Crowded Hollywood club scene turns bearish

On every news medium we are reminded of the carnage in global markets. Banks are collapsing, governments are making epic financial contributions to the private and public sector and job cuts are increasing. Commercial and personal financing is harder to source and the amount and terms somewhat sharp compared to the last few years. Confidence is low and inflationary pressures have been driving up energy and food prices. Businesses are naturally concerned about surviving and the next few years are clearly not going to be an easy ride.

Most all of our clients – from hotels and casinos to bars and restaurants, are challenged like everyone else. The economic reality is inescapable. However whilst doom and gloom may be the flavor of the month, and for many months to come, that is not the only thing we see.  Arguably, a recessionary environment can provide a platform for innovation and economic growth through entrepreneurialism and creative thinking and we encourage our clients to take novel approaches to countering the downturn.

We are all suffering. Companies will continue to suffer and the insolvency practitioners are clearly going to be kept busy for much of 2010. People are spending less and selectively as disposable income is depleted or conserved in most economic groups. A difficult economic climate requires considerable ingenuity and the ability to look at things differently. And in looking at things differently, the reality is that there are many opportunities out there – opportunities not just for new business but also to improve existing businesses. When things are at their most difficult, you cannot just maintain – by doing that, you’ll in fact move backwards – you have to grow.

Along with a long list of sectors taking a beating, the world of hospitality and leisure is suffering. Bankers are calling in loans, rents negotiated in the ‘good times’ can be stifling and cash flow is constantly under pressure.

With thousands of sites standing empty, landlords and business owners must contemplate other sources of revenue generation to counter their existing challenges. What can they do in this climate if there are less customers, no customers, low spending customers or a business with a model that is currently untenable? Look at your stock, your financials, your customer base, your payroll and your marketing. Look at your margins – in your overall business all the way down to individual services and products. Take this opportunity to look at what makes you money, what draws in the customers and what is essential to the underlying business to ensure that when times improve, you have the infrastructure and team in place to handle that. At times, make tough decisions because you need to be lean to operate in this climate.

The message we give to our clients is be cautious but don’t be inward and conservative. Look outward and look differently at your business model, at your job remit and/or your skills and work hard to seek out where the prospect lies.

There cannot be any “sacred cows” or unchangeable tenements of your business, you have to look and relook at all aspects of the way things are done within your business.  Whether it’s redefining your customer, your product, your delivery method and or your staff, you’ve got to make the changes that make you undeniably viable; you cannot rest on past results or simply what’s worked for years.  The manifest of “Doom & Gloom” is not a given and in fact is only a reality if you allow your business to be stagnant and ignore the need to constantly evolve when times are toughest.

From an unlawful detainer action to a 5 day pay or quit or simply an inability to meet your obligations, the strategy for finding a solution remains the same.

One of the issues we regularly come into contact with in our capacity as turnaround consultants for insolvent or underperforming units are our clients lease obligations. Typically executed during the “good times”, they have often proved to be an onerous burden on struggling units and when cash flow is tight and a business needs to be lean, the ability to renegotiate these leases is often the ‘make or break’ factor.

For a landlord to serve a 3 or 5 day notice to pay or quit, it may mean that talks to date have failed (or perhaps not occurred) and at this point the landlord is making it abundantly clear that they are willing to risk having a vacant property rather than keeping you as a tenant. Essentially, the landlord is looking to stop the bleeding as he or she does not have faith in your ability to remain as a tenant. At other times, the notice may merely be a strategic move to force you to repay some of the monies owing with no genuine intention of actually evicting you. Either way, receiving a ‘pay or quit’ is a nasty feeling for an operator and creates fear and insecurity for the business. As if cash flow was not tight enough already you now need to retain counsel.

