This is not off topic!
By CHARLES V. BAGLI
EW YORK -- Next month, Television City and the Fashion Cafe, two theme restaurants at
Rockefeller Center whose owners once dreamed of branches in major cities around the world, will
close.
On Broadway at 49th Street, work stopped nearly a year ago on David Copperfield's Magic
Underground, a theme restaurant that was supposed to combine magic, merchandise and good food. The
owners have spent nearly $30 million, but it may never open.
The Official All Star Cafe in Times Square has quietly been offered for sale, along with the nine other
cafes in the chain. And several troubled restaurants in its parent chain, Planet Hollywood, are on the
block.
Theme restaurants, which exploded across the urban skyline three or four years ago with promises of
untold profits from a slickly packaged blend of eating, shopping and entertainment, are collapsing. Even
former Wall Street favorites like Hard Rock Cafe, Planet Hollywood and Rainforest Cafe have seen sales
tumble as diners go elsewhere.
Industry analysts and restaurant consultants cite various reasons. Though the restaurants' themes ranged
from movie or TV memories to sports stars, supermodels and tropical rain forests, the food was often
dismissed as terrible. The elaborate decor -- rock-and-roll collectibles, racing cars, animatronic jungle
habitats -- was impressive but distracting, and the novelty soon wore thin. Rapid expansion into smaller
cities like Indianapolis undercut the cachet of flagship restaurants in London and New York. Landlords,
who once welcomed theme restaurants, have turned their backs.
"The life cycle of theme restaurants has been a lot shorter than anyone expected," said Ron Paul,
president of Technomic Inc., a restaurant consulting firm based in Chicago. "Even in New York, where
there's a huge tourist population, the novelty's gone. It turns out that the consumer had a lot more
entertainment alternatives."
The trend is not confined to New York.
The Fashion Cafe in London went into receivership in October. Planet Hollywood closed its movie-theme
restaurants in Aspen, Colo., and Jakarta, Indonesia, and scratched plans to open an All Star Cafe in
Chicago. Copperfield's Magic Underground scrapped plans to open restaurants in Chicago and Las Vegas,
though it still hopes to open one in Orlando, Fla. Many other themes never got beyond the first press
release.
Restaurant analysts and real estate executives say the concept is not necessarily dead. They expect Hard
Rock, the largest and oldest theme chain, to survive and even prosper, because it has done the best job of
focusing on food and decor. Planet Hollywood is working on a plan to reorganize as a leaner company,
jettison All Star Cafe and pull out of its tailspin. And newcomers like ESPN Zone and Wrestlemania Cafe,
with their tie-ins to television, may catch on.
But the carnage has been enormous in an industry where the number of theme restaurant chains jumped
from 6 to more than 30 in six years, and revenues rose to more than $2 billion today from an estimated
$300 million in 1992.
Dive!, a theme chain backed by Steven Spielberg and based on claustrophobic submarine spaces and
submarine sandwiches, has not gone beyond Los Angeles and Las Vegas. Billboard Live, featuring live
music from Billboard magazine charts, died in Los Angeles. Vegas, which blended food and high-kicking
chorus girls, announced its debut at a news conference in Times Square in September 1996 and promptly
disappeared.
Three never got beyond the hype stage: RKO Pictures, which was to combine food and old movies;
Marvel Mania, which was based on Marvel comic book heroes, and Chefs of the World, a theme chain
that would celebrate famous chefs.
"The industry's going to constrict dramatically and somewhat violently, either through bankruptcy or
restaurant closings," said James Berk, president and chief executive of Hard Rock Cafe International,
which operates 98 restaurants as well as hotels, concert venues and a record company. "There will be no
additional worldwide theme restaurant chains." Instead, he said, "what will be left will be either good
restaurants" or some single-site themes called "one-off" operations -- restaurants located just outside
major tourist attractions that depend on the tourist stream for survival.
The present economic situation is a far cry from the mid-1990s.
