The Marcus Corporation History

Company Perspectives:

We take great pride in our dedicated management teams and associates and will continue to develop their potential and skills at all levels within our organization. We believe in rewarding outstanding performance, and in promoting from within to develop a climate of high expectation and achievement, as well as a solid base of highly qualified associates. We will remain a quality-minded corporation, dedicated to upholding our corporate slogan, "People Pleasing People." We will maintain our position of leadership in the hospitality and entertainment industries through our commitment to quality, service, and value. We will continue our personal and corporate involvement in activities benefitting the community, state, and nation. We will support the values of the communities we are privileged to serve by honoring their traditions and preserving their environment. We pledge to remain alert to economic changes which affect our business, and to respond to ever-changing consumer demands. We will continue to successfully meet all challenges through planning, balanced diversification, and orderly growth.

Company History:

As American business success stories go, The Marcus Corporation's is a classic. A diversified, Wisconsin-based hotelier, movie theater chain, and franchised food service operator, The Marcus Corporation was founded in the 1930s by a newly transplanted Polish immigrant whose love for American westerns led him to build a movie house in Ripon, Wisconsin. Through persistence, an eye for winning business opportunities, and an ambitious desire for expansion, by 1996 Marcus built his corporation into one of the largest motel chains in the United States, the nineteenth largest theater circuit, and the largest Kentucky Fried Chicken franchiser in the midwest.

From Poland to Hollywood: 1935--1958

The son of a Polish immigrant, Ben Marcus (changed from Machtey by Ellis Island officials) arrived in the United States in 1925 with a newly acquired lesson in capitalism. While making the transatlantic voyage to reunite with his father in Minnesota, Marcus had delivered milk, water, and oranges to fellow passengers confined to their cabins with seasickness. To his surprise, each tipped him liberally for his generosity, instilling in Marcus the knowledge that pleasing people can provide more than just spiritual rewards. With his onboard earnings, Marcus traveled cross-country to join his father in his cattle brokering business near the stockyards of St. Paul. While attending high school Marcus operated a paper route for the Minneapolis Journal--which he built into the city's largest--then moved on to the paper's circulation, advertising, and entertainment staffs.

Among Marcus's first experiences of American culture was the motion picture, for which he immediately developed a lifelong love. Using his experience in the Journal's entertainment section as a springboard, Marcus began working as a marketing manager for local movie theaters, suggesting promotions, writing ads, and helping with film selection. By 1935 he had decided to open his own movie house and, while on vacation in Ripon, Wisconsin, he discovered a burned-out department store building available for purchase. Borrowing $30,000 from a bank and family members he began transforming the structure into a 500-seat state-of-the-art theater. The Campus Theater (so named because of its proximity to Ripon College) opened for business on November 1, 1935, with the Jack Benny film, "It's in the Air." Even though Marcus booked all his own films, wrote his own ads, trained his own workers, and served as his own doorman (his wife did the bookkeeping), a single theater was not enough to consume his energies, and he soon began searching for new territories. Halfway across the state he discovered an old theater in the town of Tomah and purchased its leasehold and equipment for $10,000.

Within a few years, Marcus had opened theaters in other small Wisconsin towns, from Sparta, Reedsburg, and Oshkosh to Appleton and Neenah (where he spent $40,000 to renovate an old opera house). In 1940 he moved decisively into the big-city movie house market, buying the Tosa Theater in the Milwaukee suburb of Wauwatosa (it remained in the Marcus circuit until the mid-1990s). By the time of America's entrance into World War II, the Marcus chain numbered eight theaters, each of which featured the latest motion picture projection and sound equipment and such amenities as "love seats" at the end of every aisle (so couples could share a single seat) and Wisconsin's first "dairy bar"--a concession stand featuring dairy products under a mural of contentedly grazing Holsteins. Marcus was a committed, thoroughly hands-on businessman, and he channeled all his profits back into his chain while making grueling, once-weekly trips to his theaters to check in on his managers and purchase films from his distributors in Milwaukee.

