IT'S A SATURDAY MORNING IN JULY, eight o'clock. The theater staff assembles for its monthly meeting. In among the smartly uniformed ushers and cashiers, a grinning fighter pilot, dressed in a Top Gun jumpsuit, sips contentedly on a soda. A twenty-first-century U.S. Marine, outfitted to fight back the Aliens hordes, gawks at the cherubic blonde concessionaire down the row. Then the crew from Friday night's late show arrives, in bathrobes and furry slippers, teddy bears in hand -- a mock protest at having to come back to the theater just five hours after they left.

These are the troops of the Arbor Cinema Four: 42 teenagers who for the next 18 hours will largely be responsible for the success or failure of this unusual movie house on the outskirts of Austin, Tex. On any day, they have a number of built-in advantages over their competition: an award-winning building and state-of-the-art sound and projection equipment, all of which add 25% to the cost of the typical American movie house. And on this day, they have other advantages: Weaver in Aliens, Redford in Legal Eagles, Cruise in Top Gun, and DeVito in Ruthless People. Even the weather should help draw crowds looking for air-conditioned relief from the expected 100-degree heat.

"You're Hollywood for the people of Austin," Michael Swinney reminds the staff. He has given the pep talk many times before: remember that you are not selling tickets or popcorn -- you're selling entertainment. And remember who you're selling it to: they aren't patrons -- they're guests. That's why it's important to clean that smudge off the bathroom door, or replace the burned-out bulbs on the aisles between each screening. It's that kind of attention to detail that keeps people coming out to the theater, and keeps them coming to the Arbor rather than a theater across town.

Swinney is dressed in jeans and a T-shirt sporting the logo of New York's Hard Rock Cafe. At 36, he is still youthful enough to pass -- almost -- for the movie usher he used to be. Although his title is vice-president and chief operating officer of Presidio Enterprises Inc., he is a familiar presence at the Arbor, not above tearing tickets, cleaning an auditorium between shows -- whatever is needed to maintain the magic of a night at the movies.

These are tough times for movie exhibitors. After years of making easy money showing lots of films in little concrete-block auditoriums, industry revenues have recently begun to plummet. Part of the explanation is demographic: teenagers have always been the movies' prime audience, and there are fewer teenagers around these days. At the same time, video cassette recorders and cable TV are rapidly replacing the movies as a source of entertainment. And for exhibitors, there is the problem of supply: there are just fewer hit movies being made.

The Arbor was a strategic experiment aimed at overcoming these hurdles and bucking the downward trend. It is the brainchild of Charles B. Chick, the 39-year-old founder and president of Presidio, who got into movies at about the time he dropped out of business school. Chick is not the first operator to see the payback in spending generously on his building and equipment to provide a more inviting ambience for his patrons: such publicly traded giants as the 1,117-screen Cineplex-Odeon-Plitt or the 1,163-screen General Cinema Corp. also have "upscaling" programs underway. But few have pulled it off with such panache or such dramatic payoff as Chick. Although the Arbor is only a 1,387-seat theater in the nation's 98th largest market, it has regularly placed in the top 10 grossing theaters in America ever since it opened in June 1985, and with its two new sister complexes, it was largely responsible for a 15% increase in Presidio ticket sales last year, at a time when sales were down 7% nationwide. With only 46% of the movie seats in the Austin area, Presidio now claims over 60% of the box-office revenues.

Presidio's success, however, depends in large part on the youthful band gathered around Swinney this Saturday morning. To many business owners, it would be a frightening prospect, putting the company in the hands of 42 teenagers, most of whom are holding down their first job. But Charlie Chick does it 365 days a year. During this day, his adolescent crew will likely process more than 4,000 people through the ticket lines and concession stand at the Arbor, and oversee seven or eight showings of each of four first-run films. And by the end of it all, they will likely have handled more than $20,000 in cash. The difference between making money and not depends on how well they have been trained and motivated, then retrained and remotivated.

