind it, nothing. And that small-named actor was Adam Sandler, and the movie was ‘The Waterboy.’ We ended up being the top gross in all of Dallas with this movie that was supposed to be a dog. It just happened to fit perfectly with the type of customer that likes to come to a movie grill.

“By the time I got to work the following Monday, I had messages from all the other studios asking us if we would run their first-run movies.”

A key barrier had been knocked down. The tiny movie-theater-restaurant sector now had a critical tool in its hands that would enable it to compete with “real” movie theaters and, consequently, to grow and thrive.

“We were actually the first movie-theater-restaurant in the world to get first-run products,” Schultz says. “It changed the entire industry. It created this niche, which has really become the future of movie going.”

Prepare for the flood

The scene now turned to the “Be careful what you ask for” part of Studio Movie Grill’s story. Practically overnight, SMG was inundated with new business. People loved the idea of going to theater-restaurants where they could watch big-screen Hollywood movies while they were still hot, before their pop-culture glow had begun to fade.

But feeding those big crowds and serving all of the new customers well would not be easy. For Studio Movie Grill, it was time to scale up, and fast.

“We went from marginal attendance to huge attendance very quickly,” Schultz said. “So we started to run into problems. Instead of figuring out how to serve 150 meals in an hour when people came in, it was more like how do you serve 800 meals in an hour? That really got us into some operational challenges.”

To make matters even tougher, at the same time SMG was scaling up the quantity of food it had to serve to the bigger crowds, the company had ambitions to increase the overall quality of its offerings as well.

“The basis of this concept was originally more along the lines of, you know, beer and frozen foods — kind of like cheap bar food,” Schultz says. “But I never envisioned it like that. I thought it was important that we had to be able to compete with any casual dining restaurant. So we had to serve all fresh made-to-order food that’s high quality, presented well and tastes good.”

A key move Schultz made at that time was to hook up with a new mentor: Norman Brinker, founder of Brinker International, Steak & Ale and Chili’s.

“I went to a leadership event that [Brinker] hosted, and we hit it off,” Schultz says. “Eventually, it turned into a monthly meeting, with accountability, and it really informed our organization and helped us immeasurably. So if I were going to give advice, I would say that having a great mentor has always been one of the most important keys to our success.”

Optimizing its kitchens was one of the key initiatives that SMG undertook in order to scale up its food service operation to meet the huge increase in demand for tickets to its movies.

“It goes all the way down to the type of equipment you use and simply doing math equations,” Schultz says. “For example, we need to serve this many pounds of french fries, and the output of this particular fryer is X. So will that work, and how many of these do we need?

“How can you reduce the number of steps that it takes for an employee to do their work? Can we place all the things that they need to be successful in a small space to minimize the amount of traffic in the kitchen?”

Another key tool SMG began using was dining trend analyses.

“We saw that we needed to be able to follow the trends of what people are eating, how they’re eating it and when they’re eating it, so that we could be adequately prepared with the right quantity and quality of food and beverages,” Schultz says. “We keep track of what every customer eats and drinks on a per-movie basis. This enables us to predict what people are going to eat in the future. It’s a forecasting model, and it’s been a key basis for our success.”

Mobilize the team

Asked what other recommendations he would offer CEOs faced with the challenge of having to scale up operations quickly to meet a sudden increase in demand, Schultz says soliciting ideas from everyone who works for the company is crucial, as well as making sure everyone is on the same page in order to move forward as a team.

“Ask your line employees who are doing the work what success looks like to them, and use those perspectives to get everyone in alignment,” he says. “It seems like that has been a pretty common theme when we’ve been successful: We’re all aligned on the same page as far as what success looks like.

“What you need to scale up your business is to figure out how you can get your organization in alignment so everyone understands what their success means and what their contribution is supposed to be.”

Another point Schultz recommends is keeping an eye on cash flow.

“Especially when you’re scaling up, it’s important to realize that revenue doesn’t mean cash flow,” he says. “That’s a good lesson. If you’re going through a growth phase and you’re raising revenue but you’re ending up with less [cash] at the end of the day, that’s not a good trade.

“I think some CEOs get too enamored with the top line, and they forget that there are all these details and complexity when you get to a certain size. It becomes a little different. You can no longer touch everything. So cash flow becomes more important. You’ve got to watch it closely.”

Lastly, Schultz suggests that knowing how to uncover the important questions that need to be asked and then figuring out where to go for answers are more important skills than simply trying to answer all the questions yourself.

“The advice I would give is it’s OK not to know the answer,” he says. “I would have saved myself a lot of missteps and problems if I didn’t feel compelled to be a knower versus a learner. If you don’t know how to do something as it relates to, say, financing — or accounting or purchasing or you name it — a lot of times when you’re in the leadership role you feel compelled to respond, to answer — to, you know, provide leadership.

“But hopefully you can get to a point where you realize it’s OK to say, ‘I don’t know the answer to that — let’s figure out how to find the answer.’ And that can become a breakout moment for the CEO and the company.” <<

How to reach: Studio Movie Grill, (972) 388-7888 or www.studiomoviegrill.com

 

THE SCHULTZ FILE

Name: Brian Schultz

Title: CEO

Company: Studio Movie Grill

Born: Chicago

Education: Bachelor’s degree in finance, California State University, Chico

What lessons about business leadership did you learn during your time in school?

I was the vice president of finance for the student body. We owned and operated all the businesses on campus: food service, event management, catering, copy service, the bookstore. So I basically ran a $15 million corporation all through college. It was unbelievable training and experience.

What was your first job, and what did you learn from it?

It was car detailing. I started doing it when I was 10 years old, and I basically ran my own business. I learned that speaking with the customer and giving them what they want and doing it with quality always yielded better returns, appreciation and repeat business.

Do you have a business philosophy that you use to guide you?

Yes. It’s based on the principles of conscious capitalism. It’s the idea of doing good in the world through business. Our goal is to provide value for all of our stakeholders, which include our customers, our employees, our investors, our vendors, and our local neighborhoods. If we make all our decisions based on that philosophy, we believe it creates superior returns, an energized workforce, and community attachments.

What trait do you think is the most important one for an executive to have in order to be a successful leader?

Persistence — the ability to get back up when they get knocked down.

How do you define success in business?

Our success is based on making the world a better place one movie at a time, creating great experiences for families and memories for individuals. We’re pretty specific on how we measure that, rather than just measuring success on an income statement or a balance sheet. We think the two are related and that we actually get superior returns by doing the right thing.

What’s the best advice anyone ever gave you?

The thing I remember hearing from a young age is the harder you work, the luckier you get. That’s from my father.

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