On a quiet residential street in Mid-Wilshire, Kevin Hong and his sales team huddled around a parked Toyota Sienna emblazoned with a magnet sticker reading "Dealflicks Coupon Code: Man Van."
They were loading the converted minivan with suitcases, sleeping bags, brochures and yellow "Dealflicks" T-shirts in preparation for a six-week road trip to visit movie theaters in Kansas, Iowa, Michigan, Illinois and Boston. The sales team members planned to take turns sleeping and driving as they stopped by theaters to personally market their service.
After four road trips and logging more than 40,000 miles to dozens of cities, Hong and his team have helped transform Dealflicks Inc. from a fledgling Los Angeles start-up into a fast-growing discount ticketing service for theaters across the country.
"The idea is to increase as much face time as possible," said Hong, co-founder of Dealflicks. "We'll be hitting as many theaters as we can."
Billed as a Priceline or Hotwire for movie tickets, Dealflicks partners with theaters to offer discounts of as much as 60% on movie tickets and concessions during periods when theaters are mostly vacant.
That's an appealing pitch after average movie ticket prices reached record levels in 2013 and theaters are experimenting with new ways to bring in customers to the multiplex. Last year, theaters in the U.S. and Canada drew 1.34 billion patrons, down from 1.5 billion nearly a decade ago, according to a recent report by the Motion Picture Assn. of America.
Just like hotels, theaters struggle with high rates of vacancy during off-peak times, a problem Dealflicks sees as an opportunity.
"Right now, 88% of movie theaters are empty," said Sean Wycliffe, chief executive of Dealflicks. "We'll say, 'Give us some of your excess inventory … and we'll do all the marketing for you.'"
Dealflicks lets theater owners select which movies they wish to discount, at what price and when. Unlike Priceline, there is no negotiation involved. Customers buy the tickets through Dealflicks' website or iPhone app. The company typically charges 10% to 20% of the ticket sales.
Since its launch nearly two years ago, the company has contracted with about 350 theaters that show films on 2,000 screens in California, New Jersey, New York, Connecticut, Florida, Kansas and other states. Dealflicks recently signed up 65 theaters at the annual CinemaCon trade show in Las Vegas, offering cash prizes to theaters that sign contracts.
Sales are projected to jump to more than $2 million this year from $245,000 last year. The company expects to be profitable this year.
Among Dealflicks' largest customers is Bow Tie Cinemas, the nation's oldest theater chain with 377 screens in New York, Connecticut and several other states.
"As customers have learned about it, they have really embraced it," said Joe Masher, chief operating officer for Bow Tie Cinemas. He credits Dealflicks for helping boost attendance at some theaters by as much as 20%. "Those guys studied the business and really understand how it works."
Customers go to the Dealflicks website to browse a list of theaters and movies with discounts. Once they select the movie and time they want, they log on to the website to buy the ticket. Dealflicks then sends an email voucher, which customers can take to the theater to redeem their ticket and/or concession items.
Special offers often are combined with concessions. For example, the MGN Five Star Cinema in Glendale on Monday offered a small popcorn and admission to an afternoon screening of "Spider-Man 2" for $16.75, representing a 26% discount off the regular price.
In theory, theaters stand to benefit from discounts if they bring in more customers who buy lots of popcorn, soda and other high-profit concessions.
Even so, some exhibitors have been reluctant to embrace discounting, fearing heavy marketing of low-priced tickets through discount services such as Groupon, LivingSocial and DailyCandy will erode their business by encouraging moviegoers to wait for a bargain before trekking to the multiplex.
The world of online ticketing is dominated by two major players, Fandango and MovieTickets.com. A more direct rival to Dealflicks is MoviePass, a New York City company that operates a Netflix-type service that charges a flat monthly fee in exchange for unlimited movie visits.
Dealflicks has not been immune to the challenges. It took 10 months for the company to sign up 100 theaters. Fewer than a dozen theaters have signed up for the service in Southern California, where big chains dominate. Local venues participating with Dealflicks include New Filmmakers, the Cinefamily, Arena Cinema in Hollywood and Gardena Cinema.
"When we first started a lot of people were reticent about it, but now we have a lot of case studies," Wycliffe said. "The more theaters we've signed on, the more we've shown we can bring new customers in."
Wycliffe hatched the idea for Dealflicks in 2010 after watching "The King's Speech" at a movie theater in Berkeley, where he had just graduated with a degree in economics.
"It was a great movie but it was dead empty, just a few days after the movie came out," Wycliffe said. "I just had this idea. 'There should be a Priceline for movies.'"
Wycliffe, who had previously launched a business selling cellphone services, figured he could use his sales experience to pitch the idea to theater owners. He partnered with Hong, a former stockbroker who handles business development. A third co-founder, Zachary Cancio, is the chief technology officer who runs the website.
Dealflicks launched in July 2012 with backing from 500 Startups, a seed fund program created by former PayPal executive Dave McClure. 500 Startups provided $50,000 in financing, while friends and family pitched in about $65,000.
They also got help from the Turner/Warner Bros. Media Camp, an accelerator program for media start-ups, and Be Great Partners, a Los Angeles investor that leases Dealflicks office space on Wilshire Boulevard.
The men didn't take a salary in their first year of operation and hatched the man van idea as way to save money. Kevin sold his Acura TSX and bought his mom's Toyota Sienna, removing the seats to make room for a mattress.
Not only could they cut down on airfare and hotel expenses, but the van also enables the sales team to personally connect with theaters, which the men discovered was far more effective than making sales calls.
"This is a relationship-driven business," Hong said. "We visited just about every part of the country except the Northwest."