Planet Hollywood International, Inc. Business Information, Profile, and History

Company Perspectives:

Planet Hollywood International, Inc. strives to act as a creator and developer of consumer brands that capitalize on the universal appeal of movies, sports, and other entertainment-based themes.

History of Planet Hollywood International, Inc.

Planet Hollywood International, Inc.--undergoing a major corporate restructuring in 2001--operates as the controlling body for entertainment-based theme restaurants located throughout the world. The company's name reflects its most well-known venture, a chain of approximately 60 company-owned and franchised 'Planet Hollywood' restaurants that offer patrons a chance to dine in the midst of various film and television props and memorabilia. Planet Hollywood International also runs five Official All Star Café restaurants, a chain that centers on professional sports and follows a sports-bar theme, and several Cool Planet Ice Cream shops. Under the reorganization plan, management is focusing on its core business of operating Planet Hollywood restaurants.

Origins

The first Planet Hollywood restaurant opened in New York City in 1991, but the events leading to its inception can be traced back almost 20 years before that date. In 1972, a young man named Robert Earl opened a dinner theater in London called 'The Beefeater,' which offered customers--mainly tourists--a medieval-theme dining experience. Earl, who had graduated with a degree in hotel and restaurant management from the University of Surrey, possessed a talent for creating entertainment-based restaurant concepts that drew large numbers of customers. He soon developed The Beefeater into a popular local success, which prompted him to open other theme-restaurants nearby. In the late 1970s, he created 'Talk of London,' 'Shakespeare's Tavern,' and 'The Cockney Club.'

Although successful in London, Earl saw greater growth potential in the American market, and therefore came to the United States in the early 1980s to sell his concepts to the developers of a then-new Disney World attraction called EPCOT Center. The deal fell through, but Earl decided to stay in Florida anyway and try his luck in the Orlando restaurant business. He opened several theme-restaurants using medieval and Wild West ideas, nurturing his new restaurant group until he sold it to a larger holding company in the mid-1980s.

After changing hands again numerous times, his enterprise landed in the lap of Mecca Leisure, which had just purchased rights to Hard Rock International's eastern region. Hard Rock International was the controlling body for the 'Hard Rock Café' chain of music industry-based theme restaurants. In 1989, Mecca appointed Earl as the new chief executive of their portion of the Hard Rock operation and put him in charge of expanding the chain in the eastern United States.

Within two years, Earl had helped the eastern-region Hard Rock Café chain grow from 7 units to 20. During that time, Earl met film producer Keith Barish, who soon became his business partner and the cofounder of Planet Hollywood International, Inc. Earl and Barish shared a belief that music, movies, and sports could transcend all barriers, language and otherwise, that separated the people of the world. The two men decided to capitalize on the worldwide appeal of the film and television entertainment industry by opening a restaurant based on that theme. Dubbing their creation 'Planet Hollywood,' Earl and Barish opened the restaurant in New York City in late 1991.

Quick Success in the Early 1990s

Planet Hollywood was immediately successful, drawing crowds of people who often lined up outside the restaurant for hours to get tables. Part of the restaurant's appeal lay in its museum-like quality; its decor consisted of a multitude of real film and television costumes, props, and memorabilia. The genius marketing strategy used by the restaurant's founders accounted for the rest of the attraction. They asked celebrities such as Arnold Schwarzenegger, Sylvester Stallone, Bruce Willis, Demi Moore, and Whoopi Goldberg to act as the restaurant's investor/owners. Every once in a while, these celebrities would stop by 'their restaurant' to check in and mingle briefly with their fans. Although this did not occur all that often, customers still flocked to the restaurant in hopes that they would be one of the lucky few to dine with the stars.

A year after launching Planet Hollywood, Earl left behind his post at Hard Rock and also severed ties to his original theme-restaurant group in Orlando. He and Barish began planning the worldwide introduction of additional Planet Hollywood restaurants and started by recruiting more celebrity investors for the new locations. Climbing on board were film actors Don Johnson and his then wife Melanie Griffith, director John Hughes, comedienne Roseanne, and actors Tom Arnold, Wesley Snipes, and Danny Glover. By mid-1993, Planet Hollywood International had opened new restaurants in London and southern California and was completing the construction of a fourth unit in Chicago.

Earl and Barish hired the New York City architect David Rockwell to design the new units, each of which typically seated over 200 people and contained film props and floor layouts that were unique to their locations. Different items on display throughout the chain included Dorothy's dress from 'The Wizard of Oz,' the pottery wheel used by Demi Moore and Patrick Swayze in 'Ghost,' a replica of the castle from 'Dracula,' the Batmobile, the Flintstone buggy, and a plastic model of the meat slab that was pulverized by Stallone in the film 'Rocky.' Customers were also treated to celebrity hand print walls and big-screen televisions, which played promotional clips for upcoming movies.

