The original script took place in locations around the town of Denton, like Brad and Janet's house, and Cosmo and Nation's "hospital." It was set to be filmed in the real-life town of Denton, Texas, but the 1979-1980 Screen Actors Guild strike meant no American actor was allowed to act at any location. Filming moved to the UK, but no English locations could pass for an American suburb, so director Jim Sharman set the entire film inside the Denton television studio.
When the movie was first released in the USA, it only played in limited engagements and screened only at midnight. This was based on the success of the midnight screening return seasons of The Rocky Horror Picture Show (1975) around the world.
One working idea for the movie was that Frank-N-Futer was going to come back from the dead and travel to Denton to find out Janet was pregnant with his child. Brad and Dr. Scott were supposed to have become lovers, and discovered a way to revive Frank using virgin blood. When he returns to Denton, Frank attempts to convert the entire town into a new cult of Transylvanians, and Riff-Raff and Magenta were to return to kidnap the child and destroy Frank once more. The idea was dropped when Tim Curry declined to participate.
Writer-Director Jim Sharman, comparing this film to The Rocky Horror Picture Show (1975), said, "The intentions of the two films are quite disparate. The only tangible links are Brad and Janet, who act as catalysts to the plot."
According to the production notes, Barry Humphries played the part of Bert Schnick like Dr. Caligari, a silent film villain of 1920s German Expressionist Cinema. Humphries said, "He's a highly expressionist character, a blind Viennese-born game show host. Right away you know he's not rooted in any reality of any kind, except his own."
This movie never achieved the same cult status as its precursor The Rocky Horror Picture Show (1975) but is notable as a cult film and film history oddity due to its connection with its famous cult predecessor.