Popular in Course
verified elite notetaker
Popular in Business
This page Document was uploaded by an elite notetaker on Sunday December 20, 2015. The Document belongs to a course at a university taught by a professor in Fall. Since its upload, it has received 13 views.
Reviews for Business-School-Case-Study
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 12/20/15
H Ill V LIQID Elli 5 WIW E 5 ES 5 ill Cit L N2509019 FEBRUARY 25 2009 ANITA ELBERSE RYAN BARLOW SHELDON WONG Marquee The Business of Nightlife quotThe night Stevie Wonder gave an impromptu performance of Isn t She Lovely at Marquee I said We just hit the pinnacle But a moment later I thought No way It is going to get better Noah Tepperberg founder of Marquee It s Paris Look over there One young clubgoer directed his friend s attention to a woman dressed in a designer outfit who stepped out of her chauffeured car at a busy intersection on 10th Avenue in Chelsea Manhattan The celebrity in question Paris Hilton warmly greeted the doorman took a few steps on a redcarpeted sidewalk and quickly entered through a heavy black door not noticing the two clubgoers who watched her every move After a long wait they had edged their way to the front of a line that stretched around the block and counted hundreds of people each hoping for their chance to follow Hilton inside Although the long lines and starstudded atmosphere were business as usual December 18 2008 was by no means a typical Thursday night or rather early Friday morning at Marquee one of New York City s hottest clubs Marquee was celebrating its fifth anniversary Inside nightlife impresario Noah Tepperberg who founded the club with Jason Strauss made his way around a crowded dance oor and settled at his regular table in the midst of the club s main room a place where he could be found most nights ever since the club first opened Stars like JayZ and Carson Daly had come out to celebrate with Tepperberg described as a celebrity to celebrities 1 Five years was an eternity in the nightlife industry most clubs were over within their first 18 months but Tepperberg had succeeded in maintaining Marquee s status as an ofthemoment club Meanwhile his team now also comanaged the LasVegasbased nightclubs TAO TAO Beach and LAVO and he had expanded the scope of his Strategic Group a hospitality event management and marketing firm with sales of well over 20 million in 2007 Despite the club s electrifying atmosphere on its anniversary night concerns remained about Marquee s staying power The end is always on my mind Tepperberg said and pointed out that operating costs had risen significantly since the club s early days as had the competition for fickle clubgoers Would Tepperberg soon have to pull the plug on Marquee Was it time for a change in strategy Or could Marquee defy the unwritten rules of the nightlife business and become a mainstay of New York City s nightclub scene Professor Anita Elberse and Ryan Barlow and Sheldon Wong MBAs 2008 prepared this case Some economic data have been disguised HBS cases are developed solely as the basis for class discussion Cases are not intended to serve as endorsements sources of primary data or illustrations of effective or ineffective management Copyright 2009 President and Fellows of Harvard College To order copies or request permission to reproduce materials call 1800545 7685 write Harvard Business School Publishing Boston MA 02163 or go to wwwhbspharvardedu educators This publication may not be digitized photocopied or otherwise reproduced posted or transmitted without the permission of Harvard Business School 509019 Marquee The Business of Nightlife New York City Nightlife By some estimates there were more than 1000 nightlife establishments in the five boroughs of New York City of which 80 were located in Manhattan2 The New York City nightlife industry generated an estimated 13 billion in direct revenues 97 billion in economic activity 26 billion in earnings primarily wages and 95500 jobs3 Each year nightlife venues generated an estimated total of 65445000 admissions more than three times the attendance of all New York City39s sports teams combined4 An average bar or lounge could expect around 60000 admissions annually while the figure stood at 180300 for clubs and music venues A survey among New York City nightlife attendees in 2004 revealed that around 40 of them lived in Manhattan another 25 in the other boroughs and 5 were international visitors About half of the attendees were female their average age was close to 30 years three quarters were single close to 80 had college or higher degrees and their annual incomes averaged 700005 While the industry as a whole was booming most nightclubs struggled to recoup their initial investment in equipment furniture fixtures and licenses as well as to reach sales levels that covered ongoing rent personnel marketing alcohol and other expenses In fact although no hard numbers existed the typical lifespan of the 129 legally operating nightclubs in Manhattan was thought to be about 18 months6 And of the ten American nightclubs in the Hot Clubs Around The World list published in a Forbes report on the Business of Nightlife in August 2006 three Amika in Miami Crobar in New York City and Ice in Las Vegas had closed their doors by 2008 If you get the right lease and you39re not putting in a tremendous amount of money to build the club it can be a profitable and fun businessquot said a former nightclub owner But so many of them are predicated on outrageous leases renovations and promoter fees that it39s very difficult Insurance premiums alone could be up to 300000 annually depending on the size and scope of the club7 And while licenses might be a fraction of those costs nightclubs which needed both liquor and cabaret licenses might spend up to 18 months applying for them often leading to costly delays in other areas8 Tepperberg and Strauss First Steps in the Nightlife Industry Noah Tepperberg 33 and Jason Strauss 34 started their fascination with the nightlife business while both were in high school in New York City Tepperberg at Stuyvesant and Strauss at Riverdale High School I feel like we had a head start on other people in the industry Jason and I started as promoters when we were 15 years old said Tepperberg The native New Yorkers went to different colleges Strauss went to Boston