In 2005, I walked into an Alamo Drafthouse in Austin and experienced a revelation.
Here was a movie theater serving real food — actual meals prepared by chefs — to people in spacious lounge chairs with tables. It was dining at the movies, and it was revolutionary.
I became deeply immersed in Alamo’s world, developing advertisements for their brand through my role at Time Warner, and then personally explored taking the brand into California. The discussions were serious, with enormous potential. Then reality intervened, and the deal never materialized.
In hindsight, I dodged a bullet.
Within two years, every major movie chain had upgraded to lounge chairs and expanded food menus. AMC, Regal, Cinemark; the giants awakened, looked at what Alamo was doing and copied it at massive scale.
The Gladwell principle
This illustrates what we will call the Gladwell Principle: Innovation without sustainable barriers to entry becomes imitation at scale.
The truth is uncomfortable but undeniable. Being first doesn’t matter if being second means having 40,000 locations.
Consider the dirty soda wars that have been unfolding for years. Nicole Tanner founded Swig in 2010 in St. George, Utah, creating “dirty” sodas by mixing base sodas with flavored syrups, creams and fruit purees. Her insight was brilliant, knowing Utah’s LDS population abstains from alcohol and coffee, creating demand for customized non-alcoholic beverages.
Swig trademarked “dirty soda” in 2013 and aimed for 1,000 locations within seven years. It’s a classic growth story: identify an unmet need, create a unique solution and scale nationally. Swig had a first-mover advantage, brand recognition and a clear path to dominance.
Then the giants noticed.
When giants enter
Crumbl, with over 1,100 locations, announced Crumbl dirty sodas in Canada. If that was concerning, McDonald’s entry was potentially catastrophic.
In July, McDonald’s, with 40,000+ locations worldwide, announced testing dirty sodas at more than 500 restaurants. Consider the math. Swig operates 150 locations after fourteen years. McDonald’s will test at triple that footprint for a limited experiment.
The strategic sophistication is telling. McDonald’s had already spent tens of millions on CosMc’s, their failed beverage spinoff. As Dylan Jones of Boldsquare noted on LinkedIn: “Not every big idea works the first time. But that doesn’t mean it wasn’t a good idea after all.” When CosMc’s failed, McDonald’s didn’t abandon beverages. They learned from a $50 million market research experiment.
McDonald’s estimates beverages could be a $100 billion market. They’re not copying Swig’s concept; they’re systematically improving on it with superior purchasing power, drive-thru dominance and operational efficiency.
A cultural phenomenon that couldn’t scale
The Alamo story offers sobering parallels. Beyond innovation, Alamo was a cultural phenomenon. They had a cult following, themed movie nights and a legendary “no talking, no texting” policy. By the 2010s, they envisioned major national expansion.
Yet despite building a genuine cultural cache, Alamo sits at only 41 locations today. More devastating, their financial performance collapsed as major chains copied their model. Where Alamo once enjoyed $12 per person profits versus traditional theaters’ few dollars, this advantage eroded when AMC, Regal and Cinemark invested $2.2 billion in dine-in experiences.
The result? Bankruptcy in 2021, mass layoffs in 2025 and an acquisition by Sony with tempered expectations. Sony’s CEO stated, “It’s not going to be a massive business, but it’s going to grow a little bit.”
Even cultural phenomena couldn’t fend off market giants when barriers disappeared.
Multiplication effect and margin squeeze
When McDonald’s enters a new market or product line, it signals validation to other chains. When Taco Bell (8,000+ locations) and Chick-fil-A (3,000+ locations) add dirty sodas, Swig faces an entire industry pursuing their market.
Each new entrant accelerates consumer education while making Swig’s footprint irrelevant. When customers can get customized sodas at thousands of locations across multiple chains, Swig’s convenience advantage evaporates.
Financial realities compound Swig’s challenges. Industry analysis shows Swig averages $924,000 to $1 million in revenue per location with 12.1 percent EBITDA margins, which is roughly $110,000 of annual profit per store. Crumbl performs significantly better: $1.2 million revenue with 15 percent margins, yielding a $270,000 profit per location.
Swig’s narrow 12.1 percent margin may be its death knell. McDonald’s 40,000+ locations negotiate supplier contracts that small chains can’t match. Their economies of scale in purchasing cups, straws and syrups give cost advantages that eliminate Swig’s thin margins.
Moreover, McDonald’s can treat dirty sodas as margin-enhancing add-ons while Swig must cover full overhead as a single-category business. When companies with thin margins face competitors with structural cost advantages, pricing power shifts decisively toward giants.
Innovation and survival
The challenge isn’t creating something new; it’s creating something that can’t be easily replicated at scale. This requires technical barriers, network effects, regulatory moats, brand loyalty or supply chain advantages.
Swig, like Alamo, has none of these protections. Their innovation is valuable but not defensible.
This doesn’t doom innovative companies, but requires recalibrating ambitions. Despite bankruptcy and wholesale copying by major chains, Alamo survived. Sony’s acquisition, which included 41 locations and “28 straight months of market share increases,” show survival is possible, but dominance is not.
Swig may survive this onslaught and even realize a successful liquidity event. Regional specialty chains often find buyers valuing their brand equity and customer base. But like Alamo, Swig must accept its destiny isn’t market dominance — it’s sustainable differentiation within a market controlled by giants.
Bigger picture
Innovation happens at the edges. Entrepreneurs in Austin, Texas, and St. George, Utah, identify unmet needs. But scale happens at the center, where corporations with infrastructure quickly copy and distribute innovations to massive audiences.
For consumers, this is positive, as it provides faster access to innovative products at lower prices. For innovative companies, it’s increasingly challenging. The reward for successful innovation is often that well-resourced competitors quickly erode first-mover advantage.
When I think about those Alamo California discussions, I realize the deal’s failure was fortunate. Brilliance without barriers to entry is just a blueprint for competitors.
The math is simple. Barriers to entry matter more than first-mover advantage. Innovation creates opportunities, but only sustainable competitive advantages create lasting value. Everything else is just a head start in a race that giants are designed to win.
As I sip my dirty soda, whether from Swig, Crumbl or McDonald’s, I remember that good ideas, once proven, will find a way to reach everyone. Sometimes small innovators get displaced. Sometimes, consumers get better access to products they love. Most of the time, it means both.