The cinema industry has been affected by a myriad of market challenges: with increased competition from streaming platforms and changes in consumer behaviour, operators are increasingly looking to diversify the use of their properties to a broader and more unique leisure experience that cannot be replicated at home. Consequently, movement towards a more comprehensive leisure offering – combining cinema, restaurants, bars, and entertainment, such as darts, bowling and other parlour games, – is anticipated to become increasingly common as operators seek to evolve with the changing industry.
In this blog, we'll consider some key leasing and licensing points which cinema operators should consider when re-imagining their properties.
Licensing
All cinema operators should already have a Cinema Licence in place however, to sell alcohol, a Premises Licence will also be required.
If an operator is considering diversifying their operation, they will also need to consider whether any changes to the Premises Licence will be needed to cover the increased scope of activity.
If the proposed changes impact on the Operating Plan – for example, the proposals involve the introduction of additional activities, an extension to operating hours, or an increase in capacity – a "Major Variation" application will need to be submitted to the local authority Licensing Board. This type of application will be determined at a Licensing Board meeting where attendance by the applicant is required. In advance of submitting any application, applicants are advised to check the Licensing Board's policy which sets out what the Licensing Board expects from applicants, as any proposed changes outwith the Board's policy are likely to face resistance. If the premises is in an area of overprovision, there may be a presumption against the grant of new licences or the expansion of existing licences however each application is determined on its own merits.
If the changes proposed by the operator are purely cosmetic or affect only the physical layout of the premises, a "Minor Variation" application will be required. This type of application must be granted provided that the Licensing Board deems it to fall within the category of a minor variation only.
Critically, operators should be alert to the fact that if an activity is not noted on the Operating Plan, it cannot legally take place at any time. Operators are therefore advised to consider in advance the terms of their Operating Plan to identify whether any variations will be required to their Premises Licence, and to take specialist advice on any proposed changes to increase the likelihood of the application being granted.
Leasing
Many operators will not own the cinema building and will therefore also need to consider whether there are any restrictions in their lease or in the underlying title deeds which are likely to hinder their proposed re-imagining of the property.
Operators should ask their solicitors to check the permitted use of the property as set out in the lease and to confirm whether this is sufficiently wide to encompass any ancillary activities that the operator wishes to provide. Operators should be alert to any specific prohibitions which may require to be re-negotiated, such as restrictions on the sale of food or alcohol or any restrictions on gaming. Often, Landlord consent will be required to any proposed change of use. Instigating discussions with the Landlord at an early stage to enable any variations to the lease to be agreed is therefore recommended before significant costs are incurred in pursuing new proposals.
Crucially, operators should not overlook the importance of also consulting the title deeds for the property, as these may contain specific use restrictions which are not explicitly set out in the lease. This is particularly the case if the premises forms part of a wider development, as it is common for such developments to be affected by overarching title conditions aimed at regulating the overall amenity of the development, in part by achieving a balance of occupiers across the whole development.
In addition to considering any restrictions on use, operators are also advised to check whether any additional consents will be required if they are proposing to carry out alterations to the property, as Landlord consent may be required before any works can be carried out. Similarly, operators should consider whether any additional consents will be required for any new signage that is anticipated. Discussing these points with the Landlord at the outset will help to inform operators' decision-making going forward.
Conclusion
While recent market conditions have created challenges for cinema operators, these have also undoubtedly created exciting opportunities. Being alert to the key considerations required to transition the premises into a new phase of operation, taking specialist advice and initiating discussions early will help operators to streamline the process and adapt quickly to market changes.