In 1942 Marcus was finally forced to acknowledge that he could not grow his business single-handedly and hired Joe Strother away from his archrival, the Fox movie house circuit (then the largest chain in the midwest) to act as his film buyer and booker. Two years later he also recruited another regional Fox executive, Henry Tollette, as his manager of operations and assigned him the responsibility of supervising and setting policies for each of the chain's theaters. In 1944 Marcus moved his headquarters to the railroad hub of Oshkosh, Wisconsin, to lessen his dependence on the automobile, which wartime rationing had made an impractical tool for business trips. Although the war forced privations on most Americans, it also gave them the spending money to flock to the movies, an inexpensive recreation that also served as a welcome escape from the grim news from the front. (By the end of the war, three-quarters of all Americans said they went to the movies regularly, and the average viewer saw three films a month.) In 1945 Marcus hired Truman Schroeder to help him with his thriving chain, which enjoyed an additional revenue boost when returning veterans began thronging to the movies in the early postwar years.

Marcus was named president of the Wisconsin Association of Theatre Owners in 1948, and a year later he built the first of 14 outdoor movie theaters bearing the Marcus name--just in time to capitalize on the new postwar enthusiasm for the automobile. The introduction of television in the early 1950s, however, dealt a crippling blow to the movie industry (two-thirds of all U.S. families owned a set by 1953), and with attendance cut in half many theaters across the country were forced to close. As once dominant chains like Fox and Warner began to collapse, Marcus moved his headquarters to Milwaukee in 1953 and began buying up his competitors' sites at bargain-basement prices, opening new drive-ins, and purchasing strategically located "hardtops" (traditional indoor movie theaters) where he thought the local market could still yield a regular movie audience. Marcus's success had given him a reputation as an up-and-comer in Hollywood, and in 1954 he was elected president of the National Association of Theater Owners.

On the principle that television need not spell the demise of the movie industry ("every house has a kitchen but there are still restaurants") Marcus expanded his chain to 27 theaters statewide by 1955, aided by the introduction of "Cinemascope," a new movie format that enlarged the screen size of the typical theater. When movie attendance at his hardtop theaters lagged, Marcus shifted income from his drive-ins (with revenues bolstered by healthy concession sales), and he continued the strategy of diversification he had adopted in the 1940s to spread his risk. He acquired interests in a meat packing firm, a small film distributor, a popcorn and candy vendor with a customer base of 500 midwest theaters, and several real estate development companies. Moreover, he used the new medium to rescue the old. At the recommendation of Henry Tollette, Marcus persuaded a Columbia Pictures distributor to share the cost of a television ad campaign to drum up business for the chain's theaters. Rather than offer the distributor a flat fee for the rental of a new "Blondie" picture, Marcus offered him a cut of the film's profits if a planned TV ad campaign for the film proved successful. The bold strategy worked. Residents of Green Bay poured into their local Marcus theater after a "Blondie" ad appeared on local TV, and instead of the conventional $75 rental fee the distributor walked off with a cool $1,400. Marcus deployed the "Marcus Plan" for television advertising with similar success in his other markets, and by 1958 the Marcus chain boasted 36 theaters supporting a company work force of 900.

Diversification: 1958--1966

Marcus had meanwhile become a nationally recognized advocate for the movie theater industry and was soon being photographed hobnobbing with such Hollywood eminences as Jimmy Stewart, Sophia Loren, Charlton Heston, Spencer Tracy, and movie producer Sam Goldwyn (who made special trips to Milwaukee to join Marcus for bouillabaisse at a local restaurant). Although Marcus's faith that the movie industry would recover from the onslaught of the TV revolution had by the late 1950s been vindicated, he knew diversification offered the only way to avoid a total dependence on the unpredictable movie-going habits of the American public. One of his earlier real estate investments had made him a part owner of a large tract of land in southern Florida, and Marcus began to view the site as an ideal location for a world-class amusement park like Walt Disney's legendary Disneyland in California. Several months earlier, Marcus had run into a former competitor named Gene Kilberg, who had left the Fox theater chain to enter the theater concession and then the restaurant business. Marcus decided to turn the management of his planned Florida theme park over to Kilberg.

