Marking a significant milestone in PVR INOX’s strategic expansion into Tier-2 and Tier-3 cities across India, the brand has launched its first-ever LUXE format under the FOCO (Franchise Owned, Company Operated) model in Chhattisgarh. TheatreWorld presents an exclusive interview with Pramod Arora, Chief Executive Officer at PVR INOX, to discuss this groundbreaking development…

Briefly describe a little about the FOCO model.

Pramod Arora: The business world is evolving rapidly, faster than many established companies. Zomato and Oyo’s swift growth is driven by their belief in co-existence and collaboration – a concept that traditional businesses often struggle with. This collaborative approach, where mutual success creates expansive opportunities, contrasts with the cinema industry, which, burdened by older leadership, is slow to adopt modern financial and operational strategies. Around 2018-19, it was clear that the cinema industry’s intellectual resources weren’t being used for collaborative models, unlike the successful implementations in the hotel sector (e.g., Rosewood, Hilton). These hotels partner with developers and align with governments for shared growth. The cinema industry, however, relies heavily on private banks and equity, whose primary goal is financial return and eventual exit. This investor mindset prioritises profit over brand loyalty, focusing on high-value exits. In 2018, recognising this, a discussion with non-cinema colleagues suggested a collaborative model was possible but challenging due to industry resistance. To succeed, a transparent operational framework (black box of SOPs) was crucial. Unlike contractual bank financing, this model depends on investor trust and adherence to principles. Therefore, shifting to this trust-based model required a clear and robust operational structure.

So, what are your thoughts on the concern about potential revenue loss, given the cinema industry’s traditional focus on showcasing mainstream Bollywood and Hollywood content?

Pramod Arora: Indeed, while showcasing established content remains a component, it is not solely focused on re-releases, although those are part of the strategy. Rather, it is about securing the rights to new releases as well. Furthermore, it is becoming increasingly apparent that monetising content effectively on OTT platforms is proving to be an unsustainable model, a realisation that has solidified over the past three years.

What categories of individuals or entities would would best suited to opt this initiative?

Pramod Arora: A suitable candidate would be a committed real estate developer who is establishing a shopping centre with a certain prestige, aligning with brands of a similar calibre. For instance, a developer who has already incorporated reputable brands and is targeting further premium international labels would be well-positioned. These developers recognise the critical role of Food and Beverage (F&B) in creating a vibrant and successful mall environment. Currently, mall developments often consider a framework known as the ‘F’s’, which represents key elements for consumer engagement. Initially, the three ‘F’s’ – Fun (gaming), Food, and Films (movies) – were central. Subsequently, ‘Fitness’ was added as a fourth ‘F’, and now, Fashion is frequently included, creating the ‘five F’s’. This framework allows for a flexible and curated selection of these elements. The modern mall environment necessitates a strong emphasis on these components. Food is indispensable for attracting and sustaining foot traffic. Similarly, the absence of entertainment options like ‘Fun’ significantly increases the risk of decreased visitor numbers. Regarding Films, it is my firm conviction that they are a vital anchor tenant. Therefore, this three F, four F, or five F selection process underscores the importance of these elements in a successful retail destination.

What specific and distinctive attributes will differentiate this proposed model from conventional multiplex cinema operations? Could you elaborate on the unique aspects that set it apart?