University and Tepperberg to the University of Miami but formed a partnership upon their return to New York City in 1997 to pursue their business fulltime That summer after we graduated before we knew it we were working four nights a week in New York City organizing interesting events filling up clubs and building our database We were establishing a brand that represented a certain crowd a certain experience The duo opened their first club Conscience Point in the summer of 1999 Located in the Hamptons it only operated during the summer season They sold it shortly after the summer of 2001 At that time Tepperberg and Strauss had already opened a new venture Luahn a restaurant and lounge with the actor Stephen Baldwin Roughly a year later when Luahn had closed its doors they spotted a new opportunity a chance to operate promote and market a new club Suite 16 located at 16th Street and 8th Avenue It would become one of New York City s hottest clubs in the years 2001 to 2004 We had a beautiful crowd with tons of celebrities and goodlooking girls The energy was Marquee The Business of Nightlife 509019 fantastic said Tepperberg It s part of popular culture now It s the club where Britney Spears and Justin Timberlake first ran into each other after they had broken up Everyone knew about Suite 16 Marquee Marquee became the impresarios next project even before Suite 16 closed when its landlord would not renew the lease Tepperberg and Strauss set out to convert an old 5000squarefoot garage building located on 10th Avenue between 26th and 27th Streets into a new nightclub with a total capacity of 600 people Developing Marquee When we started it wasn t much of a neighborhood just a lot of warehouses and housing projects across the street But we thought that we would be strong enough to create a destination and we saw the vision of the room so we took out a lease on an old broken down garbage truck garage that had no plumbing no electricity and a roof that was partially open with pigeons and leaks going through it like you wouldn t believe said Jason Strauss New entries into the nightlife market are usually revamped spaces with new finishings and new names added Tepperberg The building on 289 Tenth Avenue was a raw space that we could transform however we wanted This meant we could develop a space that was functional and efficiently laid out and suited the main purposes of the business drinking dancing entertainment and special events Aided by designer Steve Lewis and Philip Johnson s design firm PJAR Tepperberg and Strauss established the overall look of the club and undertook an extensive construction and remodeling effort In an aim to simultaneously cater to different types of people that make up the New York nightlife market they developed three separate spaces inside the property see Exhibit 1 for selected impressions o A 2500squarefoot cabaret space that featured 15foot ceilings a central and elevated DJ light platform a dance oor and banquet and hightop seating with a total capacity of 300350 people 0 A 1500squarefoot mezzanine space that featured a room lofted on top of the cabaret space with a birdseye view of the sprawling facility along with a 25foot bar couch ottoman and banquet seating two private bathrooms a separate entrance and a separate DJ sound system with a capacity of 100 to 150 people 0 A 800squarefoot lounge space Room 3 as Tepperberg called it that featured banquet seating for large groups a separate bar ambient lights and limited access for private parties with a capacity of 50 to 100 people We built it in a strategic way We felt we knew what a clubgoer wants because we had so much experience going to clubs ourselves We knew how much bar space we wanted how big the dance oor needed to be where we had to have a coat check where the bathroom needed to be all the details that matter said Tepperberg One such detail was the design of the banquettes the tops were wide enough to sit and dance on but curved so customers could not perch a drink on them and the seats contained hidden drawers for storing purses and other accessories 9 509019 Marquee The Business of Nightlife Exhibit 2 displays the estimated construction and opening budget for Marquee lists the rent schedule and provides overviews of the projected income To fund their activities Tepperberg and Strauss contributed a total of 200000 to their new business and they found investors who provided services and paid around 2 million in return for a 20 stake in the venture Tepperberg 30 Strauss 30 their legal advisor Ronald Fishman 3 and a group of advisors and partners together owned the remaining 80 of the business which was organized as a limited liability company As managers Tepperberg and Strauss both would receive an annual salary of 150000 while those with an ownership stake would receive a share of the net cash ow in proportion to their percentage interests Launching Marquee Unlike most other major club owners who often promoted new projects heavily in the year leading up to an opening Tepperberg and Strauss let buzz build by giving industry trendsetters and tastemakers glimpses of the soontolaunch Marquee After nights hanging out at the perennial hot spot Bungalow 8 located just around the corner and owned by fellow nightlife entrepreneur Amy Sacco the duo would take friends over for latenight tours of the underconstruction Marquee According to Tepperberg Every night we took groups of friends sometimes at 400 AM into Marquee to show it to them At the time there was still no roof on the place There were pigeons flying around And I would say things like the cement is still drying don t stand there We wanted people when opening night would come around to think to themselves I was here when it was not even here this is amazing They needed to feel like they had an inside look Only once the grand opening date could be safely predicted Tepperberg and Strauss switched to a more comprehensive public relations campaign mostly focused on getting feature stories on the concept design and launch Marquee opened its doors on December 10 2003 a few months later than initially planned We knew that a week later most of the toptier crowd would leave town for the holidays so we didn t have a big window to establish the club And the early part of January is always very slow We were really sweating it out over the first