An article in Time magazine about a one-time fry cook named Bob Wian who had opened a wildly successful California restaurant chain on the strength of his double-decker "Big Boy" hamburgers sparked Kilberg's curiosity, and he tried to convince Marcus to consider buying the midwest franchising rights for the chain. In 1957, Marcus and Kilberg headed to California to make their Florida amusement park pitch to Disney executives. Claiming they had too many existing projects to consider a Florida theme park, Disney Studios rejected the idea (15 years later, however, it would launch DisneyWorld in northern Florida). Marcus and Kilberg returned to Wisconsin without a Disney deal but instead with Bob Wian's commitment to grant them exclusive rights to develop Big Boy restaurants in Wisconsin, Minnesota, and Iowa, which Kilburg would manage.

The first Marc's Big Boy opened on Milwaukee's northwest side in October 1958 and soon became a solid success, spawning six new Big Boys in the Milwaukee area over the next four years. On a 1960 trip to northern Wisconsin, Kilburg had stumbled upon a roadside restaurant that served a dinner entree called Kentucky Fried Chicken, which the restaurant licensed from a Southern restaurant entrepreneur named Colonel Harlan Sanders. Believing he had discovered the next Big Boy, Kilburg brought the product to Marcus's attention and, within weeks, all Marc's Big Boy restaurants were featuring the Colonel's "original recipe" chicken.

Marcus entered his third business in 1960. On his frequent tours through his Wisconsin theater circuit, Marcus had noticed an intersection in Appleton that seemed perfect for a moderately priced motel aimed at families and business travelers. The Guest House Inn was the result, and by 1963 Marcus had opened a second Guest House Inn 40 miles to the east in Manitowoc. A year earlier, while serving as a trustee for the bankruptcy auction of the 70-year-old Pfister Hotel in downtown Milwaukee, Marcus decided to make a bid for the landmark to save it from its creditors. For many years Milwaukee's premier luxury hotel, the Pfister had hosted every U.S. president since Grover Cleveland in 1893, but by the early 1960s the postwar deterioration of downtown Milwaukee had begun to take its toll on the historic building.

Marcus's business instincts told him a parking lot would be a more profitable use for the site, but his respect for the Pfister's history convinced him to restore it to its former glory. He recruited Rosemary Steinfest, a Marcus employee since 1956, to serve as the hotel's director of sales (a rarity in the male-dominated world of the U.S. hotel industry) and brought his son Steve, a lawyer and real estate developer, aboard to manage the restoration. After four years and $7 million, the Pfister reopened with its 19th century flourishes restored and a new 185-room addition that more than doubled its capacity.

Changing with the Times: 1967--1980

In 1967 Harlan Sanders's Kentucky Fried Chicken (KFC) empire had come under the supervision of John Y. Brown, who decided to grow the chain by requiring that individual franchisees move the product off their menus and into dedicated KFC restaurants. Marcus and Kilberg began searching for profitable locations, and within four years Marcus was operating 21 independent KFC restaurants in the Milwaukee area. The success of Big Boy and KFC had convinced Marcus that there was a market for a family-style restaurant that also served liquor, and in 1969 the first Captain's Steak Joynt opened in Milwaukee (introducing one of the first complete salad bars in the U.S. restaurant industry). By 1970, Marcus's restaurant business--which now included 21 KFCs, 22 Big Boys, and five Captain's restaurants--was contributing as much to the bottom line as his 38 movie houses.