Whilst we are not lawyers we do, however, work closely with our client’s legal team in defining a strategy that makes the most sense under the circumstances and provides the business with the maximum leverage. Our involvement is typically based on the competency of counsel as well as the operator’s ability to see the big picture. Our advice is ‘always get the best advice’. If you need legal advice, don’t use your local firm simply because you know them. Find out what they have done in your sector and ensure you are using someone with the right experience because good advice always pays its way, especially when dealing with something like an Unlawful Detainer – which has very little “appeal” process if you are on the wrong side of the judge’s decision.

Whilst OnSite can make a significant impact on the non fixed costs and provide drastic savings, increased operational profitability and streamlining the concept, if the rental amount (typically 7% to 10% of gross sales) is unsustainable, then the value in trying to save the business may be flawed from the day we arrive.

In a majority of recent cases we have been involved in and where we have engaged with landlords in cases of crippling rent, landlords have often been willing to make a number of concessions when presented with a fair option. It is critical not to ask the landlord to reduce the rent in order to offset operator error or concept failure – if you are running your business badly it is neither their problem nor their responsabillity to subsidise you. This is one area where our appointment provides immediate confidence and assistance to the business: We immediately step in to confirm that the operations are being streamlined and efficiencies are being introduced.

An operator who has made significant errors but successfully repositioned the concept and provided a viable and profitable model still has significant leverage because he or she has identified the problem and found a solution. Typically, landlords recognize the current economic challenges that their tenants face and to the extent that they have a good relationship with their tenant, a paying tenant is a better proposition than a vacant, non rent producing unit. You must engage with your landlord in a professional way as simply ignoring the situation will only make matters worse and enrage the already frustrated owner of your site.

When either handling a pay or quit, an unlawful detainer action or even thinking it may be time to attempt to renegotiate with your landlord, you must remember that as a paying tenant, despite your reservations, you certainly have leverage. You should offer a value proposition that makes sense, with financial payments you can meet in a timely fashion and that work both in the short and long term plans.

In all instances, we suggest the landlord be treated as a partner and where available, make modifications to the lease and rental amounts to provide for a base plus gross volume percentage. This would allow, in some instances, for an immediate reduction in the base but also provide the landlord with additional revenue potential based on the expectation that business will grow and ultimately, get back to its pre-recession top line revenues. This will only happen, however, when you can provide absolute data on your business and demonstrate its ability to provide the landlord with this upside.

We have clients where their landlords have offered rent reductions without it being offset into a loan for payback in the future, whilst others have required the operator to personally guarantee the value of the offset. Arguably this creates an unfair obligation and high level of personal exposure for the tenant, however in circumstances where the rent must be reduced to secure the future of the business, operators have to make tough decisions and compromise in areas they would typically consider off limits if they want a second chance on an existing rental contract.

When proposing a change to a landlord, it must be just that – a proposal. It cannot be neither theoretical or hypothetical nor can it be a napkin with some ideas scribbled on it. The operator is pitching his or her landlord to not only receive a reduced rent but also to have faith in the future of the business: This is a lot to ask. This pressure forces an operator to treat their business as a business and create the required cash flow statements and forecasts, to define a cash model that shows a number of different options to the landlord for them to be made whole and exactly how the tenant expects to realize that. You are pitching to your landlord and should make every possible effort to do so in the most professional way.

If your P&L shows a monthly loss, presenting a landlord with a burden you cannot meet and which you are likely to breach is much the same as saying you intend to breach it. You are not being honest and the landlord will spot this and have no faith in what you are proposing. On the assumption that the model will be redefined and the unit is either moving to, trending towards or is profitable, step one has been completed. A practical landlord has less reason to remove a profitable tenant if an equitable deal can be made and a clear path to get there can be defined.

With the P&L showing or trending towards profitability and the creation of cash flow allocations, forecasts and debt amortization tables, you should now be able to show your ability to manage the historic debt obligations you have and the shelf life on those. For most facilities, the P&L is not the problem – rather it is the cash flow that provides the greatest challenge. The ability (or lack thereof) to service the debt with the profits or available cash flow the unit generates is typically the biggest issue in turnaround business plans. This is immediately exasperated by the issuance of a landlord Pay or Quit notice, as lenders will now not be willing to lend money in such an unsettling environment.