Pramod Arora: Leaving aside the immediate economics and focusing on the consumer experience, a key distinction lies in the fundamental purpose of the space. Unlike conventional cinemas solely focused on film exhibition, this model envisions a multifaceted social hub. Individuals are welcome to utilise the premises even without the intent of watching a movie. The area outside the auditorium is designed as a social networking and co-working space. Patrons can bring their laptops, work throughout the day, and partake in refreshments without any expectation of purchasing a cinema ticket. Ticketing is strictly limited to entry into the individual auditoriums. This empowers the consumer, a departure from many existing cinema formats that implicitly require film attendance upon entry. This space fosters community, allowing people with shared interests, such as enjoying tea and snacks, to connect. A second significant difference pertains to the advertising model, which is contingent on the development partner’s preferences. Initially, the concept allows for an advertisement-free environment, catering to time-conscious viewers who prefer an uninterrupted cinematic experience. While traditional cinemas often allocate considerable time to advertisements, impacting the viewing duration, this model prioritises the pure form of the film. However, should the development partner later decide that incorporating advertisements is financially beneficial, the infrastructure and support for this are readily available. In such a scenario, a revenue-sharing co-working space. Patrons can bring their laptops, work throughout the day, and partake in refreshments without any expectation of purchasing a cinema ticket. Ticketing is strictly limited to entry into the individual auditoriums. This empowers the consumer, a departure from many existing cinema formats that implicitly require film attendance upon entry. This space fosters community, allowing people with shared interests, such as enjoying tea and snacks, to connect. A second significant difference pertains to the advertising model, which is contingent on the development partner’s preferences. Initially, the concept allows for an advertisement-free environment, catering to time-conscious viewers who prefer an uninterrupted cinematic experience. While traditional cinemas often allocate considerable time to advertisements, impacting the viewing duration, this model prioritises the pure form of the film. However, should the development partner later decide that incorporating advertisements is financially beneficial, the infrastructure and support for this are readily available. In such a scenario, a revenue-sharing agreement of 50/50 for advertising revenue would be implemented. Conversely, for cinema ticket sales, the development partner retains the majority of the revenue, contributing only 10% of the gross to us. The partner maintains full control over the profit and loss statement for the cinema operations.

Are there any existing model strategies currently being implemented, or are there plans for further iterations or variations of this model?

Pramod Arora: Yes, the COCO (Company Owned, Company Operated) model currently includes an asset-light variation and will be further developed. While specific future variations are internally prepared but not yet implemented, the FOCO (Franchise Owned, Company Operated) model is the primary focus for near-term enhancements. Two significant developments planned for the FOCO model are: first, offering technology solutions on a rental basis to franchisee who prefer a lower initial investment in this area; and second, integrating live entertainment capabilities within the cinema auditoriums. Regarding live entertainment, while some existing franchise partners are receptive to this concept, we are developing versatile solutions for multi-purpose spaces. This includes an innovative, patented hydraulic stage system, currently in the engineering phase, which will allow for a seamless transition between film screenings and live performances. This feature aims to revitalise the cinema experience by accommodating events such as comedy shows and musical acts, potentially showcasing emerging local talent. This evolution is attracting interest from a younger demographic seeking to engage with a more dynamic cinema environment..

What specific factors or characteristics made Raipur the optimal location for your initial enture? Elaborate on the key reasons behind this selection.

Pramod Arora: There were two primary reasons for selecting Raipur. Firstly, it served as an effective litmus test location. Contrary to a common perception that central Indian markets, particularly Chhattisgarh, underperform, data from a local mall, Magneto, indicated reasonable performance. This provided an initial positive data point. Secondly, observations from another cinema in Bilaspur revealed a significant opportunity for improvement. Despite seemingly low average spending, a site visit indicated that the cinema’s outdated infrastructure was likely deterring patrons. The developer, a known associate, was receptive to renovation. By proposing a moderate increase in his revenue share (2.2%), coupled with a commitment to invest significantly in the renovation (four crores), a mutually beneficial agreement was reached. This investment was projected to increase revenues by an estimated 1.3 times, based on the principle that consumers are generally averse to outdated and unappealing environments. This approach underscores the importance of creating economically viable models that benefit all stakeholders. Sustainable business practices necessitate a balanced and transparent approach, fostering mutual growth rather than exploitation. Attempting to maximise profits at the expense of partners is ultimately counterproductive, as external pressures can then negatively impact the entire ecosystem. The focus should be on balanced growth and transparency, moving away from a purely self-serving business mentality.

Considering the prevalence of luxury cinemas in metropolitan areas and their corresponding audience demographics, what was your strategy for pricing and marketing this concept specifically for a location like Raipur?

