Florida Trend

Florida Small Business



June 21, 2018

Planet Hollywood: Saving the Planet

Lisa Gibbs | 6/1/1999
Say, here's an idea for a horror movie: Fabulous British restaurateur and a film producer team up to build an empire of entertainment-themed restaurants, hotels, ice cream shops and movie theaters in exotic locales the world over. It's a hit! Celebrities turn out for the restaurants' lavish grand openings; they even show up for the stock's debut on Wall Street.
Then everything turns to mud. The food stinks. Rapid expansion dilutes the brand. Sales founder. The stock craters, falling to a lousy buck a share from highs in the $30s. Debt piles up and the "empire" starts shedding assets. The finale: Big explosions as the company veers toward Chapter 11. The all-star cast features Arnold Schwarzenegger, Bruce and Demi, Sylvester Stallone and lots of extras as bag-holding shareholders.
OK, so it's not exactly "Scream 2," but it probably feels that way to shareholders of Orlando-based Planet Hollywood, the brainchild of Robert Earl, who guided the Hard Rock Cafe chain to success in the late '80s, and film producer Keith Barish. The two men persuaded celebrities to promote the restaurants in exchange for stock options. For a good while, Planet Hollywood was a supernova. Revenues exploded from $3.5 million in 1991 to $270 million in 1995, the first year Planet Hollywood turned a profit. The day Planet Hollywood went public in April 1996, the stock began trading at $31; the offer price was $18.
Even then there were warning signs. The excitement generated by the grand openings wore off quickly. The only way to keep growing was to build new outlets, but the company ran out of marquee locations. Planet Hollywoods in cities like St. Louis couldn't pull in customers like they did in Orlando or Las Vegas. "They went into some very marginal markets," says Jeffrey Rochlis, a Washington, D.C.-based themed real estate consultant.
The bigger problem, Rochlis says, was that the restaurants just weren't very good. "It latched onto this concept of theming and treated the food as secondary," he says. What's more, the company didn't do a great job developing its themes. Rochlis characterizes Planet Hollywood's museum-like displays as "static, non-dynamic, interesting one time, but not worth repeat visitation."
Last year, all this caught up with Planet. Fiscal 1998 revenues fell from $475 million to $386 million; comparable store sales fell by about 18%. Before a massive write-down of assets, the company had an operating loss of about $75 million. In December, a bank cut off its line of credit, and the company's accountant raised doubts about Planet Hollywood's ability to remain a "going concern."
So, who's the hero of this horror story? Try one Bill Baumhauer, a CPA brought in last year as president and chief operating officer to straighten things out. Baumhauer most recently was chairman and CEO of Unique Casual Restaurants, where he got credit for restoring the company's Fuddrucker chain to profitability and readying it for sale last fall.
Where Earl and Barish (who resigned as a company director in March) were visionaries, Baumhauer is nuts-and-bolts. His first step: Cutting corporate overhead by 35%, which included laying off 60 employees. Next: Overhaul Planet Hollywood's restaurants with a new, lower-priced menu, new merchandise and updated decor. The company also is dumping anything non-core, including the All Star Cafes and Cool Planet ice cream shops. No more movie theaters or hotels. Baumhauer's also doing everything he can to raise cash, including postponing a bond-interest payment and a sale/leaseback of Planet's Orlando headquarters. Meanwhile, he's trying to renegotiate the company's significant debt and won't preclude filing Chapter 11 bankruptcy to buy time.
Analysts applaud Baumhauer's moves, but wonder whether anyone shy of Superman himself could save this Planet. "Eventually you need revenue growth," says CJS Securities analyst Arnold Ursaner . "Can they rekindle the excitement in the brand and get people back into the restaurants? We won't know the answer for another six to nine months."

Capitalink: Investing in South Florida
When some high-tech wonder wants to go public, getting Goldman Sachs or Morgan Stanley Dean Witter on the phone is as easy as dialing 212. For the plain vanilla mid-size manufacturer, it's a different story: Sorry, folks, the line is busy.
Jim Cassel wants to help. Cassel beefed up the securities practice at the Miami law firm Broad and Cassel before leaping to the investment banking world in 1996 as head of corporate finance at Barber & Bronson in Fort Lauderdale. Now Cassel and two other investment banking professionals have formed Capitalink to assist small (but not start-up) and medium-size businesses with all manner of financial dealings.
Capitalink will specialize in transactions in the $5 million to $50 million range, acting primarily as the company's agent, and also plans an equity fund so that it can finance deals of between $5 million and $15 million on its own.
Although Capitalink will do business where it finds it, Cassel says the firm will concentrate in south Florida, where he believes the need is greatest. "The Tampa-St. Pete area has Raymond James, which grew up there and really blossomed," Cassel says. "None of the firms here had a vision to build a real quality mid-level investment bank that serves the local market so that people don't have to go to Atlanta or Memphis or, of course, New York."

Tags: Florida Small Business, Politics & Law, Business Florida

Florida Business News

Florida Trend Video Pick

Scam nearly puts South Florida shoe company out of business
Scam nearly puts South Florida shoe company out of business

A South Florida entrepreneur who claimed he was scammed out of about $15,000 worth of merchandise is warning others and asking any potential victims to come forward. 

Earlier Videos | Viewpoints@FloridaTrend

Ballot Box

Are you optimistic that you'll have the financial resources for a comfortable retirement?

  • Yes
  • Maybe, am working on it
  • No
  • N/A - am already retired

See Results