Alamo Drafthouse Cinema: Tim and Karrie League (2023)

In the early 1990’s, Tim League spent $50,000 in savings to lease an abandoned movie theater on the wrong side of the tracks—a shaky experiment that eventually grew into a thriving national chain. As Tim and his wife Karrie built theaters in Austin and beyond, they made a name for themselves by offering dinner with the movie, creative pairings (like sake with Godzilla), and roadshows where movie-goers could watch Deliverance in canoes, or Rocky on the famous steps in Philly. Alamo Drafthouse Cinema now has dozens of locations across the country, but there have been plenty of bruises along the way: a failed first theater, a fractious lawsuit with business partners, and a swan dive into the red during the pandemic. This episode was produced by Carla Esteves, with music by Ramtin Arablouei. Edited by Neva Grant, with research help from Carla Esteves. Follow How I Built This: Instagram → @howibuiltthis https://www.instagram.com/howibuiltthis/ X → @HowIBuiltThis https://x.com/howibuiltthis Facebook → How I Built This https://www.facebook.com/howibuiltthis Follow Guy Raz: Instagram → @guy.raz https://www.instagram.com/guy.raz/ Youtube → guy_raz https://www.youtube.com/channel/UCNSfrxNEmCruNtjIzxCBHjg X → @guyraz https://x.com/guyraz Substack → guyraz.substack.com http://guyraz.substack.com Website → guyraz.com http://guyraz.com See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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• 0:00Guy Raz?

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• 2:04Guy Raz?

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• 3:27Guy Raz?

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• 4:09Guy Raz?

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• 4:21Guy Raz?

  Hey, everyone, it's Guy here. So this week, we're bringing you a very, very good and very funny episode from our archive. It's my conversation with Tim and Carrie Leeg, who founded the Alamo Drafthouse Cinema. And this episode is so full of amazing anecdotes about how Tim and Carrie opened a small movie theater in a parking garage in Austin, Texas, and turned it into a national chain. And just to put things in context, I spoke with them back in the spring of 2023, just as life was slowly getting back to normal after COVID. And I'll share some updates about Tim and Carrie at the end of the episode. But for now, enjoy the show.

• 5:04Speaker 01

  I stayed late one night and I was really proud of myself because I sheet rocked the entire kitchen, every last bit.

• 5:09Guy Raz?

  And you were like, awesome, I've done it.

• 5:11Speaker 01

  Called in the inspection before 6:00 AM. And it was funny because the inspector at the time, he's like, you know, Tim, I'm going to pass you for this, but I just want to show you something about sheet rock. See these little divots here? That's where you can put a little joint compound and you don't get these big bumps that are on all of your walls because you installed all of these backwards.

• 5:31Guy Raz?

  Yeah.

• 5:31Speaker 01

  It's still sheet rock. It still works. Just, just don't ever tell anybody about this because it's too embarrassing.

• 5:44Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 5:56Guy Raz?

  I'm Guy Raz, and on the show today, how Tim and Carrie Leeg took two demanding businesses and mashed them into one by launching Alamo Drafthouse Cinema, a national chain that serves dinner WITH the movie.

• 6:15Guy Raz?

  In 2019, movie theaters in the US sold about $11 billion worth of tickets. But in 2020, ticket sales plunged 80% in a single year. Now, of course, that had everything to do with COVID, but the industry is still trying to fully recover. Ticket sales this year are a lot higher than last year, but still way off where they were before the pandemic. People's habits changed. They started getting used to watching new releases at home. And it's hard to know if that change is permanent. But like any crisis in any industry, it also means there are opportunities for brands that can figure out how to differentiate. So when it comes to movies,

• 6:58Guy Raz?

  big theater chains are trying to create better experiences: upgraded seats, better sound, bigger screens, and food that is actually good. But long before the industry was trying to turn movie watching into a movie experience, Tim and Carrie Leeg were experimenting with that exact idea. In 1993, with his own savings, Tim rented out an abandoned movie theater with the idea of showing classic films while serving full meals and drinks. He and his wife Carrie refurbished the place themselves, and in order to save money, they literally lived behind the screen of the theater. Now, that project fizzled out after about two years, mainly because the theater was

• 7:42Guy Raz?

  in a rough neighborhood in Bakersfield, California, not exactly a prime spot for sipping a glass of rosé while appreciating the finer points of Citizen Kane. But that shaky experiment in Bakersfield eventually grew into Alamo Drafthouse Cinema, a chain of now 40 movie theaters across the US that was among the first to offer full meals and drinks served to you while you watch a first run film. Now, running a movie theater is hard enough, but adding in a restaurant on top of it is even harder. Each of them have their own challenges around licensing, labor, logistics, you name it. But Tim and Carrie figured out how to make it work by focusing

• 8:23Guy Raz?

  on building a sense of community at each of their theaters, which you will hear about. And as with so many other founders I've talked to on this show, Tim and Carrie didn't have the slightest intention of going into business, or in this case, starting a chain of movie theaters. They both went to Rice University in the late 1980s, where Carrie studied microbiology, and Tim, mechanical engineering and art. And they first met when they were freshmen.

• 8:49Speaker 01

  The first stage of our courtship was mornings were and still continue to be challenging for me. I'm a much more of a night owl late person. And so I had an 8:00 AM calculus class. And so I would wake up, set an alarm, open up the door, and wait for Carrie to walk down the stairs and then hand her my homework to turn in so I could go back to bed. So that was how we sort of, that's like, that was sowing the seeds of the relationship, you know?

• 9:15Guy Raz?

  Yeah. All right. So you guys meet there and you become a couple, like freshman year, and that was it?

• 9:21Speaker 02

  Yeah, second semester is when we started dating.

• 9:24Guy Raz?

  Wow. So all of those kids that you knew back then and may still know some of them today, are they surprised that you got, I mean, because they're all, you know, everyone remembers like that couple that meets freshman year of college and maybe stays together for four years or maybe splits up. But here we are, like, we're talking like 35 years later.

• 9:46Speaker 02

  I think that they thought that it was strange that we were together at the time. And in fact, I think that a lot of people didn't know that we were together probably until senior year.

• 9:55Speaker 01

  Huh. Like your parents? Yeah, your parents didn't know.

• 10:00Speaker 02

  Yeah, we were definitely an odd couple.

• 10:03Guy Raz?

  Yeah. All right. So you guys graduate in 1992 from Rice University and

• 10:10Guy Raz?

  Carrie, you decide to pursue graduate work in microbiology, to pursue maybe a PhD.

• 10:18Speaker 02

  Yeah. And I will say that my relationship with Tim was a deciding factor in where I went to school.

• 10:25Guy Raz?

  Because he was going to California to go work for Shell.

• 10:28Speaker 02

  Right.

• 10:28Guy Raz?

  And that job was in Bakersfield. And I've been to Bakersfield many times, and there are like, oil rigs there. Is that, I mean, is that why there's a Shell presence there, presumably?

• 10:37Speaker 01

  Oh, yeah. I mean, if you watch the movie, there will be blood. That's kind of the Kern Valley oil epicenter. It's a huge reserve. And so it's all stems from Bakersfield.

• 10:48Guy Raz?

  And you're an engineer for Shell. And Carrie, you're up at Davis, UC Davis, which is like, what, five hours apart, but still, you're both in the same state. And tell me about that job, Tim. I mean, was it, I mean, you get there in 92. I'm sure you're paid pretty well, but it was maybe soon you get there and you realize it's not the right fit?

• 11:11Speaker 01

  Yeah. It's really, it was day one. You know, I filled out my paperwork. I, you know, signed up for my 401K, got my health insurance all sorted. And then the head of HR said, OK, well, all you got to do now is go down to the basement and pick out your art. And like, I mean, she didn't know, but that left me cold in my tracks, like, what exactly does that mean? And I can't wait to go see what this basement is. And so I went down and you had an office with a window and three walls. And so you went down to choose what paintings would be on your three walls between, you know, they had landscapes and oil derricks, or a combination of landscape and oil derrick. So you could choose whatever like spoke to you and then put it on your wall. And it was at that day where it's like,

• 11:54Speaker 01

  OK, I don't think I'm going to fit in here. And I got to now, maybe a little bit too late in the game, figure out what I want to do with my life.

• 12:03Guy Raz?

  Wow. And Carrie, you're up at UC Davis and presumably working towards a PhD in microbiology.

• 12:13Speaker 02

  Yeah. It was interesting because I was with this other group of PhD candidates. And I'd say, oh, I see that Negative Land is coming to town. Does anyone want to go see a show? And they'd tell me, no, I think that the new edition of Microbiology Today arrives in the mail today, so I can't go anywhere. And that was sort of when I realized that in a competitive field like that, you could have no outside interests. And I was doomed. And when we would call each other every night and see each other almost every weekend, a huge part of our conversation revolved around, we've made a terrible mistake.

• 12:56Guy Raz?

  Yeah.

• 12:56Speaker 02

  What are we going to do? And we would fantasize about opening a small bookshop or, you know, running away to be tour guides in Costa Rica, or, you know, millions, millions of ideas.

• 13:11Guy Raz?