Shelley Harris, the assistant manager in charge of this Saturday's matinees at the Arbor, knows just how demanding it all can be. Even at the start of her eight-hour shift, there are problems. The cashier just had a fight with his girlfriend and feels like sulking. A concessionaire's brother was in a car crash the night before, and she doesn't know if she can concentrate enough to handle cash. Shelley, all of 18 herself, is a veteran now at coping with such crises, having worked her way up through the ranks. With an encouraging word to the sulking cashier and a quick reassignment to the troubled concessionaire, she moves on to her morning inspection.

There are, first of all, the auditoriums. Popcorn on the floor in Number One -- have someone sweep it up. A Junior Mint is squashed in the third row of Number Two -- it must be mopped up. She checks the seats in each auditorium -- they'll do for now, but she notes to herself that they'll need to be steam-cleaned next week.

In the rest room, Shelley runs a light finger over the surfaces, toilet bowls, and sink fixtures, then the doors, the napkin dispensers, and the mirrors. Do the lights work? Are the floors immaculate? Is there enough soap and towels? The rest room card hanging on the wall is tattered -- have it replaced.

The manager's one-page checklist continues, six separate inspections in all. In the lobby, the staff uses about six different polishes and cleaners to make sure that every surface gleams. Three sizes of drink cups and three sizes of popcorn tubs have to be inventoried, along with about eight kinds of candy. The cash has to be counted, yesterday's figures checked, and the projectionist consulted. It is, Shelley admits, "the most nervous part" of her day.

"Please smile, y'all," she tells her ushers as she moves through the lobby, completing her rounds. "And please don't chew gum -- it looks like you don't care." She opens the doors to the Arbor Cinema Four five minutes ahead of schedule, only to find that a crowd has already formed a line that stretches back into the parking lot. It is 9:55 a.m.

If Charlie Chick hadn't gambled on expansion at the Arbor and two other locations, Presidio Enterprises probably wouldn't be around today. Charlie, his brother Dick, and several partners started the company in 1973, paying $170,000 for two United General Theaters Inc. franchisees just before United went belly-up. By 1980, they were making money from their $2.5-million, 12-screen operation, but all the time they were losing ground to larger competitors. Chick found he could no longer afford to bid for the best pictures, as distributors demanded higher and higher guarantees. His partners wondered out loud if it wouldn't be better to dump the theaters and concentrate on real estate, in which they'd begun to dabble, or cable TV.

But Charlie loved the movies. Growing up in Longview, Tex., he had saved his nickels for matinees at the local movie house, an old art deco palace where he could escape from Longview and spend afternoons with the likes of John Wayne and Jimmy Stewart. For him, the movies had always been the magical stuff of which dreams were made, and now that he had built his own small chain of Texas movie houses, he was unwilling to let it go. "We're going to dance with the girl that brought us," he said to his partners, and then embarked on an ambitious plan to build five theaters in five years. Among them was the Arbor.

It was the memory of an enraptured young moviegoer from a small Texas town that dictated the design of the new theaters. "I don't want a lobby," he told architect Girard Kinney, "I want a stage set." So rather than a ceiling at the Arbor there is an evening sky with twinkling stars and puffy clouds. An audio tape of thunder and lightning plays every five minutes. A two-story clock tower rises over the concession stand, decorated with a festive red-and-white candy-striped awning. Antique-style lamp posts mark the way past the prewar British telephone booth and into the auditoriums.

Stretch out: there are 42 inches between rows rather than the standard 39. The seats, imported from France, cost about twice the standard American model. The picture itself plays on either 70- or 35-milimeter prints, on a screen about 50 feet wide. The sound is even better, one of five theaters in America to have been constructed for George Lucas's THX system: 12-inch solid walls with two inches of soft insulation, special air-conditioning and heating systems, plus giant speakers that bathe the audience in dialogue and music. A letter from Lucas on display in the lobby rates the Arbor as the best theater in America to see a movie.

Installing THX wasn't an idea that originated with Chick -- in fact, he and his architect borrowed a number of good ideas while on a tour of some of the nation's best movie houses. He discovered THX in a theater in Dallas, where the sound system was so overpowering that the audience actually applauded it. From a chain in Seattle he took the idea of electronic gadgets that hold open the auditorium doors between features and let them close once the picture has begun. Miami's Fountainbleu Hotel provided the idea for rest room check cards. A chain in Seattle inspired him to put a manager on duty at a desk in the lobby at all times.

