Jilian’s Entertainment Holdings, Inc.

views updated

Jilians Entertainment Holdings, Inc.

1387 S. Fourth Street
Louisville, Kentucky 40208
Telephone: (502) 638-9008
Fax: (502) 638-0984
Web site: http://www.jillians.com

Private Company
Incorporated: 1988 as Jillians Billiards Club
Employees: 5,500
Sales: $110 million (2000 est.)
NAIC: 71395 Bowling Centers; 71312 Amusement Arcades; 71399 All Other Amusement and Recreation Industries; 72241 Drinking Places (Alcoholic Beverages); 72211 Full-Service Restaurants

Jilians Entertainment Holdings, Inc. operates a chain of 40 restaurant and entertainment complexes in the United States and Canada. The companys sites typically combine several drinking and dining options with billiards, bowling, high-tech video games, and a dance club. The privately held firm has put IPO plans on hold but is continuing to expand using funding from investors.

1988 Founding in Boston

The first Jillians was opened in Boston, Massachusetts, by Stephen Foster. Foster, a 1978 graduate of Boston University Law School, had been working in New York as a corporate lawyer when he noticed people roller skating to pop music in Central Park. Inspired to create a club where people could do this indoors, he quit his job and sought help from his father, a Newton, Massachusetts judge. The elder Foster mortgaged his home to provide funds for the venture, which would be located in Boston on the top floor of an old brick stable building. In August 1979, after installing 10,000 square feet of maple flooring, the skating club was opened. Called Spinoff, it did well for a few years until the roller disco craze faded; the venture folded in 1987. In the meantime Foster had founded another new business, an oil brokerage firm called United Fuels International.

When the club closed its doors, Foster and Spinoff manager Kevin Troy sought a subtenant so they could take advantage of their long-term lease at the locked-in rate of $4 a square foot, heat included. A laser-tag franchise was lined up, but the deal fell through when its parent company went out of business. While still seeking a tenant, Foster read a magazine article about billiards on a trip to New York, and he decided to investigate the subject. He found that the dingy pool hall he visited contained not just the expected hustlers and low-lifes, but also a smattering of yuppies and models. Sparked to research the topic further, Foster discovered that billiards somewhat seedy reputation was mostly a recent phenomenon, and that it had earlier been considered a refined, even royal, diversion. He also took note of the fact that the game was one that could be enjoyed by both novices and experts and seemed to work well as a social icebreaker. Figuring that they had little to lose, Foster and Troy decided to take a chance and purchased 41 pool tables to install in their still vacant space. In the summer of 1988 they opened Jillians, named after Fosters wife Gillian (but spelled with a more feminine first letter).

Although business was slow at first, word of the elegantly appointed pool hall soon got around. By the following winter, with a newly installed bar in place, Jillians was doing turn-away business. Sensing a trend in the making, Foster decided to form a new company to market the concept around the country. A second club was opened in Miami, and locations soon were being scouted in other cities. To obtain more financing, a merger was effected with the publicly traded MetalBanc Corp., which recently had sold its main business, a precious metals trading operation (MetalBanc also owned a building and development subsidiary in south Florida). After the merger MetalBancs name was changed to Carom Capital Corporation, with Foster named president and CEO. In April 1990 another club was opened in Seattle, with one in Cleveland following in July; both were located in revitalized waterfront areas. Renamed Jilians Entertainment Corp. in late 1991, the company began preparing to open more clubs during 1992 and was looking for buyers for the real estate business acquired in the MetalBanc merger.

In November 1991 Jillians found itself in the unenviable position of denying allegations of drug distribution and money laundering that related to activities of the previous regime at MetalBanc, with no current employees or administrators named in court documents. The company quickly formed a separate subsidiary to encapsulate the remaining assets from this earlier period, which might be subject to forfeiture if the case was lost. MetalBancs former leadership and Orexana, the company that had taken over the precious metals trading operation, also were named in the case. Several months later the government dropped its charges against the justifiably relieved Jillians, which resumed its focus on developing new locations.