  All right. So the two of you are in different parts of California, presumably trying to see each other as often as possible on the weekends, maybe driving up, Tim, to Davis. And you're at Shell, I think, for maybe a year or maybe less. I don't know how long you actually worked there. When you, when you come across a movie theater in Bakersfield that is available for lease?

• 13:37Speaker 01

  Yeah. So on my way to work was this abandoned theater. It had always been there. So I passed it, you know, 100 times. But one morning, it was different. It had the red marquee letters on it that said, for lease. And it was those red letters that was really the, you know, stereotypical lightbulb moment. I just drove in in the morning, couldn't stop thinking about it all day. It was Thursday or Friday, and I went out to a bar that night and just was waxing poetic about this great idea about opening up a cool venue, showing really amazing art house and classic movies in a classic old theater. And I just got obsessed with it.

• 14:16Guy Raz?

  I think it was called the T-Hone Theater. And so this theater is available for lease. And you start to think, hey, this could be cool. But like, did you call Carrie and say, hey?

• 14:29Speaker 01

  Yes.

• 14:30Guy Raz?

  This, yeah. Tell me about that conversation.

• 14:32Speaker 01

  Well, I just want to clarify some of your language. This seems to imply some sort of thoughtful approach to decision making.

• 14:42Guy Raz?

  It was a methodical, strategic plan.

• 14:44Speaker 01

  Yeah. I think the amount of time we're talking about from turning left on Baker Street and seeing that for lease sign to signing the lease, I think, was about eight days.

• 14:56Guy Raz?

  Eight days?

• 14:58Speaker 01

  Yeah. So, I mean, I know I talked to Carrie immediately.

• 15:01Guy Raz?

  Yeah.

• 15:02Speaker 01

  And was super excited about the idea. And then probably the next conversation was that, we're going to do this. We're going to make this happen. I got some business books at the library. This is not going to be that hard at all. We can totally do this. And it was, I don't know, I say often, like, my two greatest strengths at the time were arrogance and ignorance that just drove me forward because I should have thought it through maybe a little bit more.

• 15:25Guy Raz?

  And, I mean, I'm not criticizing you at all, but I think you were like, 23 at the time. And it, I mean, there's a romantic idea of running a movie theater, but, but there's a difference between the idea and actually doing it and knowing how to do it.

• 15:37Speaker 01

  Yeah.

• 15:38Guy Raz?

  And, and it had everything you needed inside. It had a screen. It had projectors. It had seats. It was, you just had to like, do some dusting and it was ready to go?

• 15:46Speaker 01

  Oh, I wouldn't quite go that far.

• 15:49Speaker 02

  I would come down on a weekend and I would load my car up with as many seats as it could hold. And then I would spend the rest of the week, every evening, reupholstering seats.

• 16:02Guy Raz?

  Like yourself?

• 16:03Speaker 02

  Yeah.

• 16:03Speaker 01

  Yeah. Carrie reupholstered 90% of the 500 seats of the first theater. And I would spray paint the bases and backs. And then Carrie would take the raw materials and watch movies through the week and then meet me the next weekend.

• 16:16Speaker 02

  Because at this point, I had really given up on my biology.

• 16:22Guy Raz?

  Yeah. So the plan was, all right, let's take this over. And, and do you remember how, how long it took you before you were ready to open it? I mean, you signed the lease, I think it was in 93 at some point. But do you remember, was it a month or two months or three months before you actually had, had done the work to renovate it?

• 16:41Speaker 01

  I think it was around three or four months. We didn't have any projectors. So there was a friend of ours that ran a punk club. And he had stripped out some projectors from a dollar theater. And I bought those from him for 2,500 bucks. And it was part of the deal that he had to show me how they worked, like how to take them apart and how to operate them.

• 17:05Guy Raz?

  And you were, I mean, you were still working at Shell. So

• 17:09Speaker 01

  Yeah.

• 17:09Guy Raz?

  You were financing all these renovations through your salary and savings?

• 17:14Speaker 01

  Yeah. So I lived very, very frugally because I was planning to do something. So I saved every nickel that I made. I was probably making close to 50 grand a year in the mid 90s.

• 17:24Guy Raz?

  Yeah.

• 17:25Speaker 01

  And I had accumulated $50,000 in two years at Shell. And so that's what I used to open up the first one, that, that nest egg.

• 17:35Guy Raz?

  And did you sort of think through how you were going to do this? You were going to work, do, do your day job, and then run the theater at night? Or like, hire people to run? Because movies also play during the daytime, right? When you're at your other job.

• 17:47Speaker 01

  Not at ours. We were just in nighttime.

• 17:49Guy Raz?

  OK.

• 17:50Speaker 01

  But I should probably take this opportunity to apologize to the Shell Oil Company for being probably one of their worst employees. I

• 17:57Guy Raz?

  Right.

• 17:59Speaker 01

  It got to a point where the head of HR said, well, Tim, we've, we've come to a crossroads. You're either going to need to quit, or I'm going to have to fire you. So then, then I was down to one job. And, you know, so we opened up. And it turns out that it was a lot harder than I expected. And it was all consuming. And I was underwater. I was just, I was just floundering.

• 18:20Guy Raz?

  I read that you guys opened with Citizen Kane, which is awesome. I mean, great, obviously, California story and one of the greatest movies of all time. And were all your dreams fulfilled that night? Was it sold out, packed and

• 18:31Speaker 01

  It was amazing.

• 18:32Guy Raz?

  Glamorous and, yeah.

• 18:33Speaker 01

  It was amazing. It was a wonderful night. There's, you know, there was, it's pretty full. I think it was maybe 250 people there. And it just felt amazing and great. Everything was working. I was exhausted, but like, completely fulfilled. And then the next day, we showed Kristof Kislowski's Blue.

• 18:53Guy Raz?

  Oh, yeah. Good film.

• 18:55Speaker 01

  Wonderful film. And two people came.

• 18:59Guy Raz?

  Two people.

• 19:01Speaker 02

  Yeah, there's something that I should mention about the location of the theater that Tim had signed a lease for, which was that in Bakersfield, there's a very distinctive delineation between the right side of the tracks and the wrong side of the tracks.

• 19:15Speaker 01

  There's literally tracks.

• 19:17Guy Raz?

  Right.

• 19:18Speaker 02

  And, yeah, we were very firmly on the wrong side of the tracks, where we were continually having to shoo away drug dealers and prostitutes off of our front steps.

• 19:30Speaker 01

  Yeah, and there was a payphone attached to the theater, and I got so angry because of the drug traffic out of that payphone that I probably, with hedge clippers, cut off the receiver at least 15 times, and they just kept on replacing it. Going back to arrogance and ignorance, you know, something that was drilled home to us very strong was that "location, location, location" mantra that some people that may have paid any attention to running a business, opening a business, might have heard. I didn't, I, that was news to me.

• 20:00Guy Raz?

  And, and so, how did you, I mean, I don't obviously know the economics of a movie theater, but presumably, like, a certain percentage of every showing, you know, you want, you want it to be, I don't know, 10 or 15% sold in order to cover your costs, or something like that. Because running a movie theater isn't like the church night movie where you charge everybody a dollar and give them popcorn, because that's not, actually, technically, you're not supposed to do that. I think you have to pay a license fee, even though, you know, that happens all the time. But in a movie theater, like, you, you have to pay the distributor for the rights to, to project that film onto a screen, and so whether 10 people are there, or 100 people are there, it doesn't matter, you still have to pay.

• 20:44Speaker 01

  Yeah, and going back to that, that time, one of my first moves was I bought a copy of box office magazine, and it had the names of all the studio and the indie distributor contacts with phone numbers, and so I just ended up calling everybody, and I, you know, just saying, "Hey, you know, I'm, we're going to be opening up an arthouse theater. I don't know how this works. Like, how does this work? Can you tell me how it works? How do I get movies?" And really, without fail, they were so kind. Like, it was just, it was a novelty, I think, and the way it generally works, there's a minimum of like a couple hundred dollars versus 35% of the box office.

• 21:26Speaker 01

  That's kind of like the standard for second-run arthouse films. And I can tell you that we predominantly paid the minimum, because 35% did not equal $200.

• 21:39Guy Raz?

  Yeah.

• 21:40Speaker 01

  So, the accounting was not that challenging.

• 21:42Guy Raz?

  I don't know what the numbers are, but was it ever sustainable? This, did it ever get to a point where this was like?

• 21:50Speaker 01

  No.

• 21:50Guy Raz?

  No.

• 21:53Speaker 01

  A lot of times, we would hope and pray that nobody would come, because that means we could go get a cup of coffee somewhere and have a night off. But inevitably, you know, two minutes before showtime, one elderly couple would come in, and they'd watch whatever we're playing, and, you know, the show must go on. But it never, never gained much traction. There was a diehard group of probably 200 people in Bakersfield that loved what we were doing, you know, that was our community, but, you know, they go to the movies three or four times a year, and it just wasn't sustainable for us.

• 22:24Speaker 02

  Yeah, although our costs were very low. We had no employees. We lived in a little room that we had carved out behind the screen.

• 22:33Guy Raz?

  Behind the screen?

• 22:34Speaker 02

  Mm-hmm.

• 22:35Guy Raz?

  In the theater?

• 22:36Speaker 01

  Yeah.