Meanwhile, a Hard Rock International executive, Peter Morton, filed suit against Earl and Planet Hollywood, alleging that Earl had engaged in the appropriation of trade secrets. Morton, a cofounder of Hard Rock International and the CEO of its western region, believed that Earl's Planet Hollywood chain was a rip-off of the Hard Rock concept. Earl nonchalantly dismissed the charges, however, and the case against Planet Hollywood never amounted to much in court. Furthermore, Morton's complaint did little to deter Planet Hollywood from expanding further, nor did it curb the public's desire to patronize the new and rapidly blossoming chain. Soon Planet Hollywood was known as a worldwide leader in the theme restaurant business.

By the end of 1993, Planet Hollywood had not only opened two new restaurants in Washington, D.C., and Cancun, Mexico, but it had also signed leases for five new units in Phoenix, Arizona; New Orleans, Louisiana; Aspen, Colorado; Maui, Hawaii; and Minneapolis's 'Mall of America' (the largest shopping mall in the United States). Each opening was a gala event, drawing enormous crowds of people to catch a glimpse of the many media personalities who made appearances and celebrated the new successes. However, the true test of a new location occurred the day after the 'official' opening, when a restaurant actually opened its doors to the general public. Without fail, each new Planet Hollywood passed these tests with ease, and in the first year of operation, most were generating revenues of almost $15 million per unit.

A strong asset of the Planet Hollywood concept was that each unit sold licensed Planet Hollywood merchandise as well as serving food and drinks. Items of all kinds were sold, from key rings and T-shirts, to sweatshirts, watches, and leather coats. Sales of this merchandise helped boost Planet Hollywood's profit margins considerably above those achieved at other restaurants that relied solely on food to bring in profits. Merchandise became so popular that within a few years, the company began to open separate retail stores called 'Planet Hollywood Superstores,' a move that further increased yearly profits.

Expansion in the mid-1990s

In 1994, Planet Hollywood continued its aggressive expansion program, and units continued to open worldwide. The company also began developing additional theme-restaurant ideas, including the concept for the Official All Star Café. Acknowledging the success that Planet Hollywood had achieved from drawing upon the public's interest in celebrity life, Earl and Barish decided that the Official All Star Café would be the perfect sports-based equivalent. They began recruiting professional sports figures to invest in the concept, drawing in people such as hockey great Wayne Gretzky, football icon Joe Montana, and basketball superstar Shaquille O'Neal. Plans for the new restaurants included a menu of 'stadium cuisine' supplemented by home cooking and sales of professional sports merchandise and souvenirs.

Also in 1994, the company opened what would soon become its highest-grossing Planet Hollywood unit, in Las Vegas. Unlike most previous units, which seated approximately 250 people, the Las Vegas restaurant was designed to seat 500 and was planned by Rockwell so that there would be no 'bad' seats. The unit's opening rivaled a sporting event or the Academy Awards in magnitude, in that it drew a crowd of more than 10,000 people who packed themselves into stadium-like bleachers nearby to witness the stars' arrivals at the event. Even former President and First Lady George and Barbara Bush were on hand to celebrate. Later that year, the entrepreneurs opened another 500-seater in Orlando's Disney World, which made Earl and Barish owners of the two highest-grossing restaurants in the United States.

At that point, Planet Hollywood was composed of 18 units around the world, and the company was projecting the addition of 17 more during 1995. The Planet Hollywood chain was expanding almost on its own, so Earl decided to begin focusing his attention and energy on other avenues of growth while the chain took care of itself. In August 1995, ground was broken in New York City near the original Planet Hollywood, and construction of the first Official All Star Café began. Meanwhile, plans were in the works to develop a theme-restaurant chain based on characters from the Marvel Comics series. Also, television game-show producer King World began working with Roseanne Barr's production company on a 'Planet Hollywood Squares' television game show, which was to be a revival of the original 'Hollywood Squares' from decades past with a new Planet Hollywood twist.

With Planet Hollywood quickly becoming a household name, the company decided to go public in 1996. Not only was stock offered to the public, but the company also convinced MBNA to issue Planet Hollywood VISA credit cards, which gave cardholders priority seating at the restaurants. A joint venture with ITT Corporation was also formed to develop Planet Hollywood casinos in Las Vegas and Atlantic City in the future. Furthermore, Marvel Entertainment Group, Inc. and Planet Hollywood International decided to move ahead with the comic book character-based restaurant concept, calling it 'Marvel Mania.' Ideas for a new concept called 'Chefs of the World,' which was to feature a 'star-studded' culinary staff, also began to arise.

