Business Economics paper

Who benefits more from partnerships between cinemas and restaurants: the cinema or the restaurant?

Hong Seo Yeon - u6763736

19/10/18

Essay

While the facebook page of cinemas are expected to promote new movies and cinema facil-

ities, we occasionally observe it promoting nearby restaurants and cafes. The reason why

cinemas help promote these seemingly unrelated food venues are because they are, in fact,

related – through partnership contracts.

Cinemas and restaurants often form partnerships, in which the restaurants offer certain

meals bundled with cheaper movie tickets. For example, Dendy Cinema provides “Dine

with Dendy” services(Dendy Cinema Website), where Salmon N Bear – among others –

allows customers to add a Dendy’s ticket for only 10 dollars if they spend more than 25

dollars on their food. In exchange, cinemas contribute to the promotion of the restaurants

on diverse platforms, including social media. Although partnerships are established on the

basic assumption that both parties become better off, an interesting question can be raised

in this case: who benefits more, Dendy Cinema or Salmon N Bear?

Although Salmon N Bear provides movie tickets at a lower-than-regular price, the eco-

nomic benefit for Dendy Cinema exceeds the possible loss in sales revenue due to the lower

prices. This is because the diners at Salmon N Bear get to see advertisements telling them

movie tickets are available at a lower price if they spend more than 25 dollars in the restau-

rant. Even if they didn’t plan to buy movie tickets before viewing the offer, the conditional

fall in price will increase their willingness to go to the cinema, and hence the demand for

movie tickets will rise (demand curve shifts rightwards), increasing the sales revenue(price

times quantity of tickets). It is also likely that after enjoying their experiences at the cin-

ema, the diners will purchase movie tickets at normal price level, further increasing Dendy’s

sales revenue in the long run. The special offer at Salmon N Bear also gives Dendy Cinema

an edge over their competitor, Palace Cinema for instance, as tickets for Dendy’s are now

available at a lower price than the tickets for Palace Cinema. In other words, the tempo-

rary cut in price can help Dendy’s widen their long-term customer base relative to other

competitors, potentially increasing their market share.

The ticket offer is definitely also beneficial to Salmon N Bear. Diners who previously

planned to spend less than 25 dollars are now willing to spend more to gain access to cheaper

movie tickets. The increase in demand for their meal leads to an increase in revenue(price of

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each meal times quantity) for Salmon N Bear. Also, people who planned to watch films at

Dendy Cinema are now more likely to buy food at Salmon N Bear, since they can have meals

and buy cheaper movie tickets at the same time. Again, demand increases, and revenue rises.

Moreover, in the longer run, the promotion of Salmon N Bear on Dendy cinema websites

and social media pages raise awareness of the restaurant, which may increase the number of

their future customers.

Whether it is Dendy Cinema or Salmon N Bear that benefits more from their mutual

contract depends on a number of elements, of which many are neither tangible nor measur-

able. For example, even if the exact amount of Dendy’s tickets sold at Salmon N Bear is

measured, it is almost impossible to deduce what proportion of those ticket sales was derived

from the demand for cinema tickets, and what proportion was derived from the demand for

food and drinks. The long-term effects of advertisements are even more ambiguous on both

sides. In sum, the respective benefits the two parties gain from their partnership is difficult

to predict or measure separately.

Therefore, a better way of examining the benefits Cinema-Restaurant partnership brings

to the involved parties is by studying the relationship between the two. From the above

analysis, Dendy Cinema and Salmon N Bear are complements, meaning the consumption

of one is accompanied by the consumption of another. Since there are many alternative

options of consumption, the two are not very strong complements. Still, the connection

suggests that increased demand for Dendy’s results in increased demand for Salmon N

Bear, vice versa. The benefits gained by the two parties are exchanged. Hence, the cinema

and the restaurant can respectively maximise their benefits by actively contributing to their

partnership contract.

The attempt to determine who benefits more from the partnership of cinemas and restau-

rants thus leads to the conclusion that the benefits are not really separable. However, it is

clear that both parties do benefit in most cases – this is precisely why the partnerships are

maintained, between many different cinemas and restaurants.

Reference

https://www.dendy.com.au/offers/dine-with-dendy-newtown

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