• 22:37Speaker 02

  And we ate meals that I prepared in the crock pot every day, using probably a dollar worth of ingredients.

• 22:46Guy Raz?

  Wow.

• 22:47Speaker 02

  And we didn't have any shipping costs, because we would drive down to Los Angeles and bring up the film prints ourselves, and go to the depot where we got the popcorn and the candy, and we would also pick up the posters and the advertising materials that we would need.

• 23:04Speaker 01

  And we didn't even process that that's not normal, you know? Like, we were the only ones coming to National Screen Service and the popcorn depot to pick it up in our car and drive it back to Bakersfield. But it did save us, you know, upwards of probably $150 a week on shipping that we just didn't have.

• 23:22Guy Raz?

  I have to assume that, that the money that you make in a movie theater is from, like, concessions, from, like, popcorn and candy. But one of the things, I guess, you guys started to do there was to serve food with, with movies. How did you, how did you decide to start doing that?

• 23:39Speaker 01

  So, we started partnering with local restaurants. It was kind of, when we worked really hard, and we put together special events that were thoughtful and creative, then people would come. And so, we would do these events where we'd show, you know, like, Il Postino, and have an Italian feast associated with it, and have an elevated ticket price, and we'd split the profit with the restaurant.

• 24:04Guy Raz?

  And by the way, did you, were you able to sell alcohol?

• 24:07Speaker 01

  Well, we wanted to. That was the original plan, and during that three or four-month period of construction, you know, I had finished a pretty heavy day of construction, so I'm wearing a dirty t-shirt and cutoff shorts, and I was, you know, 24, I think, 23 at the time, but I looked, I think, about 14, and so I just strolled into the Alcoholic Beverage Commission office and said, "I'd like one of those alcohol licenses, please." And we were turned down, so that was one of the main reasons. I think if we could have gotten that alcohol license, we might have actually been able to sneak through and make it work.

• 24:48Speaker 01

  But I will say, at this time, about a year into it, you do the math on it, we've been under the most high-stress environment of a failing business, living together 24/7 without a break from each other for a year, and we're still in love, and we're still enjoying our time together. So, you know, after, what, eight years of being together, I finally realized that means that's like, it's, it's time to propose, and so, so we got married in the middle of all that.

• 25:15Guy Raz?

  This is in, I think, in 1995, and Carrie, when you told your parents that you were marrying Tim, they were like, "Great, you're marrying a guy who's got a failing movie theater. Awesome."

• 25:30Speaker 02

  They were very ambivalent about the whole thing, the whole time.

• 25:34Speaker 01

  So, I think my, my parents were more disappointed in me, right, because of throwing away the career, and we explained this also to our parents, and I think this probably takes a little bit of the edge off of it, is that we had come to peace before we started with the idea of total and complete abject failure, right? So, we knew that that was a high probability, given the nature of the business that we were going into, and so, we had no obligations, nobody counting on us other than ourselves, and so, why not? Like, give it a shot, it could be fun, it could be changing, it could change everything, and if we fail, we'll put our tail between our legs, we'll not talk about it again, and

• 26:18Speaker 01

  we'll go become engineers and researchers again. And so, they knew that and weren't devastated by that, they were, they were supportive.

• 26:26Guy Raz?

  All right, so meanwhile, you, you guys are running this theater, and you, you make it to year two, and I think you're doing some, some pretty cool things by year two, you, like, you start to host live music, live bands, and, and so, can you tell me a little bit about this? I mean, I'm, I'm thinking about Bakersfield in the 90s, and I'm trying to, I grew up in LA, and Bakersfield in the 90s had, I mean, Korn came from Bakersfield?

• 26:51Speaker 01

  Yeah.

• 26:51Guy Raz?

  The band Korn, right? I think that's the most famed, maybe like Merle Haggard is more of, you know, but, or, you know, that, that kind of genre of country, but Korn was like the biggest band in the world at a certain point.

• 27:02Speaker 01

  So, that coincides, right? So, we had the Westwood One Radio Network Korn reunion show at the theater.

• 27:09Guy Raz?

  Wow.

• 27:10Speaker 01

  So, it was a big deal, and so, this was a special show for them.

• 27:13Guy Raz?

  That'd be a scary show.

• 27:14Speaker 02

  A homecoming show.

• 27:15Speaker 01

  It was awesome.

• 27:17Speaker 02

  They literally shook the plaster down from the ceiling.

• 27:20Speaker 01

  Yeah, and we also, we would combine silent films and music, which was pretty cool, the first time we did that there.

• 27:29Guy Raz?

  Oh, you'd have, like, live piano accompaniment?

• 27:31Speaker 01

  Or, or punk bands, too, so.

• 27:33Guy Raz?

  Punk bands to, to like silent movies in the 20s?

• 27:36Speaker 01

  Oh, yeah, yeah, that's, that's.

• 27:37Guy Raz?

  Oh, wow.

• 27:37Speaker 01

  Like, we kind of workshopped some fun ideas and said, "Oh, man, like, this is a great crowd. Too bad we're, they're just drinking water out of the water fountain."

• 27:46Guy Raz?

  The theater would last for about, maybe a bit over two years, and I guess the, kind of, the denouement, to use a film term, was a, a live performance in 1996 that was, was a performance by Montel Jordan, who, if any listeners can't remember who Montel Jordan was, the song is "This Is How We Do It," which is played at bar mitzvahs and weddings around the world today. And I don't know what he sang after he sang that song, because I don't know, I don't, you know, you've got to sit through like 12, 15 Montel Jordan songs until you get, gets to "This Is How We Do It," which is what everybody came to the show to see him sing.

• 28:27Guy Raz?

  He's performing at the theater, and I guess there was a pretty bad incident that happened that night.

• 28:34Speaker 01

  Yeah, so, there was some sort of a quarrel, we think it was sort of a love triangle dispute, and as somebody was driving away, somebody else pulled a gun out and shot, and ended up shooting the person who was driving away in the head, and that person wrecked his car into our box office, basically, and died.

• 29:00Guy Raz?

  Crashed the car into the ticket booth.

• 29:02Speaker 01

  Yeah, and so, that, that was it. We were already, I mean, the neighborhood was, was really cool, because that street was an old street, and there was a lot of really fun, interesting business trying to make a go of it, but the crime was just high.

• 29:18Guy Raz?

  Yeah.

• 29:18Speaker 01

  And so, the arthouse crowd never wanted to come, and with that press, we just knew that's it, and we were, we were gone 30 days later.

• 29:28Guy Raz?

  And so, you shut it down, and then what? I mean, now you are, your theater's done, I mean, what next? I mean, did you think about, maybe, I don't know, maybe I'll go to law school? Maybe like, or did you, Carrie, did you think, "Maybe I'll go back into the, into a PhD program"?

• 29:44Speaker 02

  No, we had been talking before that incident. We had been talking about trying again in a better location. We knew of the existence of other theaters that served food and drinks during a movie, so we strongly felt that if we could do something like that, and if we did it in a place that could support it, that it could be successful. We weren't ready to give up.

• 30:14Guy Raz?

  When we come back in just a moment, Tim and Carrie decide to launch a new movie theater in a whole new city and in the only parcel of real estate they can get, a parking garage. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 30:39Guy Raz?

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• 31:24Guy Raz?

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• 32:09Guy Raz?

  Prompt, inspect, edit and publish in one place at a whole new pace. AI agents and humans work together. The agents bring speed and scale and people bring taste, judgment and control. Learn how you can get more out of your site from a Framer specialist or get started building for free today at framer.com/built for 30% off a Framer Pro annual plan. That's framer.com/built. Rules and restrictions may apply. AI isn't just opening new business opportunities. It's changing the way businesses get work done. The questions they ask, the decisions they make, the routine tasks they can hand off.

• 32:53Guy Raz?

  That's the idea behind NetSuite Next, the next generation of NetSuite with AI woven into the tools your business already relies on. NetSuite Next surfaces insights exactly when you need them, puts agents to work on routine tasks and problems and lets you ask complex questions in plain language, like talking to a knowledgeable colleague. But technology is only part of the story. AI is also reshaping how people and teams work together. And that shift is already underway. That's why NetSuite wants to put a new expert created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work.

• 33:36Guy Raz?

  And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization and how to position your business to prosper from it. If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built.

• 34:13Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1996 and Tim and Carrie have shuttered the Téjón Theater in Bakersfield, California. But they can't give up on the idea. So they decide to look for another city where they can show movies and serve hot meals, all under the same roof.

• 34:34Speaker 02

  And we figured, well, we learned how to run a movie theater. We can learn how to run a restaurant.

• 34:39Speaker 01

  How hard could it be?

• 34:44Guy Raz?

  Man, but you decide to do this in Austin, in Texas, which is obviously an amazing city. Why did you, why'd you decide to do it there?

• 34:57Speaker 02

  We had been contemplating a variety of different cities that had a population of young people who liked to go out. And fully half of them came off of the list just because I don't like cold weather.

• 35:13Guy Raz?

  So like Minneapolis out, Boston out, yeah.

• 35:16Speaker 02

  Yeah, it just seemed like a good choice.

• 35:18Speaker 01

  And we wanted to be in where the action was. And so we had, we found a real estate broker and they were touring us on sites. And we would put in an offer and we were rejected. It's like, no, we're looking for somebody that has more than like a heroically failed business and actually a little bit of money to do this. And so.