In the end, however, Chick's movie palace was a mixture of inspiration and compromise. Trammell Crow Real Estate Investors, the developer of the Arboretum mall in northwest Austin, which had doubts about how well a movie theater would fit into its new upscale shopping center, finally allotted Chick only 22,000 square feet for his four-plex cinema -- not the 35,000 he had counted on. A smaller house would mean smaller profits. And the $2.8-million cost of completing the Arbor was so high that Chick had to turn to limited partners for most of his financing: they have claim to 25% of the net profit a year for the first five years of operation, and a smaller percent thereafter. Under those terms, it wasn't hard for Chick to raise the money -- in just two weeks, he sold $1 million in limited partnership shares each for the Arbor and another theater. But from the beginning, Chick realized that payments to investors would eat up a substantial share of the Arbor's operating profits.

Once the Arbor started selling tickets, however, the compromises hardly seemed to matter. Since opening with Back to the Future and Silverado last summer, Chick's movie palace has been setting national box-office records. Winner of a design award from the American Institute of Architects, the Arbor has been drawing tourists from Dallas and Houston, who come simply to stand in the lobby and experience the thunder and lightning. Legions of regular patrons will drive 45 minutes across Austin to see a movie there rather than drive 10 minutes to see it someplace else. And just as Chick had hoped, the Arbor dominates the market today, the clear choice of distributors who want to showcase their big pictures to large crowds in an atmosphere of comfort and magic.

Making money in the movie business is a more complicated affair than just filling the house. Take the matter of how much to pay to distributors for their movies. In Texas and almost half the other states, theater owners like Chick must bid on movies without ever seeing them, based solely on the reputation of the actors, directors, and producers. This past summer, for example, Presidio guaranteed less for Twentieth-Century Fox Film Corp.'s smash hit Aliens than for Howard the Duck, the Lucasfilm turkey.Blind bidding in the movie business is a lot like playing the slot machine in a casino.

The Arbor has improved Chick's odds. Most often, distributors sell pictures for a guarantee against a percentage of the gross, minus a negotiated allowance for theater operating expenses. Most major pictures open at 90% for the distributor, 10% for the exhibitor, with the distributor's take generally dropping the longer the picture runs. Because of the size of the Arbor auditoriums, Chick does fine at 90/10. But because of the theater's popularity, he can regularly run pictures longer, into weeks where his profit margins are higher. In addition, because of the prestige attached to showing a film at the Arbor, Chick has the leverage to negotiate the highest house allowance in Austin, which is a good thing: he has, far and away, the highest house expenses. Magic doesn't come cheaply.

The old adage, of course, was that theater operators make their money at the popcorn stand. It's still true. On a $2.75 tub of popcorn, Chick's gross markup is 539% (see box on page 104). And while it is more modest, the 65% average markup on soft drinks, candy, hot dogs, Perrier, and pickles at the Arbor is still quite respectable.

Everything about Chick's concession stand is carefully thought out. Each concessionaire has an individual workstation, with his or her own cash register, drink machine, and supply of candy and popcorn -- an added expense that nonetheless cuts down on transaction time and reduces lines that can scare away potential customers.And the kids behind the counter have been well trained: after you order the popcorn, they ask, "What kind of drink would you like?" rather than "Is that all?" Before expansion, Presidio averaged 91? in sales per customer, below the $1 most theaters aim for. Today, sales are up to $1.15, with $1.23 set as next year's target.

Meeting such goals puts a good deal of pressure on Presidio's young employees, but even more on Chick and his managers to keep them motivated. A concept borrowed from Disneyland helps. "Don't think of what you do as a job," Chick tells employees. "This is show business. You aren't an usher taking tickets. You're an actor playing the part of an usher taking tickets." A pretty subtle difference, but one not lost on teenagers whose other choice may be making a few cents more an hour flipping burgers at a fast-food joint down the street. Among Austin youth, in fact, working at the Arbor provides status and social visibility, and there's always a stack of applications on the manager's desk.