couple of weeks remarked Tepperberg We literally lined up one private party after the next the first ten nights that we were open We selected events that we knew would bring the right crowd Everyone who was involved in those events was also promoting Marquee they were getting the word out A spectacular New Year s Eve party was the highlight in those early days We were two weeks old and we had Donatella Versace in our club an 18year old Lindsay Lohan and everyone who mattered in New York City The club was amazing that night It contributed to Marquee quickly becoming a magnet for clubgoers and notoriously difficult to get in only the fashionable famous or financially secure need apply according to one insider 10 Tepperberg who along with Strauss was in the club every night in its first year commented We left a lot of money on the table to make sure we had the right people in there Our revenues were higher than projected from the very start said Tepperberg We generated 95 million in revenues in year one and 108 million in year two However we had hoped to reach margins of 60 to 70 but that proved much too optimistic Exhibit 3 provides Marquee s income statement for 2006 and 2007 Marquee The Business of Nightlife 509019 Over the years the area in which Bungalow 8 and Marquee were located would see an in ux of new and revamped clubs In fact so much so that 27th Street became known as club row see Exhibit 4 for an illustration In 2007 New York Magazine described the atmosphere as follows So many people packed Marquee in its first year 2004 that the crowd of cars and people often blocked several lanes of traffic on Tenth Avenue Inside a parade of celebrities canoodled guest D d or threw premiere parties a vast boldface honor roll recently trumpeted on the occasion of Marquee s third anniversary The dance oor at Marquee sparked a phenomenon the most concentrated and expensive burst of club development in the history of New York Club row became a onestop party shop It was magical like an amusement park for adults Instead of taxiing from one neighborhood to the next clubbers could flit across the street Marquee was the Page Six spectacle On quieter nights when a vacation vibe seemed best one would start on the opposite end of the street under the gamelodge tent of Cain Bungalow 8 was for late nights and in the middle of the block one could mix it up with the mainstream11 Running Marquee By 2008 Tepperberg and Strauss had Marquee s operations down to a science On an average night two managers a doorman six bartenders six cocktail waitresses seven bussers who cleared empty glasses and bottles from table patrons two barbacks who restocked alcohol and other bar supplies three bathroom attendants one coat check attendant and twelve security people served Marquee s customers On a busy day the club admitted up to 1200 people Of these 400 socalled bottle customers would sit at any of the 36 tables the remaining customers were referred to as the filler crowd The building allowed for a great deal of exibility explained Tepperberg We redid the back room it now has its own D booth so we can shut the room upstairs and just have the main room and the back room open On a slow night we can shut a room and still look crowded Bottle Service Customers Bottle customers were seated at small glassandwood tables not bigger than about three square feet throughout the club Each group would typically be required to pay a 150 service charge and purchase two to three bottles of topshelf liquor Among the cheapest options was a 350 bottle of Absolut Vodka which retailed for 25 at a local liquor store while a bottle of Cristal champagne that cost well over 900 was among the most expensive choices Customers got to mix their own drinks as juice tonic and an ice bucket were included Occasionally customers paid 10000 for a special bottle of Dom Perignon Vintage Methusalem12 From each table of bottle customers alone Marquee generated upwards of 1500 in revenue on a typical Saturday night In fact bottle customers usually accounted for approximately 40 of any given night s customers yet represented 80 of the revenue One such bottle service customer was featured in a New York Times article on Marquee While waiting in line for the men39s bathroom upstairs Malik Shahbaziyawaz eyes a petite beauty whose gold necklaces are disappearing into her ample bosom Dressed in slacks and a shirt that hugs his sizable tummy he smells as if he has backstroked through a pool of cologne It39s Versace he says proudly Tonight Mr Shahbaziyawaz has already spent 900 on alcohol including a 600 bottle of Johnny Walker Blue his favorite It39s 200 in the store but it39s more fun here and when you39re having fun you don39t mind to pay 13 However bottle customers came in all kinds of sizes and shapes Celebrities and models were one subcategory although clubs often waived fees for Alist stars Bono George Clooney Justin 509019 Marquee The Business of Nightlife Timberlake and the Olsen twins were just a few of the hundreds of celebrities that had put in appearances over the years Stars like Diddy Jamie Foxx Mario Lopez and Paris Hilton counted Tepperberg as a friend and frequented the club And several celebrities including Christina Aguilera Derek Jeter and Heidi Klum had thrown private parties at Marquee these were usually birthday parties holiday parties or after parties for premieres or other events Another segment were professionals Some were young men who came into money for the first time and started to live large perhaps spending 5000 or more in one night Others were the veterans the more loyal customers who purchased two bottles on a weekly or monthly basis The average life of a bottle customer was about six months If I had my way I would rather have a customer who spends 1000 a week over a longer period than one customer who for six months goes crazy and spends 100000 said Andrew Goldberg Marquee s Manager of VIP Service He added There might only be 150 or 200 consistently great customers out there A third group were socialites with a taste for the fashionable and plenty of money to spend Many of these lived on Manhattan s Upper East Side one of the wealthiest areas in the United States known for its elite schools worldclass museums expensive restaurants and boutiques and proximity to Central Park The area and its residents were