This requirement to have a demonstrable business case also ties in to one of the important operational aspects of a business. You must understand your numbers and you cash flow because what it all comes down to is understanding your data and using the information the data provides to drive your business decisions. If you are running a business where you cannot see, down to minute detail, everything from your stock levels to your net margin on dishes served, then you are then running a business that is not worthy of a landlord workout. This financial information and the ability to scrutinize it is one of the keys to restoring profitability.

For our clients and now hopefully for you, with the creation and utilization of rolling cash flow forecasts showing your ability to manage your obligations, you are now able to create a number of options for your landlord or for that matter, any creditor. You can demonstrate with authority and confidence exactly how you intend to pay debts based on what you realistically earn and can pay. Every creditor would prefer to know what you can pay and will pay regularly rather than what you would like to pay but may not be able to with regularity. The intent to breach a deal or regular breaches of financial commitments made only compounds and exacerbates the problem and the relationship – and creates difficulty trying to structure a new deal.

In proposing to a landlord that an adjustment to the rent structure can be viable, it is important and crucial that the immediate recent cash flow shows that whatever is proposed can actually work now, not based on hypothetical projections of increased revenue.

It is also important to note that as a tenant, you should not be trying to salvage the situation if you are not confident that through renewed efforts and a workable landlord you can increase sales and improve the bottom line. This cannot be about working out a deal just to survive because that alone will certainly not incentivize the landlord to renegotiate.

While there are many different interpretations and variations, there are essentially two options for a reworked lease, “less now, more later” or “base plus gross percentage”.

The “less now, more later” option asks for the landlord to decrease the monthly rentin the short term but increasing the rent in the medium to long term. Less cash is therefore required ‘now’ when the business is in trouble but when it is thriving once again, the landlord can claw back rent lost in earlier years with higher income. This option provides for a set increase and is a less riskier option for the landlord but also negates any large reward for the landlords renewed faith and risk.

The “base plus gross percentage” model lets the landlord accept a lower base rental amount but participate in a percentage of gross revenue (important to note that this is always gross and not net revenue).  There are essentially two different types of percentage rent, the most common being based on receiving a percentage of sales benchmarked against a particular target (eg, $2k base and 6% of gross revenue over $500k). The other practical option is a percentage of total revenue but guaranteed with a base amount (eg, 3% of gross sales, base of $3k).  This is riskier for the landlord but has the attraction of a much more lucrative upside.

In some instances, however, the landlord is no longer willing to wait for rent or strike a deal and under those circumstances, a pay or quit is served. For many struggling venues, this is the final nail in the coffin and as if it could not get any worse, they now have to retain an attorney and use the few pennies left in the bank for legal service rather than operational or debt service.

In our experience, however, this onerous and unpleasant process provides a number of theoretical upside opportunities for both the landlord and tenant. If the process is managed appropriately, it can equally be a fresh start for the business as the decision makers are finally forced to make tough decisions that have likely been put off (perhaps in the hope they will disappear).

Upon being served, now knowing the landlord is willing to go ‘all the way’, the first step is to ask for an extension. This gives you all time to arrange to meet for a frank and open discussion (presuming the option is there) and with everyone’s chips on the table, it allows a thorough discussion as to whether there is a deal to be done. Whilst it is common to believe the landlord is in the driving seat, this is not always the case. If your financial modeling proves your ability as a tenant, the landlord is not looking for a vacant unit and financial exposure for the sake of it and would likely rather not restart the process of finding a new tenant. Equally, if no deal is to be found, you will have sufficient time to contemplate your legal position and take advice as opposed to making a rushed and insufficiently thought out decision.

This article is not about defenses to an unlawful detainer in an effort to find the landlord at fault with a defective service nor is this a step by step guide to the legal options available when responding (answer, demurrer or motion to quash) to such a motion. Furthermore, this is also not an article seeking to find potential covenant breach or retaliatory evictions. There are hundreds of options to drag out, extend and respond to a UD that your counsel can advise on. This is about the options or remedies that you may wish to explore if your concept is viable and you can “make it work” both on paper and in practical terms. This is about turning around your business and dealing with the issue of burdensome rent whilst also nursing your unit back to full health.