Chick capitalizes on this initial enthusiasm by building motivation into every aspect of Presidio's elaborate training and personnel system. The manual for Level I ushers, for example, runs to four pages, detailing everything from how to patrol the parking lot to how to clean the auditoriums. Usher trainees must understand Chick's "theory of the guest," and pass a written exam (open book) that includes an essay and multiple-choice questions on what announcements to read when and what to keep in the usher's stub box. Only when candidates have passed the test, and demonstrated punctuality, good attendance, neatness, cooperation, and politeness, do they earn a gold Presidio star for their vest, a 5?-an-hour raise, and a posting outside the auditorium door.

Each subsequent level on the Presidio ladder has its own page in the manual, its own exam, its own set of criteria. Level II concessionaires must demonstrate an ability to handle cash accurately, a memory for prices and brands, an understanding of "psycho-suggestive selling." As a cashier candidate for Level III, you're tested on everything from how to answer the phones to how to respond to a bomb threat. Can you handle the daily cash reconciliation sheets? Do you have "polished guest relations skills"? Level IV "floor staff leads" supervise training, keep time cards and attendance for those below, and distribute the weekly duty roster, and it is from their ranks that theater managers are chosen. Leads are expected to forward new ideas on how procedures can be improved. And, should anything go wrong while they are on duty, they are expected to pitch in until the crisis has passed.

Just as each level has its own responsibilities, so it has its own incentives. Concessionaires compete for cash prizes in regular sales contests. Cashiers earn a bonus each month if they can go for 10 shifts without a cash shortfall from ticket sales. Floor leads compete for a limited number of manager positions, which earn them steady salaries and a percentage of the gross sales if their theaters hit their targets. There are also trips and automobiles to be awarded at the company picnics.

It is company policy at Presidio that jobs are filled from within, from Level II right up through the corporate offices, where all but the position of film buyer have been filled from the ranks of theater managers.Besides higher pay, the executives earn a piece of the 34% employee share of Presidio equity. They also have a chance to invest in the limited-partnership deals for theaters yet to be built.

"The major criterion we use when we hire is: Does this boy or girl have the potential to be a manager someday?" Chick explains. "We can't guarantee that they will ever become a manager, but if they have the potential, we know that they will be able to shine as a member of the floor staff."

Saturday night, 7:30. Presidio president Charlie Chick can't help himself. He knows he should be home with his wife and two sons, but with the Arbor likely to set an attendance record, he can't stay away.

Part of the reason he wants to be there is purely practical, he explains as he walks through the lobby door: "Nothing fattens cattle as does the eye of the master, as my daddy used to say." But a bigger part of it is emotional: he has never outgrown his love of the movie palace, or the excitement of owning one.

As much as he loves the Arbor, he sees its limitations on a Saturday night as busy as this one. The lobby space he was able to negotiate from Trammell Crow is far too small for the sellout crowds that now throng to the Arbor, and the crush of people makes it too hard for people to get to the concession stand. That tends to cut down on concession revenues. Worse, from Chick's point of view, it cuts down on the magic as well.

Chick tells himself the Arbor was just an experiment.He's already signed the lease for his next theater, an even grander palace. Outside, he imagines it something like Grauman's Chinese Theater, while inside he'll have 11 screens, all with THX sound. He's decided to put two more inches between the seats, so even a six-footer can stretch out. And with 50,000 square feet, he'll have room for a bar, restaurant, and an ice cream parlor right off the lobby, where you can order a drink or a snack and a ticket for the next show, all at the same time.

His imagining, however, is interrupted. "Excuse me, Mr. Chick. We're a little shorthanded. Could you help us sweep up?" The girl blushing in front of him couldn't have been more than 16 -- Cameron, her name tag says. Her energy makes him smile as he grabs a broom and heads for the popcorn stand. And when he's done there, he'll help clean out the auditoriums as well. The sweat drips down his face as he moves from one row to the next, sweeping trash to the center aisle, just as the manual prescribes. For Charlie Chick, such is the stuff of which movie magic now is made.