portrayed in movies such as The Devil Wears Prada and Sex and The City and television shows such as Dirty Sexy Money and Gossip Girl In fact in Gossip Girl s first season the show s main characters could be seen partying at Marquee Upon entering Marquee each table customer was required to present Marquee staff with a credit card and a form of identification and was asked to sign a commitment envelope which acknowledged an agreement to purchase the bottle minimum Only then would a staff member show that customer and his group members to their table Some bottle services customers preferred tables in the more private Room 3 but those in the main room near the entrance and the dance oor were most in demand Assigning customers to tables was a delicate process You can lose a customer for life if you put them in the wrong section next to the wrong table They take it personally said Goldberg Each night the club compiled a detailed seating chart for table customers You need to know what your customers are into whether it s models or celebrities We think about the location of the table and the neighboring groups added Goldberg Each table was assigned to a staff member who serviced customers throughout the night These cocktail waitresses were typically young goodlooking women according to one visitor their waitress made the tennis babe Anna Kournikova look like a gnome 14 Each time the waitresses brought a new bottle to a table an event which typically drew loud cheers from the partying crowd at and around the table particularly if it involved an expensive bottle of champagne the customers were asked to sign a receipt for confirmation When patrons were ready to leave a Marquee staff member presented the customers with a final bill that covered the cost of alcohol and a 20 gratuity fee If they had unfinished or unopened bottles the staff member also provided them with a receipt which they could use to redeem those bottles at a future visit to the club Exhibit 5 shows the different customer forms in use at Marquee Filler Crowd The filler crowd did not sit at any of the tables they ordered their drinks from the bar danced on the main oor and generally moved around the establishment s three rooms The fillers create the energy said Strauss If your bars are empty it looks silly even if your tables are busy Fillers paid Marquee s 20 cover charge to gain entrance and anywhere from 10 to 14 for their drinks Marquee The Business of Nightlife 509019 On a typical Saturday night at least 1500 to 1700 people were trying to get into Marquee Standing in line was no guarantee of gaining admittance however as the doorman ultimately decided the fate of the hopefuls Most nights scores of people were turned away Marquee s main doorman known only by his first name Wass had legendary status among clubgoers One in uential blog referred to him as the most powerful doorman in the universe 15 When asked what he tried to accomplish at Marquee he said The key to having a successful run of a nightclub is having a good mix of people and styles people who have money people who are from different parts of the world The key is to make it like a salad A salad with too many mushrooms isn t very tasty a salad with too much lettuce is just lettuce it s a nice big mix of all the elements that make a delicious salad So we re talking about some of the gay crowd some of the Upper East Side crowd some of the trendy crowd a very heavy sprinkling of the model crowd just so that there s not too much of one thing That can be very boring My goal is to make it a mixed salad every night of the week16 He added Not every place is for everyone you don t want to sacrifice the fun of the entire crowd for the fun of a few It s my job to read people 17 Different nights at Marquee open Tuesday through Saturday usually had different themes which translated into the kinds of people Marquee was looking to admit Rich Thomas who as the marketing promotional director of Marquee was responsible for the execution of the club s format for any given night and assisted at the door twice a week said Wednesday nights we go for the hipster crowd the Lower East Side crowd It is the only night on which we usually don t make a lot of money hipsters don39t spend a lot Thursday night s the hot night to go out in New York This is when Marquee will see its best and most high end public Friday night is our socalled Euro night on which the D in the main oor spins house music geared toward the European audience This attracts a very international crowd such as Spanish and French graduate students at New York City universities Tepperberg was known to sometimes shell out 15000 or more for a celebrity D at the drop of a hat without a big promotion It s a special surprise he said It makes the crowd feel like you re doing something for them 18 Managing Customer Relationships The roster of jetset customers who patronized Marquee was not developed overnight Tepperberg and Strauss had been cultivating and building relationships since their days as event promoters A lot of people that come to our clubs have known us for nearly 20 years We ve been the people they call any time they go out said Tepperberg He continued I spent my twenties going to every major hotel or restaurant or club opening in Vegas to Miami every big weekend for music conferences art fairs Christmas and New Year s If rapper and music mogul Diddy was having his birthday party in Miami I d make sure to be there that weekend If there was a big award show in Vegas I would make sure to be there that weekend I always went to Los Angeles the week of the Oscars and if there was a big party for somebody we knew And I went to major sports events such as the Super Bowl and the NBA AllStar Game Tepperberg was known for his handson approach at Marquee He usually started his day at 10 AM and was at Marquee at some point in the evening almost every night of the week staying in touch with his extensive network of customers throughout the day Strauss played a similar role in Las Vegas overseeing TAO If a longtime Marquee customer happened to be traveling in Las Vegas 7 509019 Marquee The Business of Nightlife Marquee staff tried to ensure that they were treated in the Marquee way at Strategic Group s sister property If that same customer was traveling to a city where Strategic Group did not have a nightclub