Understanding what has to happen and the legal strategy your business should take is unique to each situation. In some instances, the balance outstanding along with other debts may make a bankruptcy with intention of assuming the lease a viable option. In other instances, performing an Assignment for the benefit of Creditors (ABC) with your landlord allowing the debt to rollover to the new entity might be a potential solution.

At other times, it is just a matter of legal defense and starting the process of ensuring your lease is upheld. As an operator your entire business is tied to the lease and whilst there may be some assets (FFE, Liquor license and other items) the only real asset is the lease.

For clients who have run into difficulty with their lease obligations based on year on year and month on month revenue decline, we have seen successful use of California’s “hardship defense”. The value of this defense is that the entire concept of an unlawful detainer is the landlord asking for vacation of the property as an equitable remedy, grounded in fairness. If the landlord is asking the Court to act fairly and return the property then the court must provide you, by default, with that same level of fairness.

If you are experiencing this month on month decline in your business after you entered into a commercial agreement with specific revenue expectations you have not been able to meet – and where you have not been able to meet those due to the economic climate – then this hardship defense has merit. You did not enter into the agreement on false premise nor did you seek to mislead the landlord in committing to pay this rental amount because as an operator, the business case seemed viable. In this climate where business owners are struggling to keep their doors open, the hardship defense is very relevant and one you should turn your attention to and, where relevant, discuss it with your attorney.

This legal process of eviction is terrifying because it does not deal with overdue collections and summary judgments: Instead, the entire business is at risk. Think laterally and contemplate how you can involve your landlord to your mutual benefit because both parties stand to gain from finding a solution in these circumstances.

Why Companies Don’t Need Headquarters

David F. Carr, 06.03.10, 6:00 AM ET

James Sinclair, head of the hospitality industry turnaround firm OnSite Consulting, says one of the biggest challenges his employees have had adapting to the way he runs his business is answering the question, “But where is your company based?”

The answer: Wherever the work needs to be done. “We have 65 people, and we have no office,” Sinclair explains. Headquarters is a post office box; he also has an Internet-based phone and unified communications system.

Sinclair used to have an office. “Sure, we picked out a nice office with a conference room and people working away. But our clients don’t want to see our office, don’t want to see the conference room. They want us to come to them,” he says.

OnSite is in the business of reviving restaurants, hotels and casinos that are in trouble, sometimes on the verge of bankruptcy. In past years the company has bought and rehabilitated some facilities, but today it focuses on working with current owners on overhauling management and operations. Sinclair himself has long been a road warrior, and was rarely in the office anyway. When he did come in, he believed employees felt obliged to pepper him with issues they had been managing just fine while he was away. Or he saw them doing busywork solely to impress him with their industriousness.

About 18 months ago Sinclair decided to send all his employees into the field, where they could be more productive. That made a lot of sense for consultants and salespeople. But Sinclair went further, also dispersing his administrative workers. The person who handles billing, for example, now has a desk at the site of a longtime client.

“At first a couple of clients did say something like, ‘Let me get this straight: You gave up your office so you can use our office for free?’” Sinclair concedes. But he convinced them that any employee he parked at their location could at least serve as a point of contact, helping ensure a smoother working relationship.

Although employees found the “Where is your headquarters?” question awkward at first, Sinclair likes to turn it around, telling potential clients the OnSite consultants will be, well, on site 90% of the time, precisely because they don’t have an office to retreat back to.

The technologies Sinclair uses include Microsoft’s Office Communications Server for Internet call-routing and integration with other communication modes, such as e-mail and instant messaging. He also relies on Microsoft SharePoint for collaboration and BlackBerry Enterprise Server for mobility. OnSite has no IT staff of its own, so the technology is all managed and hosted under contract with 123together.com.