• 35:42Guy Raz?

  And how much money did you guys? I read that you had raised about $250,000 from like friends, family, anyone?

• 35:49Speaker 02

  Yeah. So I had told you that my parents were incredibly ambivalent about everything that had happened up to that point.

• 35:57Guy Raz?

  Yeah.

• 35:58Speaker 02

  And they didn't have a whole lot more faith in this project. But I just want to give a shout out to my parents, whom I adore, that they mortgaged their house.

• 36:10Guy Raz?

  Wow.

• 36:11Speaker 02

  In order to lend us $100,000.

• 36:13Speaker 01

  Yeah.

• 36:14Guy Raz?

  Wow, that's kind of nuts because your record by that, at that point, wasn't amazing. I mean, you guys are obviously smart and passionate, but like you weren't coming to the table with a record of success in the movie theater business.

• 36:29Speaker 01

  Yeah, so there's the 100 grand from Carrie's folks. My dad and my folks put in 50. We did some really silly proposal to our friends and we got maybe $10,000 from friends as an investment. We did a series of credit card, take out the credit cards, max amount. So we got probably $25,000 from that. So I came into the Téjón, putting 50 grand in, probably still had $20,000 in the bank. Then we left with $20,000 in the bank. I think so we had, it was neutral.

• 37:06Speaker 02

  We also took the screen, the projector and all of the seats out of the Téjón because it was being gutted on the inside after we left.

• 37:16Guy Raz?

  Right. I wonder what that theater is today?

• 37:18Speaker 02

  It's a church.

• 37:19Guy Raz?

  Oh, that's okay.

• 37:21Speaker 01

  It's a common transition.

• 37:22Guy Raz?

  Okay.

• 37:24Speaker 01

  And then Bank of America had an Invest in America loan. It was like a one page form.

• 37:29Guy Raz?

  Yeah.

• 37:30Speaker 01

  And so we got, I think, $50,000 from Bank of America, which we paid back within a year. And we had a long term, still have a relationship with Bank of America. And they said, well, you guys were probably in the 1% that paid that back. We're not, we're no longer investing in America on those terms.

• 37:49Guy Raz?

  By the way, it just occurred to me, it would have made more sense for you to have started in San Antonio, given that you're called Alamo Craft House.

• 37:58Speaker 01

  You don't have a, like a time machine or something there at the office too? Because it's really, so the story of the name is, I loved this neon artist in town, Evan Voyles. And so I sought him out. It's like, I want you to make a sign for us. We have $5,000. Can you do it? It's like, well, that's pretty low, but maybe you'll ask me to do more signs down the road. And so let's look. The only way we can make it at this price is you get a rusty old can and I'll put some fresh neon on it. So.

• 38:27Guy Raz?

  A rusty old can, like a piece of metal?

• 38:30Speaker 01

  Like an old vertical blade sign.

• 38:33Guy Raz?

  Okay. And then he would put neon on that sign? Okay, yep.

• 38:36Speaker 01

  Yeah, yeah. So he, that's his specialty. He does vintage style work on vintage style pieces or makes them from scratch, but those are more expensive.

• 38:43Guy Raz?

  Okay. And you go to like a scrapyard and you just find something like that?

• 38:47Speaker 01

  Yeah, he had a neon graveyard. He had a property south of town with like 40 signs. And so we had it narrowed down to two. And I really tried hard to convince Carrie, the one I really, it was really showy. And it's like, and it already had letters. It's like, it's, it's, it's the same price. But we would have had to call our theater chain, The Tasty, with two E's, The Tasty Burger. And it just, to her credit.

• 39:13Guy Raz?

  Doesn't work.

• 39:13Speaker 01

  No, no, no. It's like, no.

• 39:16Speaker 02

  So our neon guy told us, you have to choose a name with.

• 39:21Speaker 01

  Five or six.

• 39:22Speaker 02

  Five or six letters. And so we looked at each other and we said, well, we want to be first in the phone book. So it has to start with A. And the top of our original building had that kind of Alamo-esque shape to it.

• 39:39Guy Raz?

  Yeah. Because there was a time where people would say, huh, what movie theater should I go to? Let me open up the phone book.

• 39:44Speaker 02

  We have to explain this, yes, to all the people who have never seen a phone book.

• 39:49Guy Raz?

  Can you grab the phone book so we can figure out what movie theater we're going to?

• 39:52Speaker 01

  Back in my day.

• 39:56Guy Raz?

  Oh, man. All right. So you have a little bit of cash to put down for a lease and then. But what did you eventually find? Was there a movie, like an abandoned movie theater or shut down movie theater in Austin available?

• 40:09Speaker 02

  No, we rented the second floor space of what was serving as a garage at the time in the heart of the warehouse district.

• 40:19Guy Raz?

  A garage for vehicles?

• 40:21Speaker 01

  Like a parking garage.

• 40:22Speaker 02

  Parking garage, yeah.

• 40:24Guy Raz?

  And wait, so somebody said, here's a garage. You can turn this into your movie theater?

• 40:28Speaker 02

  Yep.

• 40:29Speaker 01

  Second floor only. First floor too valuable. You guys aren't worthy for the first floor.

• 40:34Guy Raz?

  How do you, I'm just thinking, I'm in this space, I'm like, OK, there are 50 cars in here. Yeah, we can put the screen there. Like, that's a lot of, I can't even imagine renovating a garage and turning it into a movie theater.

• 40:46Speaker 01

  I don't know how he did it. I'm going to explain, like, the list of things that $230,000 bought us. Because we still had like 20 grand left at the end. So we installed the cheapest elevator. We installed both bent from scratch men's and ladies restrooms. We upgraded the water service to supply those restrooms. We built a commercial kitchen. We built a projection room. We changed the structural of the columns in the building so we'd get five extra feet of ceiling height. And it doesn't, you know.

• 41:15Speaker 02

  We put in HVAC system.

• 41:16Speaker 01

  HVAC system, new, like, there was nothing. It was just.

• 41:18Speaker 02

  New electrical.

• 41:20Speaker 01

  New electrical, new plumbing. You know, just processing it now. It's just.

• 41:24Guy Raz?

  It's nuts.

• 41:24Speaker 01

  Another thing. It's not very wise.

• 41:27Guy Raz?

  I mean, just the money you'd have to put down to just get that into shape, let alone, you know, build the, I don't know, just make it look nice.

• 41:39Speaker 02

  We spent a lot of time at the library, learning how to do construction. We bought, we took out books from the library about how to build stuff. And in addition, we knew that we wanted pizza to be the sort of the core offering of the restaurant. And so Tim took a job at a pizza place to learn how to make pizza. And I took a job as a waitress to try to learn how to be a waitress. And then I would steal paperwork from the management so that I could try to figure out what the managers were doing.

• 42:12Guy Raz?

  Yeah. And so it was about six months of just gutting that building, turning it into a movie theater, and building a pizza oven as well?

• 42:24Speaker 01

  I bought a pizza oven off of, you know, out of the back of a newspaper. So every piece of equipment that we bought was used.

• 42:32Guy Raz?

  Wow. All right. So it was going to serve mainly pizza, but beer and cocktails as well?

• 42:40Speaker 01

  Just beer and wine to start. And it was pizza, salads, and sandwiches. And we actually baked our own bread for the sandwiches for the first few years.

• 42:48Guy Raz?

  Wow.

• 42:48Speaker 01

  Which is, I say wow, but, you know, it ended up being, depends on the day. Sometimes it was wow.

• 42:56Guy Raz?

  And did you, and what was the seating like? Was it, were there like round tables, like in an old jazz club? Or was it rows, like in a movie theater with like little individual desks for food?

• 43:09Speaker 02

  Yeah, it was rows of seats that were spaced probably two and a half times as far apart as you would see in a normal movie theater. And then we built these banquet's long tables in front of the row.

• 43:25Guy Raz?

  Okay, so not too different from what they look like now.

• 43:27Speaker 01

  Pretty similar.

• 43:29Guy Raz?

  I read that before you guys opened. And again, like, I'm just amazed at the, just how hard this was to do and how you threw yourselves into it. But I guess when you guys were getting inspected, the inspector was like, you put the sheetrock on backwards. All the sheetrocks on backwards. Something I would do. But, yeah.

• 43:52Speaker 01

  So, yeah, I stayed late one night and I was really proud of myself because I sheetrocked the entire kitchen, every last bit.

• 43:59Guy Raz?

  And you were like, awesome, I've done it.

• 44:01Speaker 01

  Done it. Called in the inspection before 6:00 AM. And it was funny because the inspector at the time, he's like, you know, Tim, I'm going to pass you for this because technically it's all good, right? But I just want to show you something about sheetrock. See these little divots here on the side of the sheetrock? That's where you can put a little joint compound. And you don't get these big bumps that are on all of your walls because you've installed all of these backwards.

• 44:26Guy Raz?

  Yeah.

• 44:26Speaker 01

  It's still sheetrock. It still works. Just don't ever tell anybody about this because it's too embarrassing.

• 44:33Guy Raz?

  All right. So you passed the inspection, and you're ready to open up. And you open up, this is kind of an epic opening, because I think they're two of the greatest comedy films ever, with a double feature, Raising Arizona and This is Spinal Tap.