Pramod Arora: Pricing is intrinsically linked to market dynamics. As such, the pricing strategy for the deluxe offering in Raipur has not yet been finalised. Current introductory pricing by the development partner is still being determined. This is a collaborative decision-making process, as the development partner has a significant financial investment, and we also aim to optimise our fees. Ultimately, both parties need to align on a mutually agreeable price point. Our fundamental approach, which is well-documented, is that price is dictated by the market’s capacity to absorb it. Therefore, we anticipate a price discovery phase of at least one month. Likely, our initial pricing will not be perfectly calibrated. We may either under-price or overprice the offering. If under-priced, we will incrementally adjust upwards. Conversely, if overpriced, we will reduce it. This iterative process is expected due to this being a novel concept within the city.

What is the anticipated timeframe for this research and development phase?

Pramod Arora: The stabilisation period to determine the optimal market-driven price is anticipated to be approximately one month. Given the novelty of this model, a period of price discovery is necessary. While standard cinema ticket prices for regular screens will likely align with existing market rates, the pricing for the enhanced offerings will require careful calibration. This price adjustment process is common in new ventures, as seen in other locations where initial prices have been refined based on consumer response. The market ultimately dictates the sustainable price point. Achieving profitability and overall stabilisation is projected to take approximately six months. After this period, a higher degree of confidence in the model’s success is expected, as early adopters, particularly those attending evening shows and social gatherings, often act as influential advocates, driving further adoption. This organic influence is crucial for long-term success, which is typically not immediate.

In what ways could this new cinema model potentially influence Raipur’s social dynamics? Furthermore, is there an aspiration for it to achieve a similar status and symbolic significance as established multiplexes in metropolitan cities?

Pramod Arora: This establishment has the potential to become a significant social hub in Raipur. I anticipate it attracting women’s social gatherings, providing an ideal setting for such events. The availability of high-quality food options, both within and near the cinema, coupled with the ability to arrange private screenings of films, even older titles based on specific requests, offers a unique and appealing proposition. This flexibility, where economic viability is maintained for both the patrons and the establishment, should resonate well. I do believe it can achieve a notable social standing. The discerning local clientele values both unique experiences and quality. The ability to watch desired films in a premium setting and access superior food options can elevate social circles. Furthermore, the option to host gatherings with curated amenities, potentially including licensed beverage service, presents a compelling alternative to conventional venues. As the evening progresses, the city’s prominent individuals and families are expected to frequent the establishment. Even for late-night showings, the experience caters to those who may be time constrained but still seek a comfortable and perhaps even restful environment. Positive experiences, even if not solely focused on the film itself, are likely to generate positive word-of-mouth. The luxurious amenities, such as comfortable seating and provided comforts, contribute to an overall experience that extends beyond mere film viewing, appealing to a diverse range of preferences. We aim to create a comprehensive offering that caters to a wide spectrum of potential patrons.

Given potential limitations on occupancy, how are you planning and strategising for seating arrangements and capacity management within the auditoriums, considering the screen sizes?

Pramod Arora: The auditorium is rented out entirely to the patron, who then has full discretion over its use, irrespective of the number of attendees. This approach is inspired by business models that prioritise exclusivity and personalised experiences. Consider the operational model of Hamleys during its independent era. Affluent clientele would reserve the entire store for extended periods, focusing on the experience rather than the cost. Similarly, this cinema model emphasises the personalised nature of the space. It is not about maximising occupancy per screening but rather about offering a bespoke environment. The intention is to create a space where patrons feel a sense of ownership and exclusivity, akin to having their private cinema. This caters to individuals who value personalised service and wish to provide a unique experience for their guests. The focus shifts from transactional ticket sales to offering a premium, tailored environment where convenience and exclusivity are paramount.

As someone at the forefront of your cinema’s growth and strategic direction, particularly concerning expansion into non-metropolitan areas, what specific aspects of this development are most energising and promising to you?