Some began to wonder whether Planet Hollywood was spreading its resources too thin, and speculations surfaced as to whether the company would be able to continue the growth trend that it had been experiencing for the past five years. Earl maintained ambitious goals to keep the company expanding by 30 to 40 percent each year, in both the number of restaurant locations and in annual revenues. Criticisms of that plan, however, focused on the idea that the more units that were opened, the less novel a customer's experience in patronizing the restaurant chain, which could lead to a drop in sales. Furthermore, theme restaurants were popping up all over the country, providing Earl and Barish with intense competition. The Harley-Davidson Café was gaining popularity, as were other concepts such as Robert DeNiro's Tribeca Grill, the Country Star chain (backed by Wynonna Judd, Vince Gill, and Reba McEntire), and the Thunder Roadhouse (backed by Dennis Hopper, Dwight Yoakam, and Peter Fonda).

However, Planet Hollywood and the Official All Star Café did possess one major advantage over their competition, which was the celebrity endorsement received through stars' ownership and investment in the chains. Many customers thus viewed these restaurants as the 'originals.' As for continued growth potential, Earl dismissed skepticism with easy confidence, given that in only five years the company had grown from one $3.5 million restaurant in New York to an almost $300 million operation with approximately 50 units throughout the world.

Financial Woes in the late 1990s

Nevertheless, stock price began to falter as scepticism about the future of the company increased. Despite a rise in profits and revenues in 1996, an aggressive growth strategy fueled speculation that Planet Hollywood would not be able to finance its rapid expansion. One year later, those doubts became certainties as the firm reported a $40 million loss in the fourth quarter. Management's narrow focus on diversification became apparent as the firm's core business--the Planet Hollywood restaurants--began to show signs of neglect; menu prices were high, food was mediocre, and service was below average.

In 1998, cofounder Barish resigned, leaving Earl chairman and CEO. William Baumhauer was then hired as president, and the management looked to his turnaround skills to have a positive impact on the company's finances. In August of that year, Planet Hollywood had to deal with yet another problem when a bomb exploded in one of its franchise restaurants in Cape Town, Africa. It seemed that a black cloud had settled over the firm as a loss of $244 million was recorded that year.

Bankruptcy and Restructuring in the New Millennium

In June 1999, Baumhauer resigned after having little effect on Planet Hollywood's bottom line. The company's once bright future was tarnished as it lay under $359 million in debt. Left with few options, the company declared Chapter 11 bankruptcy on October 12, 1999. The management placed blame on a loss in revenues, increasing costs, including those related to expansion, a decrease in customers, and an increase in competition.

Planet Hollywood set out to restructure itself. Its efforts included closing and selling poorly performing Planet Hollywood restaurants and Official All Star Cafes. The management also began to put into effect a strategy to focus on its core operation, its original restaurant theme. The company stopped operation of its Planet Movies by AMC--created in July 1999--and sold its Sound Republic units. It also cut costs, eliminated jobs, and halted any ventures not closely related to its core focus.

On May 9, 2000, Planet Hollywood emerged from Chapter 11 after receiving approval for its reorganization plan. The restructuring left the firm with a cash infusion, allowing it to rebuild itself without the burden of major debt. Improvements in the restaurants included new menus, updated décor, and new products. The firms's managers also set out to capture celebrity relationships, including those of Bruce Willis, Shaquille O'Neal, and musical group N'Snyc. The firm also launched its Web site, which featured live celebrity chats, coverage of celebrity events, entertainment news, and merchandise.

Planet Hollywood entered 2001 with an uncertain future. In a Securities and Exchange Commission filing, the company stated that it had substantial assets to keep it afloat for the year. Although management kept a positive outlook on the future of the company, it recognized the financial burdens and obstacles it would have to overcome in order to remain a player in the entertainment industry in the new millennium.

Principal Operating Units: Planet Hollywood Restaurants; Official All Star Café.

Principal Competitors: Dave & Buster's, Inc.; Hard Rock Café International, Inc.; Rainforest Café, Inc.

Chronology

• Key Dates:

• 1991: Planet Hollywood is established.
• 1993: Famous actors begin promoting and investing in the firm.
• 1994: The company expands with 18 locations in operation.
• 1995: The development begins on the Official All Star Café concept.
• 1996: Planet Hollywood goes public.
• 1997: The company begins to lose money and stock price falters.
• 1998: Robert Earl takes over as chairman and CEO.
• 1999: The firm files for Chapter 11 bankruptcy.
• 2000: The company emerges from Chapter 11 under a new reorganization plan.