presence Marquee staff would often try to place the customer under the care of a point person who provided the same experience We re what I like to call a onestop shop for hospitality whether it s restaurants nightclubs or other things Marquee is our platform but we handle all the needs of our customers whatever it is I m handling emails all day whether it is nightclub reservations in other cities or other details all the things they need taken off their plate said Goldberg He added If you are known as someone who takes care of people it s contagious If you take care of your customers they are going to tell their friends and they will tell their friends In order to broaden Marquee s reach beyond its NewYorkbased clientele Goldberg established relationships with concierge desks at the top hotels in the city such as the Four Seasons Ritz Carlton and the Mandarin Oriental He provided concierges with creditcardsize plastic cards the Marquee Red Card which gave hotel guests a tangible item to bring to Marquee Its main goal was to ease the process of entry into the club for the outof town visitors which helped to assure concierges that guest would be well taken care of once they left the hotel property They will send us much more business if we do it right said Goldberg Red Card customers were generally required to sign up for table service Promoters Marquee worked with socalled promoters to guarantee a steady ow of the right bottle service customers and filler crowd They hold the crowd create the energy and give the place a certain look They are the hosts said Tepperberg Promoters were tasked with attracting a crowd that fit the image of the night Each promoter had their own approach to finding desirable patrons for Marquee and cultivating relationships with them Some drew heavily on their own network of friends or acquaintances For instance several promoters were former or current fashion models who knew many other models Increasingly promoters coordinated their activities using online social networks and event sites One of Marquee s most successful promoters was Jonathan Schwartz 25 who had started promoting after graduating college Since then he had built up experience with several clubs in New York City and gradually came to work in house for Marquee He helped Tepperberg promote Strategic Group s 2008 New Year s Eve party in Miami Schwartz sold close to 500 of the 1800 available tickets He joined the company as a fulltime promoter shortly afterwards working exclusively for Marquee and Strategic Group s other properties Longterm friendships form the core of my network Schwartz said I know a lot of people from high school And now that most of my friends have started to work fulltime I get more corporate clients as well My referral rate is very high Schwartz was constantly on the lookout for new contacts When I am going out early in the week on a Monday or a Tuesday I know I am going to run into many people who are serious about going out Those are the people I like to invite to Marquee He added I like to book events in advance to get commitments on the calendar and I use my network to let it snowball from there On the day itself people text me to ask what is happening and I text them to come out Each night the promoters worked for Marquee they informed the doorman which guests were expected the doorman then made sure the promoters guests were given priority Promoters like Marquee The Business of Nightlife 509019 Schwartz often spent the early part of his evening outside near the doorman waiting for his guests to arrive and making sure they had an easy entrance into the club Of the available tables at Marquee around 30 were usually reserved for promoters Promoters also brought in approximately 10 to 20 of the filler crowd When we opened we had ten promoters And then every few months as other clubs would open and as we got older we would hire more promoters We are now up to ten to twelve promoters a night so maybe 50 in total Tepperberg remarked Some of our current promoters probably couldn t get into the club four years ago Many started as our customers they used to have to pay for their drinks In return for their efforts most promoters received a at rate Sometimes if they book a lot of tables and they bring in a lot of revenue we set up a bonus structure for them and give them a small commission from the bottle sales they are bringing in said Thomas Schwartz estimated that the average promoter earned around 400 per evening and worked three nights in a given week And what is unusual at Marquee he added quotis that they always pay you and that they pay you on time In 2006 and 2007 Marquee spent around 20 of its total expenses on promotional fees also see Exhibit 3 around 85 of those fees were spent on promoters Special Events Marquee further generated revenue through its special events group which was headed by Judy Tepperberg Noah s sister These events were usually held at Marquee before regular opening hours from 6 PM to 10 PM In an average week Marquee hosted two to three corporate parties and more so in the holiday season In 2007 Judy Tepperberg s activities generated almost 15 million in revenues And because people often stayed in the club after the scheduled special event had ended corporate events also helped Marquee s core business TAO Las Vegas TAO Beach LAVO and Other Plans In 2005 Tepperberg and Strauss signed on with Marc Packer and Richard Wolf as partners in the nightclub component of TAO Las Vegas an ambitious 10000squarefoot complex located in the Venetian Resort Hotel Casino that merged a restaurant and nightclub Jason and I don t have an interest in TAO New York because it was already open when we got involved But we are managing partners with a profit interest in the Las Vegas entity clarified Tepperberg TAO Las Vegas quickly grew into the highestgrossing independent restaurant in the United States according to Restaurants amp Institutions magazine In 2006 its first full year TAO generated over 55 million in business 16 million more than its closest competitor Tavern on the Green in New York The chief operating officer of that establishment marveled at TAO Las Vegas statistics noting that it served 600000 meals its average dinner check was 70 and 50 percent of its revenues came from alcohol he said It s really a nightclub with the food to complement