Planet Hollywood seeks happy ending

OUTLOOK

August 29, 1999|By Lorraine Mirabella

THEME-RESTAURANT chain Planet Hollywood International Inc. announced that it would file for Chapter 11 bankruptcy protection while restructuring its operations.

The company's two largest shareholders and a trust for the children of the company's chief executive officer are investing $30 million in the chain.

The company, which operates about 80 movie-themed Planet Hollywood restaurants and 20 other restaurants under names such as Official All Star Cafe, is likely to close a few Planet Hollywood restaurants outside major cities and might shed some of its other restaurants or turn them into joint ventures, according to Chief Executive Officer Robert Earl.

This year, the chain began a makeover that included overhauling its menu, restaurant design and merchandise. Where did Planet Hollywood go wrong? What steps must the company take to turn itself around?

Bill Carlino

Managing editor, Nation's Restaurant News

While they debuted in places like London and New York, they started opening in secondary cities and diluted the chain. If you're a tourist in New York, why visit a Planet Hollywood when you have one in Nashville. They took the mystique out of it when they did that. It was great for a first-time experience, but this business is all about repeat business, and Planet Hollywood wasn't getting it. It came to a point when half the sales were derived from merchandise, their food was unmemorable and the units were noisy. After the trailers of movies and memorabilia, it was like the emperor having no clothes.

With a lot of square footage, it's an expensive thing to run. They needed a tremendous sales volume to break even and they weren't getting that after a while.

They wanted Planet Hollywood to be a global brand. They should have concentrated on one area and then moved to other things.

They're probably on the right track talking about shedding units. They have got to take an inventory of what's performing well and what's not, work on the food and the service. They have serious work ahead of them. The concept will survive, maybe in another format and certainly with fewer units.

Arnold Ursaner

Managing director, CJS Securities, White Plains, N.Y.

They have had a number of challenges that have been of concern to us for a while. One is attracting a tourist market on an ongoing basis and, at the same time, attracting a local market because they like the quality of the food. Also, there's a limit to how many Planet Hollywoods you can have, and the challenge of creating additional brands. The creation of All Star Cafe brand has been a real problem for them. It's just not taking off the way investors had hoped. One of the other brands they had talked about creating was a music brand, which is now years behind schedule. That leaves you with the Planet Hollywood brand, which has lost its cachet.

Their biggest challenge is how to reinvigorate a brand that has lost its luster. To make that challenge more difficult, they're trying to market that brand to a difficult constituency. One could argue a tourist doesn't want to go to a local hangout and a local does not want to go to a tourist spot.

Historically, they've been driven by the tourist season, summer and holidays, but not much business the rest of the year. There are ways of moving toward a local market. They could use couponing, through value price incentives in the nonprimary seasons.

The pre-packaged bankruptcy buys them time. They are trying to redesign and reformat the restaurants to a more mature, softer, adult look.

They have to create a more comfortable environment. They need to encourage more alcohol consumption by creating a bar environment that's pleasant. If you're going to get me to come back, you have to give me a terrific meal and good value.

Stephen Schoene

High-yield bond analyst, Miller Tabak + Co. LLC, New York

They need to focus on profitable activities and eliminate things that don't really fit in their long-term plan.

They are trying to improve the menu and to remodel the restaurants to freshen up the image so people come away thinking they've gotten good value for what they've paid for. That's really important.

In the bankruptcy process, they will have an opportunity to decide which locations they want to close and to reject leases on unprofitable locations and settle with the landlords on more favorable terms that they could do without bankruptcy. I expect they will be closing a fair number. They've lost so much money and had such a large decline in same-store sales, there has to be a moderately large number of locations subject to closing.

There's plenty of competition and customers are choosy. The restaurant business is a very tough one.

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