Robert Earl, the impresario who had helped Hard Rock expand well beyond its London roots, started
Planet Hollywood in 1992 with actors Bruce Willis, Demi Moore and Arnold Schwarzenegger, adding 10
to 20 restaurants a year before going public in 1996.
At about that time, restaurateurs suddenly saw theme restaurants as a bonanza. Food and beverage
operations generated the 10 percent profit typical of any successful restaurant, but the high-priced
merchandise -- T-shirts, sweatshirts, leather jackets -- accounted for as much as 45 percent of the total
revenues and as much as 70 percent of profit margins.
In Manhattan, eager developers created what was practically a theme-restaurant district. The Jekyll &
Hyde Club, the Motown Cafe and the Harley-Davidson Cafe followed Hard Rock and Planet Hollywood
onto 57th Street and Avenue of the Americas. Comedy Nation, the Fashion Cafe and Television City also
opened outlets in the area.
"There was a time when investors and operators thought that theme restaurants were a sure-fire formula
for making lots of money," said Michael Mueller, a restaurant analyst with Nationsbanc Montgomery
Securities in San Francisco. "That's since been disproven by the drop in same-store sales at chains like
Planet Hollywood."
In the first nine months of 1998, Planet Hollywood lost $15.7 million, compared with a profit of $52.1
million during the same period last year. Sales dropped 20 percent in the third quarter of this year at
restaurants open for more than 18 months, continuing a two-year trend. Finally, shares of Planet
Hollywood have plunged to less than $3 today from a high of $32.13 in 1996.
Rainforest Cafe expects sales to drop by as much as 18 percent this year at the six restaurants that have
been open for more than 18 months.
At Hard Rock, sales were down about 10.1 percent in the first nine months of this year, while overall
revenue and operating profits rose more than 2 percent. Much of the decline came from a drop in sales of
Hard Rock T-shirts and caps, Berk said, not because tourists and local residents were ignoring the
restaurants. Two years ago, Berk said, the company realized that it had to cut prices and improve the
food, while periodically changing the decor, to keep customers interested.
"People came to see the stars; there weren't any," said Robert Futterman, a retail real-estate broker based
in New York who has been to most theme restaurants. "They came to eat the food, and it was terrible.
What do you need more than one T-shirt for? The thrill is gone."
At Planet Hollywood, Earl is betting that the public has not lost its taste for theme restaurants. In January,
the company is scheduled to unveil a revitalization program called Planet 2000, which is linked to the
opening of the Planet Hollywood Hotel in Times Square. The company has laid off more than 70 people
worldwide and has struggled with its lenders. Earl said the company would introduce new menus, prices,
logos and designs for the restaurants and additional movie stars.
"I think it's fixable," he said. "After the narrower concepts close, people will come back to Hard Rock
and Planet Hollywood. There is some carnage, and I think there's more coming. You'll end up with the
survival of the stronger ones."
Some Planet Hollywood investors and real estate executives said Planet Hollywood was planning to
dismantle the All Star chain. They said Planet Hollywood was quietly trying to sell the restaurants, or to
find a partner, like Wrestlemania Cafe, that would create a new chain.
Disney's ESPN Zone, with its electronic games, constantly changing array of sports stars and broadcasts
for cable television, is doing well in Baltimore and is set to open in Times Square next year. Many
analysts and real estate brokers expect it to knock what life remains out of All Star Cafe.
Glen Tullman, vice chairman of the company running Copperfield's Magic Underground, said he
expected to complete a new round of fund-raising for the project in Times Square, but analysts and
restaurateurs say it will be almost impossible for the owners to make money after having spent nearly $30
million on a single site.
David Liederman, the founder of Television City, a theme restaurant he opened in 1996 at Rockefeller
Center and hoped to bring to other cities, holds out little hope for most theme restaurant chains. He said
the time and money it took to develop an elaborate theme forced him to charge prices that many people
were unwilling to pay. Next month, Liederman said, he will convert Television City into Chez Louis, a
restaurant specializing in roast chicken cooked over wood fires, and focus on doing a few things well.
"I'm leading the de-theming pack," Liederman said. "I think there's going to be a massive exodus out of
this business." |