I heard a similar story from Doane Hadley, president of BizTech Solutions. I’m never quite as impressed when technology companies turn out to be showcase users of the technologies they promote, and BizTech had been a longtime beta tester for Microsoft SharePoint before adopting Office Communications Server.

Still, when Hadley decided to get rid of the firm’s office in New Jersey, he did it for his own reasons. Once his company had adopted unified communications, it became easier to tell people it was OK to work at home more–especially as gas prices spiked or the weather was bad. When his office manager announced she was moving to North Carolina, Hadley decided she could work from home.

“It got to the point where there weren’t a lot of people in the office anyway, and there didn’t need to be,” Hadley says. So he did away with it, and now all his employees work from home or from client sites.

Hadley has an agreement with a shared office facility in New Jersey, where he has one person stationed more or less full-time, and where he can have the use of a conference room if he needs it. But instead of running servers in his own data center, he now rents space in a commercial data center. “At the end of the day it’s better, because we have guaranteed uptime and higher connectivity,” he says.

OnSite’s Sinclair believes the decision to do away with his office has been worth more than $1 million in savings, supplemented by the increased business he has netted from a more productive workforce.

One of the side benefits is that people who were formerly confined to back-room tasks are now in contact with customers, giving them the opportunity to prove their worth. And employees are happier as a result, Sinclair says. “Some of them are earning double what they were a couple of years ago–because they’ve proven that they should be.”

David F. Carr is Forbes’ columnist on technology for small to midsize businesses. Contact him at david@carrcommunications.com.

BY COURTENAY EDELHART, Californian staff writer
cedelhart@bakersfield.com | Wednesday, Apr 28 2010 12:29 PM

Frozen yogurt shops are back.

In the 1980s, they were as ubiquitous as big hair and ripped up sweatshirts.

Now it seems they are enjoying a renaissance. Bakersfield has two new ones so far this year, and a third is set to open downtown next month.

“The yogurt craze happened in the ’80s, again in the ’90s and again now,” said James Sinclair, a principal at Los Angeles hospitality consultant OnSite Consulting. “It’s almost every 10 years like clockwork.

“The key reason for this explosive growth and what seems like a yogurt brand in every available corner, strip mall and random location is actually purely economics,” he said.

The barriers to entry to this industry are so low that any time there is a depressed real estate market, yogurt stores spring up in all the newly affordable commercial real estate space, Sinclair said.

A yogurt store doesn’t require a lot of upfront expenses, he said. Inventory and equipment are fairly cheap, and it doesn’t take much time to train management and staff.

“An operator can open in almost no time at incredibly low cost,” Sinclair said.

With so many eateries going under in the soft economy, there also are good deals to be had on restaurant equipment, said Peter Siegel, founder of BizBen.com, a Web site for buyers and sellers of small businesses.

Then, too, it’s a simple matter of timing.

“Yogurt, ice cream and other cold food places tend to open just before summer, just like you see more coffee shops opening up right before winter,” Siegel said.

The frozen yogurt industry has done a really good job of marketing itself in franchise networks, too, Siegel added. Chains are attracting people interested in franchises by stressing strong profit margins and the low cost of the product at a time when consumers are watching their spending, he said.

That was one of the draws to the business for Churros and Yogurt, an independent frozen yogurt shop that opened March 25 at Valley Plaza mall.

“It’s a good, healthy treat and it’s affordable,” said Raoul Biteng, who started the store with business partner Logan Bui.

Churros and Yogurt offers eight flavors of yogurt and 27 toppings, including fresh fruit and candy, as well as, of course, churros.

Biteng said he chose to start out in the mall because of the built in foot-traffic there, but would like to expand to other areas and eventually sell franchises.

Another newcomer, Love Yogurt, opened in a strip mall this month at 6077 Coffee Road north of Olive Drive. The owner did not respond to repeated requests for an interview.

BurrBerry Frozen Yogurt is scheduled to open in a week or two in the Moronet Professional Building, 1514 18th St.

