The idea of a public company run as a private family business might raise eyebrows. It suggests a lack of transparency or accountability. But that was how Richard Smith ran General Cinema for four decades — and in that time, the company's performance outstripped the S&P 500 by more than elevenfold.
Like the story of most family businesses, this one does not start with Richard Smith. It begins with his father, Phil. Phil immigrated to America from Russia in 1908. Two decades and a string of odd jobs later, Phil borrowed money from friends and family to buy an unprofitable theatre in Boston. He planned to turn it around by dropping ticket prices and developing a timetable to showcase different movies. If this sounds obvious today, remember that 1908 was a century ago, when the movie industry was in its infancy. Phil’s was a novel strategy.
Illustration of early General Cinemas. Source: Castanea Partners
The strategy worked. It worked so well that Phil’s strategy became an industry standard; by 1925, Phil owned 12 theatres. But good times do not, indeed, last forever. The Great Depression hit the business hard, and Phil was forced to sell nine of his theatres.
When the Depression ended in 1935, Phil was hanging on to three locations, and wanted to rebuild the business. He noticed a boom in car sales and experimented with drive-in theatres, opening one each in Detroit and Cleveland. Richard Smith would later say:
“He wasn’t the first to test the concept of whether or not pictures could be shown outdoors, but I believe my father was the first to commercially operate something successful. He invented the idea of having children come in free and of providing playgrounds to try to make it a family experience.”
Once again, Phil’s strategy worked. His business, “Midwest Drive-In Theatres,” operated 53 modestly profitable drive-in theatres by the 1950s. Phil, however, was always looking ahead. He spotted a problem. American families were relocating away from urban areas to the suburbs — and were reluctant to travel into the city just to watch a movie. Phil decided to bring the movies to them.
In 1951, Phil opened his first theatre in a new suburban shopping centre. It was a roaring success. Phil was already thinking about his next step, saying in a 1956 interview with the Boston Sunday Post: “You have it good in one line and then something happens and you have to change.”
Phil launched a restaurant chain called “Richard’s Drive-Ins” (yes, named after his son), and a series of coffee shops called “Amy Joe’s Pancake Houses” (named after his granddaughter!) The company went public in 1960, with Phil retaining a contro ...
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