In the spring of 1992 Jillians began looking at ways to franchise the billiards concept, retaining International Franchise Development, Inc. for this purpose. The companys newest club, its second in the Cleveland area, opened late in the year after the city of Cleveland Heights granted a variance on laws requiring pool halls to close by midnight. The club, which featured 23 billiard tables, a bar, and kitchen, was seeking major pool tournaments and stars such as Minnesota Fats to give exhibitions, according to the company.

Focus on Expansion in the 1990s

During 1993 Jillians announced that it had leased sites for new clubs to be located in Champaign, Illinois; Annapolis, Maryland; and Worcester, Massachusetts. A billiards club in Pasadena, California, also was purchased. Each new outlet was set up as a separate subsidiary of the company. The year 1993 was Jillians first profitable one, with earnings of $162,000 on revenues of $3.6 million. By the end of 1994 the company had a total of eight locations, and its growth continued at a measured pace over the next several years.

In 1997 a restructuring took place whereby a company called Jillians Entertainment Holdings, Inc. took ownership of Jillians Entertainment Corp., thus taking the company private. The new firm was owned by J.W. Childs Equity Partners LP and seven other shareholders, including Stephen Foster. J.W. Childs had reportedly invested $25 million. In the winter Jillians headquarters was moved to Louisville, Kentucky, to be closer to the center of the widening chain.

With the new infusion of capital, Foster was able to step up the pace of expansion, adding four new locations by the end of the year and six more in 1998. In addition to billiards, some clubs were now also offering high tech games such as virtual horse racing and skiing, plus sports cafes that featured large-screen televisions showing live games.

To accommodate the widening range of activities, Jillians was looking for larger spaces to lease, with a minimum of 20,000 square feet required. Development costs could run as much as $5 million per site, depending on the location. A company spokesman emphasized the fact that, despite the sports-associated atmosphere, Jillians was intended to appeal to a broad cross-section of the public, and the company was planning to feature even more diverse activities, including ten to 16 bowling lanes and a dance club, at future locations.

In early 1999 Jillians opened its first New York location, in Albany, and additional clubs were soon under construction in the towns of Rochester and Farmingdale. The company was now operating more than 25 sites around the country. It also had taken over two America Live operations in Phoenix and Minneapolis, the latter located at the Mall of America. This 50,000-square-foot entertainment complex was the companys largest to date.

Putting IPO on Hold in 1999 and Moving into the 21st Century

In September the company announced plans for an initial public stock offering, citing the need for capital to fuel its continuing expansion. The offering was expected to bring in $46 million. In the face of the increasingly rocky IPO market the offering was shelved, however, with the company obtaining funding from private investors instead. Jillians reported revenues of $59.7 million for 1999 with a loss of $2.5 million, which it attributed to the cost of its ongoing expansion.

The company partnered with Sony in early 2000 to offer HyperBowl, a Sony-developed virtual bowling game, at its locations around the country. HyperBowl utilized a full-sized bowling ball that was rolled in a way that interacted with a computer. A video projection system displayed the lane, which could be depicted as the heaving deck of a sailing ship, a curving street in San Francisco, or the ruins of Rome. Sony had introduced the game at its own Metreon Entertainment Center in San Francisco the previous summer.

Company Perspectives:

Jilliari s Management believes that it is on the cutting edge of the Eat! Drink! Play! industry. With its tightly managed and fully conceived program, consistently profitable unit economics, the visionary leadership of its founder, and the recent partnership with the J.W. Childs Group of Boston, Jillians is uniquely positioned to dominate its target markets. Its aggressive expansion strategy, powered both by new builds and by acquisitions, should enable Jillian s to secure its position as market leader and to establish its brand further in the national consciousness.