the club 19 The TAO nightclub and restaurant catered to people craving a highenergy DJdriven atmosphere and boasted a 40footlong outside terrace with views of the Las Vegas Strip gogo dancers stateof theart audio and lighting systems and two main rooms each featuring varying music formats The facility also offered eight private skyboxes with minibars espresso machines and Marquee banquettes featuring secured purse drawers The club was decorated with lush velvets and silks waterfalls centuryold woods stones and a handcarved 20foot tall signature Buddha that oats peacefully above an infinity pool complete with Japanese koi20 509019 Marquee The Business of Nightlife Resting atop the TAO Las Vegas nightclub and restaurant was TAO Beach a beach club catering to the jet set that offered a pool light show oating Chinese lanterns four 14foottall fire columns day beds and seven 1000minimum poolside cabanas each with its own HD plasma screen televisions video game console chilled luxury terry cloth towels preprogrammed iPod rentals and other amenities During the summer months Tepperberg and Strauss continued to operate a highend venue called Dune in the Hamptons a getaway destination for New York City s elite In September 2008 Tepperberg and Strauss expanded their operations in Las Vegas by opening LAVO in partnership with TAO creators Packer and Wolf The 14500squarefeet restaurant and nightclub located inside the Palazzo Resort and Casino featured 40 bottle service tables and a slightly more intimate setting than the larger TAO The space was decorated in a Mediterranean style reminiscent of the baths of ancient Rome with tile walls plaster water features high wooden ceilings and low hanging chandeliers The team was working on a new TAO club in Miami scheduled to open in late 2009 in which they would have an ownership interest Meanwhile Tepperberg also kept an eye on the New York City market In November 2008 he had presented a plan to a Community Board in West Chelsea for approval to take over the existing lease for a property 10 blocks south of Marquee next to the current hotspot 1 Oak He proposed a plan to run the space half the size of Marquee as a lounge and restaurant that would serve a full menu until its 4 AM closing time without a cabaret license or promoters I m getting a little older and my friends and clientele have grown up he said In early December the Board voted in favor of the proposal allowing Tepperberg to continue to develop his plans Strategic Group In the fall of 2001 Tepperberg and Strauss started an events and marketing agency they called Strategic Group Its primary goal was to serve companies in consumer packaged goods fashion media entertainment and a variety of other industries that were seeking help in building their brands Strategic Group s core strength was in nightlife marketing It used its relationships in the nightlife industry and with consumers to create programs and events designed to stimulate consumers to convert to its clients brands Our first clients were Guinness beer Smirnoff Ice and Stuff magazine said Tepperberg We organized events for them and we tried to get noteworthy people at our establishments and other parties to try their products and to get sightings of those people and the brands mentioned in the newspapers It was our job to make these brands cool For example Strategic Group was asked to organize an event that would generate significant buzz for the launch of the Level Vodka brand made by Absolut in 2004 To achieve that objective Strategic Group sponsored events in nightclubs in six target markets A team of sampling agents dressed in trendy nightlife attire engaged consumers and invited them to sample Level Vodka at their reserved tables In addition Level Vodka was made a signature liquor at the clubs and was served to all promoters celebrities and other VIPs The approach drove sales of over 2600 incremental cases during the promotional period and helped Absolut secure over 120 million media impressions One picture singers John Mayer and Jessica Simpson then a new couple hanging out together in a club and drinking a bottle of Level Vodka made all the major gossip magazines 10 Marquee The Business of Nightlife 509019 Demand for Strategic Group s marketing services was strong from its inception As Tepperberg and Strauss developed their portfolio of businesses Strategic Group came to encompass a wide variety of activities As of May 2008 it consisted of two separate companies One was Strategic Hospitality Group SHG which covered Tepperberg and Strauss ownership and management of Marquee their management of TAO Las Vegas LAVO and the planned TAO Miami among other things Marquee had 110 employees TAO Las Vegas just over a 1000 and LAVO around 400 The other company was Strategic Marketing Group SMG a fullservice marketing specialevents publicrelations and consumerpromotions company In January 2005 Strauss and Tepperberg brought on Seth Rodsky as a partner tasked with running the marketing and events portion of Strategic Group A former Creative Artists Agency CAA agent Rodsky had been responsible for marketing brands such as Coca Cola through movies music and television By May 2008 Strategic Marketing Group had 45 fulltime employees of which 25 were located at the main office in New York City and the others were distributed across other offices nationwide The company strived to have a presence at all major entertainment events in the country It hosted annual parties for loyal Marquee customers and other VIPs at among other events the Super Bowl the NBA allstar weekend the film industry s Academy Awards Sundance and Tribeca Film Festival the music industry s Grammy and Billboard awards the television upfront market and New York City s fashion week see Exhibit 6 Strategic Group generated 23 million in gross revenues in 2007 which came on top of the income generated through Marquee and TAO Las Vegas Last Call for Marquee By all measures Tepperberg and Strauss run with Marquee had been a tremendous success for a much longer time than was to expected of a New York City nightclub Strauss commented Five years is almost unheard of in New York City nightlife We ve had iconic events top celebrities and great press and we think we ve made a significant contribution to the nightlife culture Marquee really was the staple If we were open