With his diversification strategy an unqualified success, Marcus reformed his company, which until then had operated as a network of 32 corporate fiefdoms, as the Marcus Corporation in 1972 and went public, with the Marcus family retaining a majority of shares. In the same year, Marcus purchased the 44-year-old Sheraton Schroeder Hotel (Wisconsin's largest), which was renamed the Marc Plaza and given an $8 million facelift. The 1972 public stock offering gave Marcus the wherewithal to fuel a major expansion, which by the end of the decade saw the number of Marcus theaters and restaurants more than double to 83 and 109, respectively. Between 1970 and 1979, Marcus's hotel holdings also quadrupled from three to 13.

The once moribund movie industry underwent radical changes throughout the 1970s, and Marcus began installing multiple screens ("twins" or "triplexes"), xenon-gas movie projectors, optical sound and Dolby noise reduction systems, and automated projection booths to keep his theaters on the cutting edge. Although Marcus added 18 (mostly suburban) theaters in the 1970s, the multiple-screen strategy enabled him to expand to 45 screens, which boosted revenues by offering customers a range of films without requiring the purchase of additional real estate.

In 1971 Marcus's son Stephen left the Pfister Hotel and began developing a new hotel concept that resulted in the opening of the first Budgetel Inn (located in Oshkosh) in 1974. The Budgetel concept was spurred by the growing need for hotels that were cheaper than upper-end hotels like Holiday Inn but offered more amenities than bare-bones budget motels like Motel 6. The 60- to 150-room Budgetels would have no restaurants, banquet rooms, or spacious lobbies but would offer travelers roomy, attractive, comfortable quarters near heavily traveled thoroughfares at reasonable prices. Like Marcus's small-town movie houses, Big Boys, and KFC carryouts, the Budgetel concept neatly filled an unanswered niche, and by 1977 Marcus's sales had vaulted to nearly $90 million and its work force had climbed from 3,500 (in 1970) to 6,000. In 1974, Marcus assumed the management of the Sheraton Mayfair Inn in western Milwaukee (which it ran until 1995) and began developing an in-house ad agency called Spectrumedia under the direction of newcomer Bruce Olson. Despite its breakneck growth in the 1970s, Marcus had fed its expansion through profits rather than loans, and as the decade progressed its long-term debt as a percentage of stockholder equity actually declined.

The Second Generation: 1980--1993

As Ben Marcus approached his sixth decade in business, he began to yield control of the corporation's management to his son. Three years after Steve Marcus was named president and COO in 1980, Marcus began another ambitious expansion program, opening a new multiple-screen state-of-the-technology movie complex in the Milwaukee suburb of Waukesha. It also closed its antiquated or unproductive theaters, adopted new building designs for its Big Boy and KFC restaurants, and, in 1986, signaled its intent to turn its Budgetel motel concept into a national enterprise by introducing a franchising program in which franchisees would pay an initial franchise fee and yearly marketing fees plus reservation system fees and royalties based on room revenues. As a Marcus Corporation executive later explained, Budgetel was given the green light to franchise because "we simply saw opportunities that were larger than our ability to grow." Between 1985 and 1987 alone, Marcus's revenues rose from nearly $132 million to more than $152 million, and two months after it opened the sixtieth Budgetel in July 1988, Ben Marcus (now 77 years old) named Steve Marcus CEO. In 1989, with revenues spiraling toward $177 million, Steve Marcus promoted Bruce Olson to manage Marcus's sprawling theater operation.

By 1989 fierce competition from new limited service hotel chains like Red Roof Inns, Days Inn, Comfort Inns, and La Quinta Inns was forcing Marcus to step away from the no-frills concept that had initially defined Budgetel's niche. In 1991 it launched a $20 million reconstruction program for the motel system and by 1993 was offering such amenities as key-card door locks, free continental breakfasts, and free local phone service--all for an average room rate of between $39 and $49. By 1993 Budgetels were enjoying an average room occupancy rate of 80 percent compared with the 66 percent rate of the economy hotel industry as a whole, and Marcus continued to add value by offering new services, from executive conference centers, king-sized beds, and free incoming fax transmissions to in-room coffee makers and hair dryers, remote control cable TVs, and large working desks.

