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(from the archives)
December 2, 1996
by Mark Kass
of The Business Journal - Serving Greater Milwaukee
Reprinted here with permission from the Saturday November 30th, 1996 issue of The Business Journal - Serving Greater Milwaukee
With construction beginning in another month on the largest, most lucrative cinema complex in Wisconsin, how is it The Marcus Corp., the state's largest movie theater chain, was shut out of the Mayfair Mall project?
And whatever became of the Milwaukee company's plans for a similarly grandiose theater complex on Highway 100?
The answers to both those questions provide a look at how Marcus tries to use its size and market dominance to win projects and keep competitors out -- and how that tactic didn't work in a high-stakes bid for a marquee project.
And it was the first example of the expected battle in the Milwaukee-area movie industry now that several large national movie chains are planning to enter a market that Marcus has dominated for years.
When the owners of Mayfair Mall sought proposals for a multiscreen movie theater in January, they intentionally omitted Marcus, even though it is the dominant theater operator in the metropolitan Milwaukee market.
Representatives of the Wauwatosa shopping center decided they would receive better proposals from large national chains with more experience building ultra-modern theaters.
"We knew (Marcus) had the most to lose by this project going forward, and that could impact the information they would provide to us," said Mayfair general manager Stephen Smith.
Marcus ultimately made a pitch for the project in the late stages of deliberations, but Mayfair instead chose AMC Entertainment Inc. of Kansas City, the second-largest theater chain in the United States, in May. AMC plans to build a 24-screen theater on the mall's second floor.
Construction on the $5 million theater will begin in January and be completed by November 1997, in time for the holiday movie season. The 100,000-square-foot theater will be the state's largest, with projected revenue of more than $10 million a year.
The decision to give the contract to AMC was seen as a blow to Marcus, which has controlled most new theater development in the Milwaukee-area market for years, one retail observer said. A major national theater chain like AMC will likely take its share of the movie-going public's money, he said.
Marcus put up a fight for its territory, though.
The company unveiled plans in March for a 20-screen theater at the site of the former Borden Inc. plant, 1540 S. 108th St., in West Allis, two miles south of Mayfair Mall. The 4,000-seat complex was to open by December.
As of late November, however, Marcus officials had submitted no plans to the city of West Allis. In addition, the company's contract to buy the site lapsed in October, and Marcus chose not to renew it, said Mel Sedlock, director of real estate for Borden.
"We are looking at other offers right now," he said.
Bruce Olson, president of Marcus Theatres Corp., a Marcus subsidiary, said plans for the Borden site have been scrapped. Instead, he said, the company is pursuing several possibilities for a similar development. The sites are in the central metropolitan area, but he declined to identify the locations further.
"It may even end up being a larger development because the sites we are looking at are larger in acreage," Olson said.
Planning representatives in West Allis and Wauwatosa said they hadn't heard of any new Marcus theater developments in their communities.
Mayfair's Smith said Marcus unveiled its plans for the Borden site while still in negotiations for the Mayfair Mall theater complex. He first learned of the West Allis project by reading about it in the newspaper.
"It looked like they were trying to get the jump on AMC to try to force them not to pursue the project because there would be a comparable project built nearby," Smith said.
If so, it didn't work.
"Of course, we had some concern," said Rick King, senior vice president of the northeast division for AMC. "But we believed that Mayfair Mall is a much better location and would still be a successful project."
Mayfair Mall representatives and tenants claim Marcus tried to orchestrate opposition against the theater development as Wauwatosa officials reviewed the project. At one hearing, a resident handed out unflattering pictures of an AMC theater in Dallas and asked if this is what city officials wanted in Wauwatosa.
The only contact city officials had from Marcus was a warning that the AMC development could force the closure of its Tosa Theater, 6823 W. North Ave., said Wauwatosa Mayor Maricollete Walsh. The one-screen theater was sold recently to two Mequon residents.
"There was some information presented at the public hearings that I don't know how it could have gotten into some people's hands," said Gordon Rozmus, city planning director.
Olson adamantly denies Marcus tried to block or even oppose the AMC project.
"We believe in the free enterprise system and we enjoy competition," he said. "We welcome AMC to the market and look forward to a healthy competition with them. Competition stimulates innovations in technology and customer service."
Too close to home
The reason Mayfair Mall invited AMC into the Milwaukee market and dealt Marcus out of initial considerations was that the mall's owners were also looking at developing a similar project at a Virginia shopping center it owns, said Smith.
"This center is 1,500 miles away from here and Marcus had never done a project that was more than 200 miles away from Milwaukee," he said.
The Mayfair proposal had two firm requirements. The theater must have only one entrance on the second level, and it must include stadium seating. The number of screens was negotiable.
Six national theater chains made proposals to Mayfair: AMC; Hoyt's Cinemas, Boston; Cineplex Odeon Corp., Toronto; United Artists Theaters, Denver; and Cinemark USA Inc., Dallas.
The list was quickly narrowed to AMC, Hoyt's and Cineplex Odeon.
"As we got into the next level of negotiations, it became obvious that AMC was the best one for our project, along with the theater at our other center," Smith said.
At that point, Marcus made a presentation to Mayfair's owners, but it didn't meet the requirements. Marcus proposed a 16-screen theater with an exterior entrance, which Mayfair wouldn't consider.
"One of the main points in doing the project is to increase traffic on the second level, and if you have an exterior entrance, you lose some of the impact," Smith said.
Retailers on the second level of the 1.2-million-square-foot mall generate an average of 25 percent less sales revenue than first-floor tenants, he said. Mall officials for several years discussed plans to extend the second floor to its two anchors, Marshall Field's and Boston Store.
"To add 100,000 square feet of retail space in today's retail environment would be risky," he said. "But we knew we needed to do something to increase the traffic floor on the second level."
Marcus defended its plan, saying a second-floor only entrance isn't in the best interest of theater customers.
"It doesn't make sense to make people park their cars and walk through the mall to get to the theater," Olson said.
© 1996, The Business Journal
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