five nights a week people were going out five nights a week And based on our success with Marquee a whole neighborhood has erupted everything from restaurants to galleries to a dozen other nightclubs trying to feed off of the energy that we brought to the area Customers know what they are going to get when they go out at Marquee It has stayed socially acceptable added promoter Jonathan Schwartz But it is getting a bit of a struggle to keep a constant ow of people They have other options Some just want to go to the hottest club around The nightlife impresarios were well aware that the sizzle could quickly subside and that it was increasingly difficult to maintain profitability If you run a nightclub you know that the longer you are open the higher your costs will be 1 said Tepperberg The rent goes up every year and payroll and professional fees are going up even faster also see Exhibit 3 Tepperberg wondered more and more what the best course of action was We can ride it out We can continue as we are operate the business every day go to work every day try to keep doing the nearly impossible by staying in business longer than most nightclubs and fix any problems that come our way We could also take our team and move on to 11 509019 Marquee The Business of Nightlife a new place a new challenge there are many pros and many cons to doing that Or we could put the club up for sale and take an offer with a good price What was the best way forward And when was the right moment to take action 12 Marquee The Business of Nightlife 509019 Exhibit 1 Selected Impressions of Marquee Source 10th Avenue Hospitality Group LLC 13 509019 Marquee The Business of Nightlife Exhibit 1 continued Selected Impressions of Marquee Source 10th Avenue Hospitality Group LLC 14 Marquee The Business of Nightlife Exhibit 2a Estimated Construction and Opening Budget for Marquee Item Total Costs LegalLicensingSecurity 200000 DesignArchitectu re 100000 AudioNisuaI 150000 Construction 1650000 Operating Capital 100000 Total 2200000 Source 10th Avenue Hospitality Group LLC Exhibit 2b Rent Costs for Marqueea Year Effective Date Monthly Rent Annual Rent 1 January 1 2003 July 31 2003 Free Free August 1 2003 December 31 2003 16667 83333 2 January 1 2004 December 31 2004 16667 200000 3 January 1 2005 December 31 2005 18750 225000 4 January 1 2006 December 31 2006 19313 231750 5 January 1 2007 December 31 2007 19892 238703 6 January 1 2008 December 31 2008 20489 245864 7 January 1 2009 December 31 2009 21103 253239 8 January 1 2010 December 31 2010 21736 260837 9 January 1 2011 December 31 2011 22388 268662 10 January 1 2012 December 31 2012 23060 276722 11 January 1 2013 December 31 2013 23752 285023 12 January 1 2014 December 31 2014 24465 293574 13 January 1 2015 December 31 2015 25198 302381 14 January 1 2016 December 31 2016 25954 311453 15 January 1 2017 December 31 2017 26733 320796 Source 10th Avenue Hospitality Group LLC a Amounts are rounded to the nearest dollar 509019 15 509019 Exhibit 2c Projected Income for Marqueea Marquee The Business of Nightlife Item Year 1 Year 2 Year 3 Revenues Door 364000 364000 780000 Tables 1 243000 1 885000 2080000 Bar 3955000 5421 000 5951000 Special EventsMiscellaneous Revenues 927000 1187000 1187000 Total Revenues 6488000 8857000 9998000 Beverage Revenues 5562000 7801000 8031000 Costs of Goods Sold 18 1001000 1404000 1446000 Gross Profit 5487000 7453000 8552000 Other Expenses Bar Supplies 36000 36000 36000 Credit Card Discounts 137000 187000 210960 Decorations and Flowers 24000 24000 24000 Insurance 102000 102000 102000 Legal and Accounting Fees 21000 21000 21000 Payroll Expenses 1818000 2089000 2261000 Promotional Expenses 156000 156000 156000 Rent 200000 225000 225000 Repairs amp Maintenance 12000 12000 24000 Utilities 67000 67000 67000 Miscellaneous Expenses 393 92000 92000 92000 Total Other Expenses 2664000 3005000 3213000 Depreciation 300000 500000 300000 Net Income 2522000 3948000 6485000 Source 10th Avenue Hospitality Group LLC a Amounts are rounded to the nearest thousand dollars Columns therefore may not add up b Includes banking expenses 3000 cleaning 3000 data processing 12000 equipment rental 9000 exterminator 3000 licensing and permits 9000 linen 10000 office supplies 3000 payroll expenses 4000 printing 12000 rubbish removal 12000 Violations 6000 and website 6000 All these items are under 20000 each year 16 Exhibit 2d Total Annual Revenues Projections for Marquee Year 1 509019 17 Day Door Admits Door Covers Table Coversa Average Table SpendPersonb Beverage Sales Per Tablec Bar Sales Total Revenues Standard Projections Monday Tuesday Wednesday Thursday Friday Saturday Sunday Weekly Total Yearly Total 52 weeks Special Event Projectionsd Holiday Sundays Big Events Holiday Season Private Parties Other Private Parties Yearly Total Miscellaneous Revenues Sponsorship Coat Checke Total Projected Annual Revenues 125 350 350 800 800 800 3225 172900 0000 3000 4000 7000 35 35 120 120 120 2000 2000 6250 6250 6250 700 700 z500 z500 z500 23900 2500 7875 7875 1 7000 20400 20400 76050 2500 8575 8575 24500 30900 31 900 106950 5561400 80000 120000 200000 330000 730000 1 00000 96750 6488150 Source 10th Avenue Hospitality Group LLC a The venue shall seat a maximum of 120 people for bottle service b The expected average table spend per person on Tuesdays and Wednesdays 20 is based on the purchase of cheaper bottles and more people sharing a bottle ie champagne and Wine at 1200 per bottle The projection for Thursday Friday and Saturday 6250 is based on a house policy of one bottle of alcohol or a 250 minimum for every 4 people C Bar sales for Monday door admits 20 drinks per person 10 per drink bar sales for Tuesday through Thursday door admits table covers 25 drinks per person 10 per drink table sales bar sales for Friday and Saturday door admits table covers 3 drinks per person10 per drink table sales The venue will be closed on Sundays during the first year d Big events are New Year s Thanksgiving Christmas Eve and Halloween The projection for holiday season private parties is based on a 3Week holiday season The other private parties are based on 30000 per month for 11 months and includes all parties of 20 people or more and daytime events 9 The coat check estimate assumes 50 of all patrons will check 1 piece per night seasonally 509019 Exhibit 3 Marquee s Income Statement