Planet Hollywood International, Inc.

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Planet Hollywood International, Inc.

founded: 1991

Contact Information:

headquarters: 8669 commodity cir.

orlando, fl 32819 phone: (497)363-7827 fax: (407)363-4862 url: http://www.planethollywood.com

OVERVIEW

Planet Hollywood International, Inc. is in the "eater-tainment" business, mixing menus and memorabilia. Promoting these restaurants are such Hollywood Stars as Bruce Willis and Arnold Schwarzenegger, who have small interests in the company. With 80 restaurants worldwide Planet Hollywood caters to movie buffs, while sports fans are served by 9 Official All Star Cafes. These sports-themed restaurants are publicized by Tiger Woods, Shaquille O'Neal, and Monica Seles, all of whom are stockholders.

Merchandise makes up about one-third of the Planet Hollywood profit margin. Each restaurant has its own gift shop, tailored to its market, so diners can purchase a piece of the Planet. The company is expanding into other entertainment areas—such as music, movies, hotels, and casinos—and is marketing its trademark through various licensing agreements.

COMPANY FINANCES

Within four years of the 1991 opening of the first Planet Hollywood in Manhattan (a premiere that came with a $750,000 price tag), the chain grew to 28 restaurants in locations from Honolulu to Helsinki. Sales in that year totaled $3.5 million. Sales continued to rise every year reaching $20.4 million in 1992, $30.7 million in 1993, $25.9 million in 1994, and $270.6 million in 1995. Average annual income generated per restaurant is $10 to $15 million. At the close of 1997, there were 78 Planet Hollywood restaurants and 9 Official All-Star Cafes throughout the world. Due to a poor fourth-quarter closing in 1997, expansion plans for 1998 included only 3 new Planet Hollywood restaurants and 2 new Official All-Star Cafes.

Sales for 1997 totalled $475.1 million, a 27-percent increase over 1996's $373.4 million. The breakdown of 1997 revenues were as follows: food and beverage, 58 percent; merchandise, 37 percent; franchise fees, 3 percent; royalties, 2 percent.

The fourth-quarter 1997 loss caused the company's stock, which had been trading as high as $27.25 in July, to fall to $6.75 in January (although it did rebound). In March 1998 Prince Walid bin Talal increased his percentage of ownership from 1 to 4 percent of common stock. Through his Kingdom Holding Company, the Prince planned to develop 34 restaurants in 23 Middle Eastern and European countries.

ANALYSTS' OPINIONS

Customer opinion, obviously, is paramount. In a 1997 consumer survey conducted by National Family Opinion for the trade publication Restaurants & Institutions, it was found that "Hard Rock edged out Planet by a narrow margin of 3.57 to 3.47 in the overall satisfaction index, based on seven categories. But Planet was ranked No. 1 among all restaurant chains in atmosphere while Hard Rock was No. 2. Still, Hard Rock finished ahead of Planet in food quality, menu variety, service, value, and convenience. Planet topped Hard Rock in atmosphere and cleanliness ratings."

Profits in theme restaurants, including Planet Hollywood, seem to be leveling off. A 1998 Wall Street Journal article points to a 13-percent decrease in same-store sales blamed on a "been there, done that" attitude.

HISTORY

If Planet Hollywood bears a striking resemblance to the Hard Rock Cafe chain, it is—at least to Hard Rock founder Peter Morton—no coincidence. Morton has sued CEO Robert Earl on numerous allegations, including stealing trade secrets from Hard Rock Cafe.

The first Planet Hollywood opened in October 1991. In February 1992 Morton filed a $1.5-billion suit after seeing Planet Hollywood for himself. Fuel was added to the fire after an employee of Earl's, according to Rolling Stone, proclaimed Earl intended to place a Planet Hollywood in every location where Morton's Hard Rocks were located. That spring a Planet Hollywood opened in Newport Beach, California, where Morton was opening a Hard Rock Cafe. Morton filed another multimillion-dollar suit. Earl claimed he did nothing wrong and moved his restaurant to Santa Ana. The grand openings were mere weeks apart.

That and other legal battles with Morton aside, Planet Hollywood has expanded into Planet Hollywood International, Inc., setting up franchises in South America, Europe, the Middle East, and Asia. Capitalizing on the theme concept, the company launched its Official All-Star Cafes, which are sports-based restaurants resembling arenas and touting memorabilia of past and present superstar athletes.

The company has continued to expand over the years, growing to 78 Planet Hollywood restaurants and 9 Official All-Star Cafes by the end of 1997. Other themes were conceptualized, such as a Chefs of the World chain and a comic book chain in partnership with Marvel Comics. However, the theme restaurant business seemed to level out during 1997, so the Chefs idea was dropped. When Marvel Comics declared bankruptcy, the comic-themed concept died as well. Only 3 new Planet Hollywood restaurants and 2 Official All-Star Cafes were scheduled to open in 1998; however, the company was looking to diversify into the music, entertainment, and hotel/gaming industry.

