Restaurants: - The Wall Street Journal

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Coming only days after another theme restaurant company, ... restaurants and retail outlets will open this year rather than the nine once contemplated.
Restaurants: Planet Hollywood Reels As `Eatertainment' Fades By Richard Gibson

01/23/1998 The Wall Street Journal Page B1 (Copyright (c) 1998, Dow Jones & Company, Inc.) Is Planet Hollywood following a script for a bad thriller? The fast-growing chain of celebrity-themed restaurants this week announced that it will post a big unexpected loss for the fourth quarter and slash its aggressive expansion plans. Coming only days after another theme restaurant company, Rainforest Cafe Inc., announced disappointing results, Planet Hollywood International Inc.'s pullback raises questions about the viability of the "eatertainment" business. A wave sweeping over the nation's restaurant industry in recent years, eatertainment lets operators charge high prices for ordinary food in exchange for an offbeat environment. But what happens when the novelty wears off? Planet Hollywood 's rapid expansion to 78 restaurants means that a substantial portion of its potential customer base already has experienced its celebrity jackets and movie props, often at several locations. Attesting to that is its 13% falloff in same-store sales. To address that problem, the company said it was dispatching a top executive to Hollywood to recruit "new, up-and-coming stars" to "inject new excitement" and bring in the tourists. The announcement sent Planet Hollywood shares tumbling to a record low of $7.125, yesterday, down 31.7% from Wednesday's close. The setbacks at Planet Hollywood and Rainforest Cafe could serve as a warning to other high-concept restaurants, ranging from Fashion Cafe -- which has models strolling a runway -- to Dive!, a faux-submarine eatery backed by director Steven Spielberg and others. There are theme restaurants tied to Harley-Davidson motorcycles as well as to monsters. And then there is Twins, a New York restaurant that shows off identical twosomes. One danger is relying too heavily on the themed decor, says Dennis Lombardi, who tracks the restaurant industry at Technomic Inc., Chicago. "Once you've been there and done that, the entertainment value falls away." That means operators must pay particular attention to the quality of their food, beverages and service. Also, inventories of T-shirts and other memorabilia must be updated with ever-new items. Otherwise repeat visitors aren't likely to spend what can be high-profit dollars at a restaurant merchandise counter. On that score, Planet Hollywood promised investors that it would refresh its souvenir merchandise while reducing the total inventory. Planet Hollywood is also contemplating taking reservations, to cut down on wait lines and encourage repeat business. In his announcement of a likely $44 million loss for the quarter, Planet Hollywood 's chief executive, Robert Earl, blamed heightened competition for some of the company's travail. "We have seen a number of new entrants into the industry who have sought to emulate our success," he said. "And while these concepts may have affected our near-term results, we are, we believe, best-positioned for the long term as the market leader with several key brands." Now just three new company-owned Planet Hollywood restaurants and retail outlets will open this year rather than the nine once contemplated. Also, its Official All-Star Cafe concept, a fancy sports-bar operation, will add two units, not six. Planet Hollywood said it intends to proceed with its third concept, a musical-themed restaurant-and-concert idea appropriately called Music. But it is shelving two others: Marvel Mania (a comic-book theme) and Chefs of the World. Corporate expenses also will be slashed, with layoffs in the works. Joint ventures with Aladdin Gaming LLC on a Las Vegas casino-hotel as well as development of a string of theaters with AMC Entertainment Inc. will continue, the company said. Plans for a hotel with a sports theme in the neighborhood of New York's Madison Square Garden also remain alive. Among celebrities with big investments in Planet Hollywood are Arnold Schwarzenegger, Sylvester Stallone, Bruce Willis, Demi Moore and Whoopi Goldberg. To generate publicity for the chain, they attend grand openings and other staged events. The company's Official All-Star Cafe concept has such athlete-owners as Andre Agassi, Wayne Gretzky, Shaquille O'Neal and Monica Seles. Was Wall Street perhaps blinded by the glitz, and too optimistic about such stocks? "That's a fair thing to say," says Joseph T. Buckley of Bear Stearns, which helped to take Planet Hollywood public. Still, he remains optimistic long term. "One reason we think this company can resume growing is that the brand is an asset they can use in many different ways," he says. "The brand is the key." (See related letter: "Letters to the Editor: Something's Fishy" -- WSJ Feb. 11, 1998)