for 2006 and 2007a Marquee The Business of Nightlife Item 2006 2007 Revenues Door 1120000 997000 Drinksb 12388000 12782000 Special EventsMiscellaneous Revenues 1231000 1415000 Total Revenues 14740000 15195000 Expenses Drinks 1746000 1798000 Juice Water Food and Groceries 208000 283000 Total Cost of Goods Sold 1954000 2080000 Payroll Expenses 1372000 1988000 Promotional Expenses 2667000 3200000 Other ExpensesC 4940000 5100000 Total Other Expenses 8980000 10289000 Total Expenses 10933000 12369000 Net Income1 3381000 2412000 Source 10th Avenue Hospitality Group LLC a Amounts are rounded to the nearest thousand dollars Columns therefore may not add up b Includes beer beverages liquor and Wine C Items over 50000 include banquet exchange comps insurance legal and accounting fees merchant fees music and entertainment office expense outside services rent repairs and maintenance restaurant supplies security and utilities d After depreciation and amortization interest income and expenses and taxes 18 Marquee The Business of Nightlife Exhibit 4 Marquee and Club Row Clubbing in Chelsea Manhattan 1 Ff nazhst Bang I alhmjra Earlul Shaman Esnnasmst Ell in sh Er Richard E nldlrinig Firmr Elamhaan swirl E Eu g l w 3 myihamul swirl in gull I I li I1 quot39ihl2 IJIIIquot LLW 1I39r39 Haima thhnrtn U uutt Emir lah adic I I39 I39I39 I 39Il39hik EriEZNIIEIIJI39EIJ39IIi rll39l39 nunnil 1139 ii I I 1 H LIFEI EIILU Iiiflzl39rmlgili giallri 39i39ul I ll39mrnrlr wlm I m nr III w rpm5 11 Min wggEun E Marquee Nah I Jason trtauss iiaiui L39Iai F i mill13F 39 Evinq IliLll flirt in ii HumEr 39I39I39uttnn E 1 12quot I 39 ur JrrirL39139 quEMPIHH iEII iIhL AIITi39L39I u u Lquot I Ll I L JEIHJLIJ PI39 F39i39IE39l mu galla airilu39 I11 rm alulmlni fur 11i39il39l139l39 estl musn 39 I j IiiIPIEII i I g L1 39uil 1ui l1 39 Eiain Jam e flail hulll and Jragplma llamas i IquotIiaIIL1quot l l 39iavl rl IIEII l1l 39i Source New York Magazine quotThe Short Drunken Life of Club Row February 11 2007 By Isaiah Wilner 509019 19 509019 Marquee The Business of Nightlife Exhibit 5 Partying at Marquee Forms to Complete Bottle Minimum I the customer agree to meet the bottle minimum set forth by the host for this night This does not include tax or the 20 gratuity charge tHost Time of P39eopie Tabe Customer Name Customer Signature The envelope that customers sign when they sign up for a table Their credit card is stored in this envelope MARQUEE con rm that I am signing for an additional gratuity and agree to pay the amount of Signature CT Server 7 DATE i39 r An additional form they complete when they order a bottle MARQUEE Customer Nome Dote r39 r39 Woe of Liquor Amount in iUTWS leit39ln bottle it 10 Please cell 64643 t3202 to make year reservation Stores bottles are kegs to F ooys from the above note and reaeemobie mly with valid ID Customer must meet bottle minimum set tor the nighr A receipt they receive when they store an opened bottle Source 10th Avenue Hospitality Group LLC 20 Marquee The Business of Nightlife 509019 Exhibit 6 Strategic Group Selected Activities Across the US in 2008 Les Vegas New Kerk 1quot Hamptum MESH Faehien Week TeDWene tien Hetel Mereeelei a Benz Pele Ehelilenge Billboard Music Awarde 39 39 Triilneee Film Festival 39 4th e July T39hquot U eFrents Week Perle City UT 39 Euedanee Film IFE STIT39e al Sleuth Elleride Latin Grammy39e quot 39 o Wiimer Mueie enfmenee Seut 39iem Eal nmie V v a AHEEIEE1 Feehien Week r Fail15m Weak 39 Grammw e j Pheenilm HI MW Movie Wards I n 5e peran eademy Awende m ideeMue le Awards New rleam NBA EllEater Weekend 5123 Df ce wj39sej s eremeeae eue Source 10th Avenue Hospitality Group LLC 21 509019 Marquee The Business of Nightlife Endnotes 1 Conde Nast Portfolio World According to Noah Tepperberg April 17 2008 2 Audience Research amp Analysis llThe 9 Billion Economic Impact of the Nightlife Industry on New York City A Study of Spending by Bar Lounges and Clubs Music Venues and their Attendees Prepared for the New York Nightlife Association January 2004 This report is based on sources such as the Time Out New York Bars amp Clubs guide and the New York City Nightlife Zagat Survey Among the nightlife spots studied the majority of which were bars and lounges were about 60 dance clubs and another 60 music venues 3 Audience Research amp Analysis llThe 9 Billion Economic Impact of the Nightlife Industry on New York City A Study of Spending by Bar Lounges and Clubs Music Venues and their Attendees Prepared for the New York Nightlife Association January 2004 4 Audience Research amp Analysis llThe 9 Billion Economic Impact of the Nightlife Industry on New York City A Study of Spending by Bar Lounges and Clubs Music Venues and their Attendees Prepared for the New York Nightlife Association January 2004 5 Audience Research amp Analysis llThe 9 Billion Economic Impact of the Nightlife Industry on New York City A Study of Spending by Bar Lounges and Clubs Music Venues and their Attendees Prepared for the New York Nightlife Association January 2004 6 Forbes Flaming Out Never Felt So Good August 22 2006 7 Forbes Flaming Out Never Felt So Good August 22 2006 8 Forbes Flaming Out Never Felt So Good August 22 2006 9 Forbes The Science of a Sizzling Club August 22 2006 10 The New York Times Club Stays Hot at Ripe Old Age of 2 November 3 2005 11 New York Magazine The Short Drunken Life of Club Row February 11 2007 12 Forbes The Science of a Sizzling Club August 22 2006 13 The New York Times Club Stays Hot at Ripe Old Age of 2 November 3 2005 14 The New York Times Club Stays Hot at Ripe Old Age of 2 November 3 2005 15 Goodnight Mr Lewis Marquee Wass The Most Powerful Doorman In The Universe February 27 2008 wwwgoodnightmrlewiscom 2008 02 marqueewassthhtml accessed on December 10 2008 16 Goodnight Mr Lewis Marquee Wass The Most Powerful Doorman In The Universe February 27 2008 wwwgoodnightmrlewiscom 2008 02 marqueewassthhtml accessed on December 10 2008 17 Goodnight Mr Lewis Marquee Wass The Most Powerful Doorman In The Universe February 27 2008 wwwgoodnightmrlewiscom 2008 02 marqueewassthhtml accessed on December 10 2008 18 Forbes The Science of a Sizzling Club August 22 2006 19 The New York Times llSetting Restaurant Records by Selling the Sizzle July 22 2007 20 TAO Night Club Website wwwtaolasvegascom accessed on December 10 2008 22
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'