A 1997 company reorganization created five divisions: Consumer Products, Food & Beverage, Lodging & Gaming, Retail & Merchandise, and Theaters & Entertainment. According to CEO and President Robert Earl, "The company's new divisional structure more closely aligns operating expertise and activities, which should create greater synergies for all of our brands. It also enables each operating division to be viewed as a stand-alone operation, which should help to make each of the company's business initiatives easier to understand while following their progress and future growth. We will also benefit from a clearer picture of the businesses that are now emerging and are becoming an increasing contributor to the company's future profitability and earnings growth."

STRATEGY

Capitalizing on the draw of celebrity, Planet Hollywood Inc. actively seeks out up-and-coming stars in the movie and sports arenas to become stockholders. These celebrity stockholders subsequently help the company promote its various brands. Gala affairs with celebrities in tow are used to draw customers to both new and existing restaurants.

Two of the company's primary goals are brand recognition and diversification. In an effort to diversify, Planet Hollywood is venturing into movie theaters, lodging, gaming, and consumer products. The company has partnered with AMC to launch multiplex cinema centers; with Aladdin Gaming LLC to construct a hotel/gaming casino complex; with EMI to produce a new record label; with MTV to work with their new music-themed restaurants, and with Dreyer's Grand Ice Cream Inc. to produce ice cream. The ice cream will be sold at supermarkets as well at a new chain of ice-cream parlors. Large-scale campaigns, such as a $4.5 million MARS Candy sweepstakes, help keep the Planet Hollywood name in the limelight.

To support its various ventures, Planet Hollywood Inc. reorganized into five divisions: Consumer Products, Food & Beverage, Lodging & Gaming, Retail & Merchandise, and Theaters & Entertainment. Each division functions as a separate company and plays its own role in publicizing the Planet Hollywood name.

Planet Hollywood hopes to encourage customers to visit more than one location, so each restaurant offers a unique combination of props and memorabilia at each restaurant. Merchandise changes regularly and is tailored to the tastes of each location's population. The Planet Hollywood logo, accompanied by the location name, enhances the collectibility of the merchandise.

The Official All-Star Cafes' new marketing strategy entails tieing special events at key restaurants to high-profile sporting events. This effort, which the company launched during Super Bowl XXXII, is aimed at bolstering the All-Star Cafe's image versus its competitors'.

FAST FACTS: About Planet Hollywood International, Inc.

Ownership: Planet Hollywood International, Inc. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: PHL

Officers: Robert Earl, CEO & Pres., 45, $500,000; Thomas Avallone, Exec. VP & CFO, 38, $240,000; Keith Barish, Chmn., 52, $500,000

Employees: 9,100

Chief Competitors: Planet Hollywood's primary business is "eatertainment," or theme restaurants. Some primary competitors include: Ark Restaurants; Rain-forest Cafe; Rank; Country Star; dick clark productions; HOB Entertainment; Lettuce Entertain You; and Restaurant Associates.

INFLUENCES

Relatively flat sales are predicted for 1998, and fewer Planet Hollywood and Official All-Star Cafes will be opened. To broaden market appeal, Planet Hollywood Inc. is branching out into music-themed enterprises, movie theaters, and a Las Vegas hotel/gaming complex. As approximately one third of its income is from merchandise sales, Planet Hollywood Inc. plans to offer a greater variety of merchandise bearing its trademark, as well as celebrity-sponsored brands and seasonal wear.

CURRENT TRENDS

Planet Hollywood Inc. continues its themed-based enterprises not only by opening new Planet Hollywoods and Official All-Star Cafes, but also by adding music-themed restaurants and a number of ice cream parlors. The Planet Hollywood restaurants focus on movie memorabilia from classic and current films, including materials provided by their celebrity stockholders. Each Official All-Star Cafe resembles a sports arena and contains memorabilia from past and present sports greats, again including celebrity stock holders. The newest chain, tentatively titled Asylum, will build on the music concept. Each restaurant will feature an integrated stage as well as an attached club, thus providing two venues for live music entertainment. The first two restaurants, one in London and one in New York, are scheduled to open in 1998. The ice cream shops, earmarked for California and Florida, will be known as Cool Planets Cafes. Their featured product, Cool Planet brand ice cream, will also be available in supermarkets and other Planet Hollywood Inc. chains.

A new partner, Aladdin Gaming LLC, has been found to help Planet Hollywood Inc. step into the hotel/gaming industry. The $250 million complex will become part of Aladdin's existing site on Las Vegas Boulevard.

Expansion in the movie-theater industry comes about with a joint venture with AMC Entertainment. The megaplex theaters, called Planet Movies by AMC, will feature up to 30 screens as well as restaurants, snack bars, and gift stores. The first is slated to open in Columbus, Ohio, in 1999.

To further its mark on the music industry, Planet Hollywood Inc. has joined forces with EMI-Capitol Entertainment to start a new label in 1998. The label, which will be called either Planet Hollywood Music or Planet Music, will include movie-inspired compilations and film sound tracks. Product sales will be through Planet Hollywood Inc.'s various restaurants and music retailers.