Pramod Arora: The most exhilarating aspect of this cinema expansion, particularly in non-metropolitan cities, is the potential for multifaceted evolution. Firstly, the evolution of human resources within the industry is compelling. The current dominance of seasoned professionals presents a significant opportunity for a generational shift, empowering younger talent into leadership roles. This infusion of fresh perspectives is crucial for the industry’s revitalisation. Secondly, the evolution of the cinema experience itself is exciting. This involves integrating elements from the burgeoning gaming industry and revolutionising the Food and Beverage (F&B) offerings. Moving beyond limited, unseen menus to showcasing a diverse and appealing culinary experience is key. Thirdly, the integration of live entertainment within cinema spaces represents a significant evolution. This creates opportunities for hyper-local artistic expression and diversifies the cinema’s appeal beyond film screenings. Fourthly, the rapid evolution of technology offers transformative possibilities. Imagine interactive cinematic experiences where viewers can virtually engage with the on-screen content. This technological integration holds immense potential to redefine the moviegoing experience. These four pillars of evolution – human resources, experience, live events, and technology – are what make this expansion so dynamic. It’s not merely about business growth but about fundamentally reshaping the cinema landscape to be more inclusive and engaging for a wider audience, including those who do not typically frequent cinemas. The vision is to create a destination akin to exclusive membership clubs, offering a personalised and high-quality experience that fosters a sense of belonging and exclusivity.

While the FOCO (Franchise Owned, Company Operated) model is often perceived as a lower-risk venture for franchisees due to its inherent benefits, what unforeseen or less obvious challenges have you encountered or do you anticipate within this model?

Pramod Arora: A significant challenge encountered during the development of the FOCO model was the extensive time required – approximately three and a half years – to establish comprehensive Standard Operating Procedures (SOPs), particularly around transparent operational metrics. Defining parameters such as data collection, net and gross revenue, ticket pricing, and budgetary controls across different locations presented a complex undertaking. Achieving alignment with development partners on aspects like initial ticket pricing, where differing perspectives exist, also introduces complexities. The iterative process of refining these parameters over time has been time-consuming. Furthermore, programming control poses another key challenge. Traditionally, programming decisions reside centrally. The objective is to empower the franchise owner to have greater autonomy in programming, potentially through a dedicated mobile application. However, the full realisation of such an ‘FOCO app’ is still some time away. Democratising the cinema ecosystem, where franchise owners have a more direct say in operational aspects like programming, is a crucial evolution. While initial SOPs have been established, perfecting this model and addressing intricacies like devolving programming control equitably will require further development over the next three years. The challenge lies in creating systems, such as the envisioned app, that facilitate this democratisation and empower owners in decision-making relevant to their specific market. While these challenges exist, they are inherent to the process of innovation and refinement.

Setting aside the expected premium amenities such as reclining seating, gourmet refreshments, and overall luxurious ambience, what is one less obvious yet compelling feature of this cinema that you believe will particularly delight and surprise the audience?

Pramod Arora: Beyond the expected premium features, the most under-rated and surprising element will be the inclusion of a prominent café space integrated within the cinema complex. This café is designed to challenge the conventional perception that entry into a cinema necessitates a ticket purchase. We anticipate that within a couple of months, this notion will be dispelled, establishing the cinema as a desirable social destination in its own right, particularly during afternoons. This concept is inspired by the success of experiential food destinations. For instance, the popularity of specific eateries, even those with significant wait times, demonstrates the power of creating a compelling experience that transcends mere consumption. We aim to replicate this by offering a welcoming café environment within the cinema, encouraging people to visit and socialise regardless of their intention to watch a film. Furthermore, we are exploring the incorporation of additional lifestyle amenities within our cinema spaces. For example, select future locations are slated to include nail bars, recognising the high margins and convenience this service offers to patrons. This diversification aims to cater to a broader range of needs and preferences. Looking ahead, one particularly innovative feature being developed for a new Bangalore location is a dine-in cinema experience unlike any other. This will involve a meticulously designed, high-end restaurant setting within the auditorium itself, allowing patrons to enjoy a full dining experience while watching a new release on an LED screen. The use of LED technology, while a significant investment, will enhance the viewing experience by allowing patrons to see their food. This level of detailed planning and commitment to an exceptional customer experience is what we believe will truly differentiate our cinemas. Our strategic focus is on creating a love mark rather than just a trademark, fostering a deep connection with our audience by consistently exceeding their expectations.