In 1991, Ben Marcus officially retired after 56 years at the helm, and Steve Marcus was named chairman of the board. Under his leadership, Marcus began integrating the operations of its theater, restaurant, and lodging divisions so that promotional events, insurance, legal affairs, and other administrative operations, which had previously been handled separately by each division, were handled jointly by the corporate office. In 1992, Marcus generated $30 in a stock offering and in 1993 launched a $180 million three-year plan to add 25 new company-owned Budgetels, 50 new movie screens, and several new Applebee's family restaurants, a franchise that Marcus had entered in 1990. In 1993 Marcus moved into the resort end of the lodging industry with the purchase and renovation of the Americana Lake Geneva Resort (renamed the Grand Geneva Resort and Spa), a former Playboy Club in southeastern Wisconsin. It also acquired the Gino's East restaurant franchise of Chicago as another franchising vehicle and took over the management of the Northstar Hotel in Minneapolis, which it reopened in 1994 as a luxury hotel for Holiday Inn under the name Crowne Plaza-Northstar.

Streamlining: 1994--1997

Marcus's Big Boy family restaurants, which had grown to a chain of 64 restaurants at their peak, had by the early 1990s fallen victim to the faster service and lower prices of fast food chains like McDonald's and Burger King, and despite an attempt to modernize their faltering image under the name Marc's Cafe & Coffee Mill, by mid-1994 the restaurants' sales were accounting for only five percent of Marcus's total revenues. Between 1994 and 1996 Marcus began unloading its Big Boys and in early 1995 sold all of its Applebee's restaurants to Apple South for $48 million, resulting in a $46 million decline in annual revenues but strengthened profit margins. With its restaurant business reduced to its 27-year-old KFC operation, in 1997 Marcus announced it was considering expanding the chicken franchise into new territories and was discussing a program with the chain's parent, Pepsico, to convert some of its existing KFCs into combined KFC/Taco Bell restaurants.

Ben Marcus's original movie theater business also came under intensified pressure in the mid-1990s. Traditionally, the Marcus name had been synonymous with Wisconsin's theater market, and it controlled as much as 64 percent of the cities' screens and owned more than half of its largest theaters. But new competition, Hollywood's increased film output, and the consolidation of the theater industry as a whole had created several national theater chains--including United Artists, American Multi-Cinema (AMC), Carmike, and Cinemark--that began to encroach on Marcus's turf. With 181 total screens in 1994, Steve Marcus announced the biggest expansion program in company history, with a goal of adding 100 new screens by the end of 1997. In 1996 it added 27 screens in Illinois and Wisconsin and late in the year opened its largest movie complex ever--a 20-screen "ultraplex"--in Addison, Illinois. By 1997 new multiple screens had been installed or announced in northern Illinois; Columbus, Ohio; and throughout Marcus's Wisconsin home territory. Between 1988 and 1995, Marcus had increased its number of screens by 42 percent, and its average theater boasted five screens or more. By the end of 1997, Marcus expected to have 300 total screens in operation, growing to 400 by the year 2000.

Both its new and old theaters had been transformed into models of modern movie-projection technology. In addition to such low-tech amenities as chair-arm cup holders and oversized love seats, the latest Marcus theaters would offer digital sound systems, 24-hour automatic ticket-purchasing kiosks (and, eventually, a ticket-buying site on the Internet), and tiered "stadium seating" designs that offered improved viewing angles for every customer. Theater-goers could now buy mineral water, frozen yogurt, and pizza at many Marcus theaters, and in 1995 the company announced plans to install giant 3-D "ride immersion simulators" at one or two of its theaters in a joint program with Imax. In the period 1995 to 1997, Marcus shut down its last outdoor theater, closing a four-decade-old chapter in Wisconsin movie history; introduced a "Value Cinema" program of budget films; and opened its first Funset Boulevard Family Entertainment Center in Appleton, Wisconsin. Using a Hollywood film studio theme, the center was a combination movie theater, restaurant, and high-tech playground, with traditional activities like minigolf and a carousel commingling with virtual reality amusements and laser tag games.