• 44:50Speaker 01

  Sold out.

• 44:51Guy Raz?

  Tell me about that night. People come to watch those movies, the pizzas are slinging into the oven. And what was it like?

• 44:59Speaker 01

  It was smoother than I would have thought. Like, there were things about it. There's like little granular things that went wrong. We had this idea, we'd have these little metal carts that you'd roll down the aisles. But there was a disaster. And after about five minutes, we'd say, ditch the carts, ditch the carts. But, you know, it was great. Everything worked. And it just felt that we had made it. We did it.

• 45:22Speaker 02

  Everyone had a good time, staff and customers alike. We were on top of the world. We were on cloud nine.

• 45:31Guy Raz?

  And this was, I think, about 220 seats, right?

• 45:34Speaker 02

  Yeah.

• 45:35Guy Raz?

  And now you're in, you've got a critical mass. You've got tens of thousands of students at UT. You've got music scene. It's, I mean, it's a cultural capital. Like, this is, now you're like where you should be.

• 45:50Speaker 01

  Yeah. I mean, the problem is that day two wasn't good.

• 45:58Speaker 01

  So it was, you know, remember Bakersfield, like Citizen Kane?

• 46:02Guy Raz?

  Yeah.

• 46:03Speaker 01

  Wonderful. Everything was feeling great. And then the next day, there were two people. So we showed the Clint Eastwood movie the next day, Absolute Power. Because we weren't being an art house. We were kind of a second run movie theater showing Hollywood movies.

• 46:16Guy Raz?

  OK.

• 46:17Speaker 01

  But it was better than Bakersfield because we had three people show up on day two. But this time, we had a staff. And we didn't have any money in the bank. We had enough money for about three payroll cycles. And then we're done. We're like donezo.

• 46:33Guy Raz?

  Wow.

• 46:34Speaker 01

  Yeah, we had 26 employees when we opened up.

• 46:37Guy Raz?

  Wow.

• 46:38Speaker 01

  And that was still pretty lean, you know, for what we were trying to do for a 200-person restaurant. And what we forgot was advertising.

• 46:49Guy Raz?

  Oh, right. You have to put movie ads in the newspaper at the time, in the art section, so people could like flip through and see what was playing. You couldn't, you didn't place those ads.

• 46:57Speaker 01

  Yeah. So we started taking out some ads. And then we would also, when we closed down, and this, you know, probably sounds terrible, but, you know, we're desperate. We would go to the other movie theaters with some pretty snarky flyers, like, why are you here? Just like cover, you should be at our theater. And so it's like, this is our target audience. Let's do them. And then we're, you know, routinely chased away from those marketing opportunities.

• 47:25Guy Raz?

  But here's the thing, you're, I'm assuming that your value proposition wasn't, hey, we're an art house cinema in Austin. Or, hey, we're a second run movie theater in Austin. It was, hey, we serve beer and good food, and you can see a cool movie.

• 47:41Speaker 02

  Yeah.

• 47:41Guy Raz?

  That was what you were focused on?

• 47:43Speaker 01

  100%. And so a couple of things happened pretty early. You know, the folks at the Austin Chronicle were very kind and wrote about our events. And the midnight movie programming worked pretty quickly. And then about three weeks into operation, Austin Powers, the first one, hit the second run market.

• 48:04Guy Raz?

  Uh huh.

• 48:05Speaker 01

  And it hit us like a freight train. And.

• 48:08Guy Raz?

  What do you mean?

• 48:08Speaker 01

  Well, at the same time, before that weekend, Anne Hornaday, who's now a critic for the, one of the Washington.

• 48:16Guy Raz?

  Washington Post.

• 48:16Speaker 01

  Yeah. So she wrote a really nice article about what we were and what we represented and what we were trying to do.

• 48:24Speaker 02

  Yeah. And I was like a deer in the headlights in the box office, just like mechanically, like a zombie, just selling tickets. And in my head, I was panicking.

• 48:35Guy Raz?

  Yeah. How many, how many people did you have on staff that night?

• 48:39Speaker 01

  There was two in the kitchen, and Carrie and two waiters. So there was four. But the bartender showed up in the middle of the rush. And I was like, damn, put on an apron. And so he actually worked that shift. And then I waited tables. And, you know, thankfully, we made it through that night. And from there on, it was actually pretty great. Like, it worked after that.

• 49:03Guy Raz?

  Yeah. Let me, let me ask you about the food part for a moment, because I've been to Alamo Drafthouse, and it's super fun to eat while you're watching a movie. But it's also different, right? I mean, I guess it depends, because you can go to any movie theater and somebody's crunching on popcorn. They might be really loud. But like, like there was going to be an element of just disruption, because you would have servers, like, people are moving around, getting up, getting the food. And so how did you kind of think about managing that in those early days?

• 49:33Speaker 01

  You know, it's not, it's not perfect, right? I mean, we take a hard stance on, you know, guest behavior in terms of no talking, no texting. But we acknowledge that we're not a pristine environment. You know, there's cinemas in France that don't allow any food at all into the cinema. It's just a pure experience. And we're far from that. But it's a huge part of our training to, you know, wear black and crouch down and know the movie. Don't disrupt during, you know, a key pivotal moment. And now, we're in a different era where we're, you know, to preorder in advance, and you don't have the checkout process. So you're kind of eliminating the touch points of server interaction with you.

• 50:16Guy Raz?

  Yeah. So, all right. So the Austin Powers kind of thing just really kind of just helped you guys find your footing. And I think, like, within a couple of months, maybe within a year, you started to do more of these special themed menus. Like, if you played Streetcar Named a Dream Desire, you would serve New Orleans food. Or Godzilla was being screened, you'd serve sake.

• 50:44Speaker 01

  Yeah. So it was a leap for our ability, for our culinary team, because we weren't, you know, hiring, you know, Michelin rated chefs. So, yeah, like, I think it took us a while. Like, I remember week two, you know, the servers had finished, and they'd pick up their checks, and they'd check out. And then Carrie and I would just clean the theater. And then one of the waiters said, you know, everybody's going to kill me for saying this to you guys. But the way it works in restaurants is the waiters actually clean the theater. You guys don't, you guys shouldn't do it. I just, I don't want to do it, but I just can't watch any further, just watching you do this every single night.

• 51:25Guy Raz?

  I'm curious about some of the things that you did. Because this was, we're talking when it was one theater. And there's something that you guys, I mean, there are many of these sort of events that you would mount. Like, for example, you started this thing called the Rolling Road Show. And I think one of the things you did was you somehow got like 60 or 70 canoes and you hauled them out to the edge of a river and you had, you screened the movie Deliverance so people could watch Deliverance in canoes on a riverbank.

• 51:56Speaker 01

  Yeah. We'd have, we'd hire banjo players on the river. So you'd do this, the river cruise. And Carrie roasted a whole pig on a spit. You know, it's just for the squeal like pig parallel.

• 52:09Speaker 02

  For six hours.

• 52:11Speaker 01

  So, but it was so awesome.

• 52:14Guy Raz?

  Amazing. I wish I was there. But it doesn't sound like a super efficient, like you weren't sort of thinking, all right, is this going to bring us a return on our investment? Are we going to be able to make money off this? Is this going to be sustainable? It was just like, this is going to be fun. Let's do this.

• 52:27Speaker 02

  Yeah. All of the extra stuff that we did, the feast nights where we would show a food-related movie with a matching menu, the Rolling Road Show, the scavenger hunts that we would do, all of that was for us. It was for fun. And it was for the community that we had developed, all of the people that we saw, you know, week in and week out that would come to the theater and became our friends.

• 52:55Speaker 01

  People would come and they'd hang out in the lobby afterwards. And, you know, people would have another beer and we'd just talk about things and a lot of ideas. If, once you start doing crazy weird things, then everybody has ideas for crazy weird things.

• 53:09Guy Raz?

  Yeah.

• 53:10Speaker 01

  You know, like, I remember very distinctly, I mean, it wasn't a money-making venture, but for five years, we had an annual cannibal film festival where we showed cannibal films and purported to be selling actual human flesh. And then, but we did, you know, those were also the things that people would write about and talk about. It became part of like our identity to one-up ourselves in these fun things. But all the while, just having a blast.

• 53:38Speaker 02

  And they didn't not make money.

• 53:39Speaker 01

  Yeah.

• 53:40Speaker 02

  When, we would always plan it out such that the ticket price did make us money. It's just that a lot of times, there wasn't cushion. You know, we had to sell it out in order to make money. And most of the time, we did.

• 53:53Guy Raz?

  I want to ask you for a sec about the no advertising. Because I think, and I think it's still to this day, you don't play ads before films. But, but back then, I mean, surely that was another source of revenue. Like, you could have had another income stream from that.

• 54:10Speaker 02

  There were several times when we had the opportunity to find out how much of an income stream

• 54:16Guy Raz?

  Yeah, I bet.

• 54:17Speaker 02

  that it would be. And we both said, no, we don't want to know. We don't want to know. We don't want to have any regrets at all or any inkling of temptation. So don't tell us.

• 54:30Guy Raz?

