July 2, 2007
There Are No Gentlemen in a Strip Club
Peter Siris explains in this week’s Barron’s why he likes the strip club business:
First, they have 90% gross margins. If you go into a gentlemen’s club, they charge you a cover and a lot of money for drinks. Secondly, the girls who work there, the dancers, or what the industry calls the “talent,” pay $150 to $200 a shift for the privilege of working. It’s my kind of business where you charge both customers and employees to walk in the door … I asked one guy in the business, ‘What’s the biggest risk to your business model?’ He said if the government stops immigration from Eastern Europe.
These companies net 35% to 40% pre-tax, after all their expenses. There are huge barriers to entry. Why? Because most people don’t want them in their neighborhoods. There are big zoning restrictions. These companies can make acquisitions at three to five times earnings. Why? Because there aren’t a lot of buyers. The church isn’t going to buy one. We may laugh about it, but flash back 20 or 30 years ago, and people might have reacted the same way to an investment in a casino company. Now the funds that won’t buy an MGM Mirage are few and far between.”
I’ve never been in a strip club, believe it or not. I’m not a prude or moralizer, but casinos make me feel oogie enough (this is why I prefer playing poker online); I can’t imagine how scummy a strip club would make me feel.
Always read the prospectus if you want to understand a business; here’s an important point to keep in mind about RICK’s key employees: “Competition for topless entertainers in the adult entertainment business is intense.” At any time the talent can just gyrate out the door. ;-)
Another amusing bit about a Houston, Texas city ordinance:
There are other provisions in the ordinance, such as provisions governing the level of lighting in a sexually oriented business, the distance between a customer and a dancer while the dancer is performing in a state of nudity and provisions regarding the licensing of dancers which may be detrimental to the conduct of business by the Company and all of these provisions also will be the subject of the above mentioned litigation.
I’d love to meet the lawyer who came up with “performing in a state of nudity.”
July 2nd, 2007 at 5:04 pm
Hey Maoxian,
Never been to a strip club either… but what is feeling oogie?
July 2nd, 2007 at 7:49 pm
I’m having trouble posting, I get the following error when I try to post to other articles:
Precondition Failed
The precondition on the request for the URL /wp-comments-post.php evaluated to false.
July 2nd, 2007 at 9:35 pm
@opw: “Oogie” means you feel dirty or gross … soiled. There’s always a pervasive air of desperation in casinos, even in the poker room, that feels gross.
@Jason: If the spam filter doesn’t like some of your text, words like casin0 and gamb1ing are instantly flagged, then you’ll get that error.
July 3rd, 2007 at 12:22 am
I went in one once. I was 23 and drunk. I left after about 15 minutes a little under $100 poorer. It was more like getting mugged than anything else. They did everything but turn me upside down and vaccum my pockets out. Cover, tip, other tip, this tip, that tip, buy a drink, etc. It wasn’t a particularly sexy.
July 3rd, 2007 at 4:56 am
In 1979, I spent time in Key West. After the tourist bars, we found a little strip joint on the east side. No one was in the club except one table of older people. After a long wait, a young girl came out,threw 3 quarters in a jukebox, hopped up on the six foot wide stage and danced away until the quarters ran out. The people at the table clapped and told her good she was. They were her mom,dad,older sister, granma and a couple of cousins from the trailer park across the street and it was the first day of her first job. The bartender finally thew us out when we wouldn’t stop laughing.
July 3rd, 2007 at 2:05 pm
HI all, as I said before I am a pilot from the U.S. but after my layoff I started flying in China, Thailand, etc… I truly love the culture. Working two jobs in my earlier days (one as a commuter pilot) building my hours and the other as a owner/operator as an entertainment agency. I had roughly 30 subcontracted employees (mostly private dancers) doing the bachelor party deal. It is a dirty business. Many of the girls have a ton of problems. I finally sold the business off. Partially for a change that took place in my life (religion) and I finally got hired flying jets.