Jillians locations now offered a unique blend of entertainment options that appealed to upscale 20- and 30-somethings, and even a few baby boomers. In the Hibachi Grill, groups of diners were seated around a Japanese-style grill run by an entertainer/chef wearing a distinctive hat. The chef would flip balls of rice or popcorn shrimp into the mouths of diners while cooking as many as seven courses of food at the table. In the Amazing Game Room, Hyperbowl was joined by a NASCAR racing simulator (the full-sized cars windshield was a video screen displaying a simulated race), an F-16 flight simulator patterned after actual military training models, a basketball game that required players to shoot at a moving hoop, and many more. Games did not require money or tokens, but used credit card-sized swipe cards that could be reloaded with value as the evening progressed. An onsite ATM was available if needed. In the retro-styled Hi-Life Lanes neon-colored bowling balls were rolled down one of a dozen or so black light-illuminated lanes in a room that was ringed with video screens and pulsated with amplified music and crashing pin-strike sounds, while a nearby bar served drinks. Other areas of the facility included the Groove Shack video dance club and bar, the billiards club/bar combo, and the Video Cafe & Bar sports lounge. The newest locations also featured the Blue Kat Live club, which featured a mix of rock, blues, and acid jazz performers.

Although Julians targeted, for the most part, single adults and corporate groups, the companys offerings were easily adaptable to families, and its sites were popular destinations for teens on weekend afternoons. Noting the broad appeal of the concept, and the number of markets with no similar eat-ertainment establishment, the company projected that it could open as many as 150 or more additional clubs in North America. Its first location outside the United States, in Montreal, Canada, was scheduled for completion in the summer of 2001, bringing the number of sites in the chain to 40.

After more than ten years in business, Jillians had distilled its concept into one that was bigger and bolder than ever. With many potential markets left to tap, its expansion was not likely to slow down any time soon. The broad audience base, the wide range of entertainment offerings, and the energy and excitement of the Jillians experience all contributed to the companys success.

Principal Subsidiaries

Jillians Entertainment Corp.

Principal Competitors

AMF Bowling, Inc.; Champps Entertainment, Inc.; Dave & Busters, Inc.; dick dark productions, inc.; Fashion Cafe; Hard Rock Cafe International, Inc.; HOB Entertainment, Inc.; Hooters of America, Inc.; Johnny Rockets Group, Inc.; Planet Hollywood International, Inc.; Total Entertainment Restaurant Corp.

Key Dates:

Stephen Foster founds the first Jillians Billiards Club in Boston.
Jillians merges with MetalBanc Corp.; name is changed to Carom Corp.
Name is changed to Jillians Entertainment Corp.
Jillians goes private; $25 million is invested by J.W. Childs Equity Partners.
Headquarters is moved to Louisville, Kentucky.
IPO is announced, but later withdrawn.
Jillians teams with Sony Corporation to distribute HyperBowl virtual reality game.
First Canadian site opens; chain grows to 40 locations.

Further Reading

Bergendorf, Dennis, Its Hardly Traditional, Bowlers Journal International, April 2000.

CEO Interview: Jillians Entertainment Corporation, Wall Street Transcript, May 16, 1994.

Drexler, Michael, Jillians Hustles to Open Hall, Plain Dealer Cleveland Ohio, September 19, 1992.

Fischler, Marcelle S., Like a Disneyland for Evenings on the Town, New York Times, March 26, 2000.

Flynn, Sara, Clubs: Pinball Wizards, Boston, February 1997.

Gray, Andy, Play with Your FoodGame Rooms Add Flavor to Jillians, Tribune Chronicle, July 15, 1999.

Karman, John R., Strong Growth Is Still Jillians Game Plan Despite Pulling IPO, Business First of Louisville, January 28, 2000, p. 4.

Milliken, Peter H., Entertainment Complex Has a Variety of Diversions, Vindicator, June 11, 1999.

OConnor, Bill, Night Moves, Sunday Beacon Magazine, June 21, 1998.

Redding, Rick, Jillians to Put IPO on the Table, Business First of Louisville, September 10, 1999, p. 1.

Schooley, Tim, Jillians Scouts Sites, Pittsburgh Business Times & Journal, November 5, 1999, p. 1.

Von Bergen, Jane M., A Retro, Transcendental Spin on Dining, Playing, Philadelphia Inquirer, June 25, 1999.

Werbock, Sunshine, Jillians: Its All Just Fun and Games, Northeast Times, July 1, 1999.

Frank Uhle