  But what, I'm just curious, why, why were you so opposed to ads? I mean, great ads can be really entertaining. I mean, obviously, people watch the Super Bowl for ads.

• 54:38Speaker 01

  Oh, Guy, that's, you know.

• 54:40Speaker 02

  When the last

• 54:41Speaker 01

  In your heart of hearts, you know that's not true.

• 54:43Guy Raz?

  I know. But I'm curious, why, yeah, I mean, why were you so opposed to it?

• 54:48Speaker 01

  I thought that, and this, I do feel like it was forward-thinking, that it would instill loyalty to us. Like, here's all the things I hate about going to a movie theater. We're not going to do this to you. This is, you know, maybe Super Bowl ads are somewhat entertaining, but I can tell you the caliber of cinema ads in the 90s was not.

• 55:07Guy Raz?

  No.

• 55:08Speaker 01

  And I just found it offensive.

• 55:10Speaker 02

  And still are not.

• 55:11Speaker 01

  Yeah. And just thought that that would be a lot, like, that's how people are going to want to come to us, because we're different. We're not the same movie theater that you're used to.

• 55:19Guy Raz?

  All right. So you've got this one really successful movie theater in Austin. That is what you, now you, you guys are living the dream. But I guess a twist of fate, which is often what happens in these stories, a twist of fate occurs, which is that a potential competitor is thinking about coming into, or a company that, that wants to compete and wants to have a similar model, food, drinks, movies, is thinking about opening up a spot in Austin. And that starts to change the way you think about expanding?

• 55:56Speaker 01

  Yeah. We had no, no plans to expand. And the landlord of the Village Theater, it was a four-plex in central Austin, called me. And he's familiar with the theater. And he'd seen a line around the block for our theater. And said, hey, I just want to let you know that I have a ready-to-be-executed lease with a competitor of yours. And I'm going to sign that lease.

• 56:24Guy Raz?

  Wow.

• 56:25Speaker 01

  But if you want it, you can have it. It's yours. Because I'd rather, I'd rather work with somebody in town, local, and I like what you do. But here's the proviso. You have to sign it by this week, by this Friday, and you can't change a word in the lease.

• 56:40Guy Raz?

  And how long was lease going to be for?

• 56:43Speaker 01

  10 years.

• 56:46Speaker 02

  10 years.

• 56:47Guy Raz?

  10 years. You had, you had six days or five days to make a decision.

• 56:50Speaker 01

  Yeah. So, no surprise, we signed that lease without changing a word. And embarked upon construction project number two.

• 56:59Guy Raz?

  How did you finance that?

• 57:01Speaker 01

  That one was $300,000. And we just financed it out of profits.

• 57:09Guy Raz?

  Out of cash flow?

• 57:10Speaker 01

  Yeah.

• 57:11Guy Raz?

  Wow. So that was, so, okay, great. And did you have to do similar amount of work on it? Or?

• 57:17Speaker 01

  No. Well, I mean, different. It was bigger work. And it was, like, it was a bigger kitchen, because it was four theaters, you know, doubled the amount of seats.

• 57:25Guy Raz?

  Four theaters?

• 57:26Speaker 01

  Yeah.

• 57:27Guy Raz?

  Four screens?

• 57:28Speaker 01

  Four screens.

• 57:29Guy Raz?

  I mean, that's like, that's like a restaurant with four dining rooms, with 200 people in each dining room, one central kitchen, and a waitstaff going from like, one dining room to the next, which are really far away. That's a big operation.

• 57:41Speaker 01

  It is a big operation. But interestingly, so we ended up running first-run movies, like, brand-new movies there.

• 57:49Guy Raz?

  I read that by 2003. Because I think you, you actually opened a third location in 2003, that year. Is that right?

• 57:58Speaker 01

  Yes. We opened a third location.

• 58:00Guy Raz?

  Also in Austin.

• 58:02Speaker 01

  Correct.

• 58:03Speaker 02

  And it was a very similar situation, where the landlord called us and said that there was a competitor potentially moving in. I feel like most of the expansion that we've done, or that we did early on, was entirely based in fear.

• 58:17Guy Raz?

  Yeah. I read that by 2003. Alamo was making much more money from food than ticket sales. And that might have happened even before. Which makes sense, right? I mean, because that's really where you, especially drinks, right? When people are buying multiple drinks.

• 58:36Speaker 01

  I mean, it's all, it's really just about cost of goods. You know, the, you're paying a majority of the ticket on first-run movies to the studio, you know? And on food, you're, you're paying what rounds to 25% of just food costs, right? So you have a much better profit margin. So there's still profit to be made in the movie tickets, but the, you know, beer and alcohol costs are less than food costs. So that's where the real profit was. But it was, you know, it's a balance of probably one-third box office, two-thirds concessions.

• 59:08Guy Raz?

  All right. So you, you've got, you know, these, these three locations, I guess, and you're thinking about a fourth location. And I think around this period, people, people sort of approached you about maybe franchising. And you, you did it. You, you opened a new franchise, a few franchises, I think around, around Texas, like in Houston and maybe San Antonio. But I guess you weren't, like, really comfortable with that? Like, what, what was going on? Tell me the story.

• 59:35Speaker 01

  Well, at that point, I think we had become really ingrained in the Austin community and were enjoying the aspects of community building at a real scale.

• 59:46Guy Raz?

  Yeah.

• 59:47Speaker 01

  And there was more, more headache on the franchising. And I didn't, it wasn't where my passion was.

• 59:53Guy Raz?

  Yeah. There was probably a lot of lawyers and meetings and, and you want to, like, mount cool movies and like, have chit chats with directors on, in front of audiences, probably.

• 1:00:03Speaker 01

  That's all good stuff, yeah.

• 1:00:05Speaker 02

  I feel like we had been sort of dragged, kicking and screaming to every level of expansion. And finally, we were ready to say, no.

• 1:00:14Guy Raz?

  Yeah.

• 1:00:15Speaker 02

  No, we don't want to do that. Because now, the four-screen first-run theater was financing all of the cool stuff that we were able to do at the single-screen theater. Then suddenly, people were talking about going nationwide.

• 1:00:29Guy Raz?

  Yeah.

• 1:00:30Speaker 02

  And I think we just didn't want to think about that.

• 1:00:33Guy Raz?

  Did it, did it stress you out?

• 1:00:35Speaker 02

  Yes.

• 1:00:36Guy Raz?

  When we come back in just a moment, a franchising deal devolves into a nasty lawsuit and gets settled in a very surprising way. Stick around. I'm Guy Raz, and you're listening to How I Built This.

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• 1:02:37Guy Raz?

  Hey, welcome back to How I Built This. So it's 2004, and with some trepidation, Tim and Carrie move further into franchising, basically turning Alamo into two companies. The first will be run by them and made up of the theaters they already have in Austin. The second will be run by two new partners who want to build well beyond Texas.

• 1:03:00Speaker 01

  It was actually a great deal, and it was causing us a lot of stress. You know, I preferred the putting on a show aspect of Alamo.

• 1:03:09Guy Raz?

  Yeah.

• 1:03:09Speaker 01

  But it was very enticing to us, so we did it.

• 1:03:12Guy Raz?

  So just to clarify, there were these guys, John Martin and David Kennedy, and they basically said, "Look, we want to create a new business that is a franchising business. We will run it and own it. You guys will own a part of it." And you were OK with that?

• 1:03:31Speaker 01

  Well, even in those early days of franchising, we were very upfront. It's like, this is not a normal franchise. And yes, we're undeniably a chain, but we started preaching this mantra. It's like, we're a loosely connected network of local community theaters.

• 1:03:49Guy Raz?

  All right. So they're opening franchises. But meantime, you guys are now really able to just, those guys are doing the franchising thing, whatever. You're focusing on your own initiatives, and you really kind of double down on this rolling roadshow thing that you do. And then, like, you take it outside of Austin. Like, you guys did, like, so cool. I wish I was there. You screened Rocky on the rocky steps of the Philadelphia Museum of Art.

• 1:04:15Speaker 01

  Yeah.

• 1:04:16Speaker 02

  That was a great tour.

• 1:04:18Guy Raz?

  Oh.

• 1:04:18Speaker 01

  I think we did Rocky 1, 2, and 3.

• 1:04:21Guy Raz?

  Oh.

• 1:04:21Speaker 01

  And it was a marathon. And we also had these giant slabs of beef up at the top of the stairs that people could take pictures of themselves punching. It was really gross.

• 1:04:32Guy Raz?

  Like Polly in the meatpacking. Oh, my god.

• 1:04:36Speaker 01

  It's very wasteful, I'm sorry. But it was such a cool thing. And it dripped a lot on the steps, and I apologize to the city of Philadelphia.

• 1:04:43Guy Raz?

  Yeah, I remember that scene. He's punching those carcasses of meat, and the newscaster, the news reporters there, and they're doing a segment. And, oh, my god, that's so cool. So you've got this going. And I guess around 2009, you start to have second thoughts, or maybe second thoughts is an understatement, about what's going on with the franchising. You're not happy with how it's turning out. What was going on? What was making you uncomfortable about how the franchising was rolling out?

• 1:05:16Speaker 02

  It wasn't actually we who were uncomfortable. We were having a great time. But when we sold the franchise rights, we made very, very sure in the contract that we were going to be allowed to do whatever we wanted, regardless of what direction the franchise took.

