TheaterXtreme's Bankruptcy, Even after the Money

Photo/TheaterXtreme web

A Blue MauMau reader asks the community about franchisor TheaterXtreme, who recently filed for Chapter 7 bankruptcy, despite raising $795,000 right before announcing their insolvency. 

Lack of funding was the major reason cited in the SEC filings, a notion that seemed juxtaposed with the announcement that TheaterXtreme had secured $795,000 in new investment capital.  There's more to the story, according to former TheaterXtreme CEO Scott Oglum. "There was so much that was hidden because we were public."

Oglum says the home theater franchise was extremely close to merging with Circuit City, on three different occasions. He also says the company’s constant struggle for funding was misrepresented.

"What went wrong?" the reader of Blue MauMau asks.

"When I put the epitaph on TheaterXtreme, I always call it the perfect storm," Oglum says. "When I stepped down as CEO, I was already dealing with it."

Experts wonder not about the perfect storm but if the franchisor had a house of cards to begin with and if it ever really had a sustainable business model.

There are plenty of CE industry folks, however, that question whether there is a viable mass market for TheaterXtreme's specialty, front-projection home theater. Its strategy of bringing the traditionally pricey product category to mall stores certainly raised eyebrows.

"There just isn't enough awareness of the category to warrant two-piece projection stores across the country," says Jeannette Howe, executive director of buying group Specialty Electronics Nationwide. "It was a bold and daring idea, and I admire that, but I don't think it was a sustainable business model. I don't believe they were able to create the efficiencies they required to service all of their locations."

Franchise owners were out of the loop. What's next for them?

Read the full article at CEPro