Planet Hollywood Inc. launched a web page in 1998 to encourage public access to the company. Planet Hollywood Online offers live chat with fans and stars alike; animated series updated weekly like the cliff hangers of old; film reviews, previews, and promos; celebrity profiles; an events calendar; an arcade with games and contests; and, of course, an online store selling official Planet Hollywood merchandise.

PRODUCTS

CEO Robert Earl stated in U.S. News & World Report, "We're not in the restaurant business. . . . We're in the lifestyle and trademark business." With this in mind, Planet Hollywood Inc. continues to market its trademark. In addition to the above-mentioned venures, a "Planet Hollywood—The Game" boardgame, a Planet Hollywood Barbie doll, and a Planet Hollywood Visa card are in the works. A Planet Hollywood "entertainment minute update" is coming soon to radio stations nationwide.

GLOBAL PRESENCE

International expansion has been enhanced by a number of licensing agreements. Planet Hollywood (Asia) Pte Ltd., which Planet Hollywood Inc. owns equally with a Singapore company, currently holds the rights to Asia. South America is under ECE, a publicly traded Mexican Company of which Planet Hollywood Inc. is a 20-percent stockholder. Restaurants already exist in Cancun, Buenos Aires, Los Cabos, Puerto Vallarta, Nassau, Cozumel, Acapulco, and Sao Paolo, and rights have been granted for an additional seven restaurants in Mexico through the year 2000. Additional sites can be added in Mexico, and rights have also been granted for Rio de Janiero, Brazil, and Santiago, Chile. HRH Prince Walid Bin Talal Abdulaziz Al Saud of Saudi Arabia has purchased the rights for up to 15 restaurants, as well as the right of first refusal for an additional 19 throughout the Middle East and Europe.

CHRONOLOGY: Key Dates for Planet Hollywood International, Inc.

1991:: First restaurant opens in Manhattan
1992:: Hard Rock Cafe founder Peter Morton sues Planet Hollywood CEO Robert Earl
1996:: Works with MNBA Corp. to issue Planet Hollywood Visa cards
1997:: Divides the company into five divisions focusing on the different aspects of their business
1998:: Starts new record label with EMI-Capitol Entertainment

Merchandise has become an important component of the company mix. Sales of Planet Hollywood trademarked products account for approximately one third of total revenues. With this in mind, Planet Hollywood has licensed products from Barbie dolls to ice cream, while

A DIFFERENT WORLD

See Hollywood superstars sitting right next to you, ready to be your new friend! Buy T-shirts, caps, and leather jackets! Listen to pop tunes blasting from every corner of the room! Watch video screens with previews of Hollywood's latest coming attractions! Sit underneath a naked replica of Sylvester Stallone! Ogle at the ice-pick from Basic Instinct, Dorothy's dress from The Wizard of Oz, and Arnold Schwarzenegger's costume from The Terminator! (Is it the actual one? You bet it is! And every Planet Hollywood has one!) It's a multisensory extravaganza, it's a hoot, it's the beginning and end of the world, and it's a completely cool, multipurpose restaurant! Oh, yeah. They serve food too.

introducing new merchandise twice each year. A new web site, Planet Hollywood Online, offers more opportunities to promote and sell the Planet Hollywood name.

SOURCES OF INFORMATION

Bibliography

Bernstein, Charles. "Hard Rock and Planet Hollywood: Head to Head." Restaurants & Institutions, 1 April 1997.

Binkley, Christina, and Richard Gibson. "Planet Hollywood, Aladdin Gaming to Build Casino." Wall Street Journal, 3 November 1997.

Cagle, Jess. "Between a Planet and a Hard Rock." Entertainment Weekly, 30 April 1993.

Canedy, Dana. "Saudi in Alliance to Develop Planet Hollywood Restaurants." New York Times, April 1997.

Coeyman, Marjorie. "Stomach Over Stars? Planet Hollywood Revamps its 'Okay' Menu." Restaurant Business, 1 August 1997.

"EMI Plans Planet Hollywood Label." Advertising Age, 15 December 1997.

Gibson, Richard. "Planet Hollywood Reels As 'Eatertainment' Fades." Wall Street Journal, 23 January 1998, B1.

Greenberg, Herb. "Earth to Planet Hollywood." Fortune, 23 December 1996.

Guttman, Monika. "Why the Stars Orbit Planet Hollywood: With Meteoric Growth, the Eateries May Go Public." U.S. News & World Report, 27 November 1995.

"Investors Say 'Hasta la Vista' after Planet Cites Falling Numbers." Nation's Restaurant News, 2 February 1998.

Jensen, Jeff. "All-Star Cafe Puts Events at Heart of its Strategy." Advertising Age, 26 January 1998.

"MTV links up with Planet Hollywood UK." Sunday Times, 5 October 1997.

"Planet Hollywood Announces Divisional Structure For Its Brands." PR Newswire, 24 October 1997.

"Planet Hollywood to Open Ice Cream Shops in 1998." Orlando Sentinel, 19 September 1997.

"Promotions: Mars Links with Planet Hollywood For $4.5M Milky Way Sweeps." Brandweek, 10 November 1997.

"Some Theme Restaurant Chains Slowing Down Expansion Plans." Miami Herald, 22 March 1998.