• 1:05:33Guy Raz?

  Right. OK.

• 1:05:34Speaker 02

  And so we were just doing that. We were doing whatever we wanted to do. We were having a great time. And in the meantime, the franchise was working very, very hard on systems and efficiency and all of that sort of a thing. And they became increasingly unhappy with people calling them and saying, "But the Alamo is supposed to do it this way. Why is this theater in Denver not doing it this way?" and referring back to us. So that was making them very unhappy, and they wanted to retract some of the language in the contract that was going to allow us to not pay attention to what they are doing.

• 1:06:17Guy Raz?

  And so you ended up in a legal battle with your former partners around this.

• 1:06:24Speaker 02

  Yes.

• 1:06:25Speaker 01

  Well, Guy, they sued us first.

• 1:06:31Guy Raz?

  And they sued you basically because they wanted to change the language of the contract to make you...

• 1:06:34Speaker 01

  You know, it was like, we were angry, and we were just baffled by it. It's like, no, come on. It's pretty clear language and this trademark infringement and things like that. So then we countersued to unwind the deal, basically. So we felt that there was things that had happened between us that they were in violation of. And so you're going to, you know, you push me, I'm going to push you. So we went to war.

• 1:07:01Speaker 02

  And it was clear that this was ugly enough that there weren't going to be no winners other than the lawyers. But the interesting thing about it is that, to that point, we had never really met or spoken to Dave Kennedy, who was the guy who had put the money in to buy the franchise.

• 1:07:21Guy Raz?

  So you didn't know him?

• 1:07:23Speaker 02

  We didn't know him. He didn't know us.

• 1:07:25Guy Raz?

  So the first time you really kind of meet him properly is during this lawsuit?

• 1:07:30Speaker 02

  Yes.

• 1:07:30Speaker 01

  During the first day of deposition.

• 1:07:34Guy Raz?

  And you're just sitting there, hearing his take, and then...

• 1:07:37Speaker 01

  And vice versa.

• 1:07:38Speaker 02

  Yeah. So we went first, I think. And he sat, and he listened to our deposition about the fact that, you know, a lot of the things that we did were not done for profit.

• 1:07:48Guy Raz?

  Yeah.

• 1:07:49Speaker 02

  And during my deposition, they came out with an email where I had, I don't know if it was an employee or a partner in one of the events that we were doing. And I said, "Well, we really want to do this thing, and I know it's going to add a lot to the cost, but it really doesn't matter if we make a profit." And so they took this email and they threw it at me in a kind of a aha way, sort of accusing us of trying to, you know, tank the company by not caring about profit.

• 1:08:22Guy Raz?

  Yeah.

• 1:08:22Speaker 02

  And it gave me just a really great diving board for explaining the difference between short-term profit and long-term investment in a brand. And Dave Kennedy was sitting there, listening to it. It was the first time he had ever heard me say anything outside of the contract negotiations, which went through the lawyer.

• 1:08:46Guy Raz?

  Wow. And so what happened?

• 1:08:51Speaker 01

  So we finished the day of deposition. And afterwards, Dave Kennedy, to his credit, texted me and said, "Hey, would you have time for breakfast tomorrow morning?" And I said, "Yes." And it was a pretty bold move on his part.

• 1:09:12Guy Raz?

  Yeah, especially because his lawyer would have been like, "What are you doing?"

• 1:09:15Speaker 01

  I know, exactly.

• 1:09:16Speaker 02

  Ours did, too.

• 1:09:18Guy Raz?

  Yeah.

• 1:09:19Speaker 01

  Man, our lawyer was this tough-as-nails, female barrel racing rodeo champion.

• 1:09:25Speaker 02

  Missing half of her finger.

• 1:09:26Speaker 01

  Oh, my god. I was so scared of her.

• 1:09:27Guy Raz?

  Yeah.

• 1:09:29Speaker 01

  So he proposed the idea. It's like, hey, I have a left field idea for you. What would you think about crushing the brands back together and you stepping in as CEO of the consolidated company?

• 1:09:44Guy Raz?

  Wow.

• 1:09:45Speaker 01

  So basically, it's like liked what we had to say, liked our vision for the company and the brand. And it was a wild idea.

• 1:09:53Guy Raz?

  He's heard what you've said at depositions and he starts to think, hey, that sounds such a bad idea. Yeah. Asks you to breakfast and offers you to be the CEO of a combined company. I mean-

• 1:10:02Speaker 02

  Add 50% of the combined business also.

• 1:10:05Guy Raz?

  Amazing. I mean, this is like, this is like a great example of why mediation is often a better option than lawsuits.

• 1:10:13Speaker 01

  Yeah.

• 1:10:13Guy Raz?

  Because you could, I mean, he's basically saying, why are we going through this? Let's just work together.

• 1:10:19Speaker 01

  Yeah.

• 1:10:19Guy Raz?

  I mean, what incredible maturity and foresight.

• 1:10:23Speaker 01

  I agree. And the beauty was that once we did it, because obviously, cutting ahead, we said yes. And the idea of growing so that we can truly support the movies that we love got super exciting. And helping craft that plan to open in LA, to open in New York, and to like to be a force in the industry, that was a totally different game. And they had built a great structure and system and knew how to grow, knew how to expand. They had, you know, running laps around us in accounting and operations. And we had the perfect counter strengths.

• 1:11:01Guy Raz?

  Okay, so this thing, I love this, this thing that kind of happened again serendipitously, although probably at the time, I don't know if it ever, ever thought it would happen that way or work out that way. But you guys have had this kind of very strict policy, let's say, about noise. Like, I don't know if you've ever heard of like a Keith Jarrett concert?

• 1:11:26Speaker 01

  Yeah.

• 1:11:26Guy Raz?

  Like, if you cough at a Keith Jarrett concert, like, he will, he will look at you and ask you to leave. Like, he will walk off stage if he hears like candy wrappers, right? And your policy was like that around phone texting. Like, if you text in a theater, you know, we'll kick you out. We don't want you to mess up anyone's experience. And I guess this lady, this woman, went to a theater and was really mad because she was kicked out and then left a voicemail, which you guys then turned into like a YouTube video.

• 1:11:55Speaker 01

  Yeah, we consulted with our lawyer first because I wanted to find out property ownership on that. So apparently, the way I understand the law is if somebody leaves you a voicemail, it's, it's your property as long as you don't sell it, because then you'd have to kind of work out a deal with the person.

• 1:12:10Guy Raz?

  Yeah.

• 1:12:10Speaker 01

  So we didn't sell it. We just turned it into a little bit of a snarky clip because she was very mad. And she was obviously a little bit intoxicated and was furious about getting kicked out because she was using her phone in the theater. And-

• 1:12:24Guy Raz?

  In your effing little S's theater.

• 1:12:27Speaker 01

  She was very funny. And I mean, it's probably, I don't know how many, it's, it's big for us. I don't know, 10 million, 12 million views on it. So it became our, our calling card for a long time.

• 1:12:39Speaker 02

  Yeah. We always do a PSA to explain our policy to people before the movie. And that's by far-

• 1:12:45Guy Raz?

  Yeah.

• 1:12:45Speaker 02

  -our most popular PSA of all time.

• 1:12:50Guy Raz?

  So when you became, and around the time you became CEO, I know, Carrie, you took some time away because you had your children, twins.

• 1:12:59Speaker 02

  Yeah. And you may have noticed that, you know, when we've been talking about the expansion and every time we expanded, that I was the one with far more reluctance. So, so when the companies got crushed together and it was a major commitment to essentially unlimited expansion, that was when I tapped out and said, okay, I'm ready to have kids now.

• 1:13:23Guy Raz?

  Yeah. Yeah. All right. So I want to, I want to jump forward a little bit to, to 2017, which is sort of the year where the kind of Me Too movement really started to kind of explode, obviously in the New York Times with their reporting and, and other organizations. And, you know, I don't think there was a single organization that, that wasn't affected by it, including yours, right? And you guys had somebody who worked with you, or who's like running the magazine that Alamo Drafthouse was putting out. And he, he was accused of sexual harassment and, and left or was fired. And, and that would have been the end of the story. But I guess he was brought back a few months later?

• 1:14:05Speaker 01

  Yeah.

• 1:14:06Guy Raz?

  What, what happened?

• 1:14:08Speaker 01

  So it was challenging because, you know, it's-

• 1:14:14Guy Raz?

  You'd known him for a long time, right?

• 1:14:16Speaker 01

  Long time. Yeah, yeah. He was a friend. So I kept in touch with him and it was just, I saw that it was challenging for him because he didn't find any pathway to, to write-

• 1:14:29Guy Raz?

  Yeah.

• 1:14:29Speaker 01

  -anywhere anymore. And was depressed and I was worried about him. And so I, I made the decision at the board meeting to offer him a copy editing position that he could do from home.

• 1:14:41Guy Raz?

  Because he sort of came back quietly and somebody saw his byline and said, why is this guy back in the company?