By the mid-1990s, Marcus's motel, hotel, and resort operations were accounting for 43 percent of the company's total revenues. In 1994 Marcus's lodging operations (now separated into the motel division and the hotel/resort division) encompassed 96 Budgetel Inns in 25 states, four Woodfield Suites, and the Grand Geneva Resort & Spa. The Lake Geneva resort had been an expensive but profitable gamble, and in 1996 Marcus made its second foray into the resort market by buying its first property outside the midwest, a 226-room desert resort near Palm Springs, California, which it planned to turn into a five-star luxury "boutique" hotel for businessmen and vacationers. By 1997 company executives were announcing that Marcus planned to add one or two new hotels or resorts a year in California and Wisconsin in the coming years.

In its small hotel segment, Marcus won a management contract for a hotel in Wisconsin Rapids in 1994 and in 1995 obtained a Hilton franchise for its Marc Plaza Hotel, which it began expanding in anticipation of the boom in hotel room demand that was expected to greet the opening of Milwaukee's new Midwest Express Convention Center in 1998. In the late 1980s Marcus had unveiled a new mid-priced hotel chain named Woodfield Suites, whose typical suite offered travelers a separate bedroom and living room (and sometimes a kitchenette) and on-site amenities such as swimming pools and whirlpools, a game room, and complimentary breakfasts and cocktail hours. The concept was a sound one, and in 1995 Marcus was operating company-owned Woodfields in Milwaukee; Madison, Wisconsin; Cincinnati; and Colorado. As a low-cost way to promote the inns' growth, in 1996 Marcus announced plans to begin franchising the Woodfields nationally.

By the mid-1990s Marcus's Budgetels had to a large extent become the firm's bread and butter. In 1995 it added eight new motels and another 18 in 1996, including its first motel in New York, giving it a presence in 28 states. In August 1996, it reached an agreement with Levtex Hotel Ventures to develop 42 franchise Budgetels in Texas and in 1996-97 pursued new motels in Arizona and the Pacific Northwest. In March 1997 it unveiled its 135th Budgetel, and Marcus officials announced that the company planned to more than double that number to between 300 and 333 by the year 2000. To get there, it would increasingly rely on franchising, transforming the largely company-owned Budgetel chain into a 50--50 mix of owned and franchised motels. Now a national chain with franchise offices in Atlanta, Dallas, and Chicago, Marcus opened a computerized reservation center in Milwaukee in 1996 and created a web site so customers could check on motel locations and make reservations online.

Principal Subsidiaries: B&G Realty; Budgetel Inns; First America Finance Corporation; Pfister Corporation; Marc Plaza Corporation.

Further Reading:

• "Budgetel Inns and Levtex Hotel Ventures Agree to Lone Star State Franchise Expansion" (press release), Milwaukee, Wisc.: The Marcus Corporation, August 19, 1996.
• Gunn, Erik, "Three Teams Vie for Terrace Hotel Project," The Business Journal Serving Greater Milwaukee, October 28, 1996.
• Kass, Mark, "Shut Out at Mayfair," The Business Journal Serving Greater Milwaukee, December 2, 1996.
• Kass, Mark, and Holley, Paul, "National Theater Chains Challenge Marcus," The Business Journal Serving Greater Milwaukee, December 2, 1996.
  In the Light of Liberty: A History of the Marcus Corporation, Milwaukee, Wisc.: Marcus Corporation.
• "Marcus Corp. Unit To Open 2 Multiplexes in Ohio," Dow Jones Newswires, June 12, 1997.
  The Marquee (the newsletter of the Marcus Theatres Corporation), Milwaukee, Wisc.: Spring 1997.
• Palmeri, Christopher, "'We're Tenacious,"' Forbes, July 19, 1993.

Source: International Directory of Company Histories, Vol. 21. St. James Press, 1998.

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