• 1:14:47Speaker 01

  Yeah. And, you know, once that happens, and, you know, especially at the time within, you know, a very important movement in our culture, you know, that it's, it's also not a place for nuanced dialogue. But what clearly, what had happened is I was the leader of this company and I had made a mistake. And what was necessary immediately was to acknowledge the failure and mistake. And there were other allegations from the past that came forward. And we had spent so much time focusing on guest experience and being laser focused on

• 1:15:27Speaker 01

  guest experience. And frankly, we could have done a much better job of building a proper culture, building, you know, a safe environment for work. You know, a lot of things were just casual. So I embarked upon a tour and, you know, went to every location and apologized. And it was basically a listening tour of like, what's wrong in the venues that I may not know about. And, you know, we truly want to be the best theater that has ever been. Help us.

• 1:15:57Guy Raz?

  And did you learn about, I mean, on this tour, did you learn about things that people had experienced that you didn't know?

• 1:16:05Speaker 01

  Absolutely. Yeah. I mean, there were sexual harassment issues. There were allegations of racism. There was like, there's individual, you know, managers that I don't think were kind.

• 1:16:16Guy Raz?

  Yeah.

• 1:16:16Speaker 01

  You know? So what we did in the wake of it is we established a really robust anonymous engine where I would start my day every day and just read comments from teammates across the country. And we had a monthly all staff meeting where the ones that were the hardest, we would address them publicly in front of everybody. And, you know, we grew from it. It was, it was really hard and painful and we're better because of it.

• 1:16:52Guy Raz?

  I want to, and we'll, we'll talk about the movie industry in a moment, but I think 2018 was the high watermark, or maybe it was 2019 of, of box office sales. It was like, really great. And even 2019 was pretty strong. And then, of course, COVID hits. And you're in an industry, not only in the movie industry, you're in the restaurant business too. Like, you get hit by this twice.

• 1:17:19Speaker 01

  Yeah.

• 1:17:20Guy Raz?

  Right? You're running restaurants and movie theaters in the same place.

• 1:17:23Speaker 01

  Lot of, lot of shared recycled air.

• 1:17:27Guy Raz?

  Oh, my God. But, I mean, you guys shut them all down. You shut all your locations down.

• 1:17:32Speaker 01

  Yeah.

• 1:17:33Guy Raz?

  You go from, from like, tens of millions of dollars coming into the door to zero in like a day.

• 1:17:39Speaker 01

  Yeah. You know, everybody knows it. It's not a unique story for us, but just, we had no idea at the time in March of 2020, when, if ever, this is coming back.

• 1:17:52Guy Raz?

  Yeah.

• 1:17:52Speaker 01

  And we knew, you know, very quickly knew our burn rate as to what debt was accumulating from some very expensive leases. And, you know, we had gotten a little over our skis in terms of being bullish on expansion and had mounted some debt and had a big team.

• 1:18:10Guy Raz?

  You'd hit by that point, by that point, like 47 locations or something like that?

• 1:18:14Speaker 01

  42, 43, something like that. Yeah.

• 1:18:16Guy Raz?

  Yep. You eventually had to file for Chapter 11 bankruptcy in March of 2021.

• 1:18:24Speaker 01

  Yeah.

• 1:18:26Guy Raz?

  Tell me what, what, I mean, basically, you would not be able to pay your debts at that point?

• 1:18:31Speaker 01

  Well, it's, it's a little bit more complicated in that we probably had about two payroll cycles left before we were done.

• 1:18:40Guy Raz?

  Wow.

• 1:18:41Speaker 01

  And so in December, we took on some basically distressed asset financing, right? So that money's not cheap. But turns out, not a lot of people waiting in line to invest in movie theaters in December 2020. So, you know, but at the end of it, it did what it's supposed to, right? So we're back.

• 1:19:05Guy Raz?

  Yeah.

• 1:19:05Speaker 01

  We're healthy. Everybody took a little haircut. We took a big one.

• 1:19:09Guy Raz?

  You guys had to sell, I think, get to sell a lot of your assets. There's some of your assets to a private equity group or a venture group, right?

• 1:19:17Speaker 01

  Yeah.

• 1:19:17Guy Raz?

  I mean, that's, that's essentially what happened. That helps you emerge from bankruptcy.

• 1:19:21Speaker 01

  Yeah. And so we weathered it, right? So it's, it's far from ideal, but, you know, we lived to ride another day, right? So the balance sheet looks good and we're actually growing and expanding new theaters. We're bullish on the future of the industry and looking for opportunities to grow.

• 1:19:39Guy Raz?

  So now we get to the conversation that you've been asked a bazillion times, and I'm going to ask you for the bazillionth and one, one time, bazillionth and one time, which is the future of movie theaters. Okay. And movie industry and streaming and all this stuff.

• 1:19:55Speaker 01

  Mm-hmm.

• 1:19:55Guy Raz?

  We know that some big chains are gone. And so we know that there's been some shedding. But-

• 1:20:06Guy Raz?

  But do you still believe that people will want to go to the movies in the same rate in 10 years from now, five, 10 years? When you've got, you know, on a 50-inch TV screen, today is like a joke. You can buy one for 200 bucks.

• 1:20:22Speaker 01

  Yeah.

• 1:20:23Guy Raz?

  What is going to make people go to movies at the same rate that they've been going to in the past?

• 1:20:30Speaker 01

  Well, I guess I'll ask you a question of, do you have a stove in your house?

• 1:20:37Guy Raz?

  Yeah, I got a really good one. You mean a stove top? Yeah, it's awesome.

• 1:20:41Speaker 01

  Yeah, but you still go out to restaurants, right? Every once in a while?

• 1:20:45Guy Raz?

  Yeah.

• 1:20:46Speaker 01

  So that's really it, like humans. And I think this is so evident after COVID. The first time I stepped back in a movie theater, we put together a very nostalgic clip about welcome back to the movies, but like, I was in tears.

• 1:21:01Guy Raz?

  Yeah.

• 1:21:02Speaker 01

  I was just so happy to be out of the home. You know, like every once in a while, no matter how much streaming content you watch at home, you want to get out, you want to be a part of an event, you want to have experiences. So I think there's legit pressure to up the game, to make sure that our industry, cinema industry, delivers, you know, exceptional experiences. There's just something about, you know, a lot of times I hate the home experience in a way because there aren't the rules. Like, if somebody calls me, I'm going to answer that call.

• 1:21:43Speaker 01

  If there's like a little pause where it's a little bit lull in a movie, because I'm addicted to my device, I have this urge to pull it out. So like being lights down in an excited theater, experiencing something fresh with a group of people, that's the core experience. Like, that core product is beautiful. I love it.

• 1:22:06Guy Raz?

  Yeah. If you think about all the ups and downs of this, and it's a tough business, and you guys have really been up and down and up and down and up, and have really built, you know, this incredible thing that, you know, people know, and has become kind of like a model for other competitors and others to kind of create, almost like a dinner theater experience. How much of where you are today do you attribute to just how hard you worked, the both of you, and how much to the luck that you came across?

• 1:22:41Speaker 02

  I would say that a lot of it has to do with hard work. We worked 11 hours a day for seven days a week for probably five years. But at the same time, we have been incredibly lucky because of all of the people that we've come across who have been so supportive and kind, from the film distributors early on to the people who helped us get started in Austin. We didn't tell you the story about the food purveyor at Cisco who knew that we were an impoverished couple that was asking him for samples to develop our menu just so that we would have something to eat. And he provided us with huge amounts of samples anyway.

• 1:23:26Speaker 02

  He knew that that's what we were doing, and he did it anyway. So, yeah, also a good deal of luck in there.

• 1:23:32Guy Raz?

  Hmm. Tim?

• 1:23:34Speaker 01

  Oh, you know, it's definitely a mix, you know? And I'm not unaware of like the basic luck that I have, just the privilege of having a stable family life and supporting parents and a good education and not really, like having a nuclear family, it just like, it's, you know, it's all I know, right? But I know that that's not everybody, and I'm keenly aware that that has given me what others don't have. And, you know, I certainly work really hard. I still like doing it. And on the flip side, just like, like, life is just full of these weird little moments,

• 1:24:19Speaker 01

  like having a for-lease sign pop up, or, you know, that we were able to get financing before we ran out of payroll, right? So I put the scales more in luck than in hard work, but gosh darn, I can work pretty hard when I need to.

• 1:24:37Guy Raz?

  That's Tim and Carrie Leeg, co-founders of Alamo Drafthouse Cinema. Since this interview first aired back in 2023, Alamo has gone through some pretty big changes. Sony Pictures Entertainment acquired the chain, and Tim and Carrie sold their stakes in Alamo as part of that deal. Today, Carrie manages a creative hub, it's called the Baker Center in Austin, and Tim is back in the movie business. Last year, he opened a luxury movie theater in New York called Metro Private Cinema. It has private screening rooms and a tasting menu. Hey, thanks so much for listening to the show this week.

• 1:25:19Guy Raz?

  Please make sure to click the follow button on your podcast app so you never miss a new episode of the show, and it's totally free. This episode was produced by Carla Esteves, with music composed by Ramtin Arablouei. It was edited by Neva Grant. Our production staff also includes J.C. Howard, Casey Herman, Chris Messini, Carrie Thompson, Alex Chung, Sam Paulson, Catherine Seifer, John Isabella, and Elaine Coats. I'm Guy Raz, and you've been listening to How I Built This.