Attorney Bruce South is opening BurrBerry Frozen Yogurt downtown with wife and business partner Pam Boucher.

They thought downtown would be a good location for a yogurt shop.

“We sat out there for an hour one day and just counted the people walking by, and there were 130 pedestrians,” South said. “That’s a lot of potential foot traffic.”

Along with yogurt, the 1,300-square-foot store will sell low-fat pastries and a full line of gourmet coffees.

BurrBerry Frozen Yogurt is trying to differentiate itself from the competition by attracting the health conscious, South said.

“We want to provide a nutritious alternative to the Snickers bar in the afternoon,” he said.

So no high-fat yogurt flavors such as chocolate, and candy toppings will be gone in favor of such offerings as granola, fresh fruit and coconut.

The yogurt selection will be burrberry tart and a rotating flavor of the month. Or consumers can buy a swirled blend of the two.

Ice cream shop Cold Stone Creamery, which has three locations in Bakersfield, discontinued frozen yogurt at one point only to bring it back.

Frozen yogurt is not a fad, said general manager Violet Garcia.

“Customers are much more health conscious now, wanting the low-calorie or low-fat selections,” she said. “So many people are watching what they eat.

“I think we’re going to keep it around for a while.”

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Will Your Texting Policy Stand Up in Court?

By Minda Zetlin

A new Supreme Court case casts a shadow on employee text messaging rules. The case involves an employer sued for reading an employee’s (highly sexual) text messages, even though he sent and received them using company-owned equipment.

You have a mobile workforce, so you issue mobile devices to your employees. You pay for their mobile service and make sure their equipment is working. Since it’s intended for business, you have the right to read employees’ text messages. What’s more, you have a policy that says so, in so many words. All employees must acknowledge this policy when receiving their Blackberry devices or other smartphones.

Legally, you might think you’re well covered — and you might be wrong. In Ontario, Calif., police officials reviewed an unusually large number of texts sent by a police sergeant named Jeff Quon. They found hundreds of sexually explicit texts. Quon sued, arguing that his bosses had no right to read the texts. The case made its way up the food chain to the Ninth Circuit Court of Appeals, which ruled in favor of the cop. Recently, the U.S. Supreme Court agreed to hear the case, with a final ruling expected this summer.

Whatever the court eventually rules, this is unlikely to be the last employment case involving text messages, and employers find themselves setting text and other communications policies in an increasingly confusing world. “Technology is changing fast and the courts are left to catch up,” notes Jason C. Gavejian, an associate at Jackson Lewis LLP. “The biggest challenge is the interplay between federal law, and state and local law,” he adds. “In one New Jersey case, the courts ruled that employers have an obligation to make sure employees are not viewing child pornography. That requires monitoring. Now the Supreme Court may rule that monitoring is illegal.” If it does, the two rulings will be in direct conflict, and employers in New Jersey will have to choose between disobeying state and federal courts.

It should be clear by now that setting an appropriate policy governing the use of mobile devices is a very serious business. But many small companies don’t take it seriously enough, says Michael McAuliffe Miller, partner in the labor and employment group at Eckert Seamans Cherin & Mellott, LLC. “The biggest mistake companies make is that they have no policy on texting and mobile communications,” he says. “Or else, they have an off-the-shelf policy that they’ve downloaded from the Internet. Then they’re inconsistent about enforcing the policy, especially with employees everybody likes.”

Develop a policy on texting

If the above is a good description of how not to handle texting policy, what’s the right way to do it, especially in light of the Quon case? Unfortunately, there’s no one right way, but here are some steps that may help:

Have the right people create policy. “In many companies we consult, these policies are set by an IT person,” notes James Sinclair, principal of OnSite Consulting, a hospitality industry consulting firm that specializes in helping financially troubled companies regain profitability. “I’m a big believer that these should be management decisions.” Top management should set mobile communications policy, with input from legal counsel.

Update the policy often. Especially any time you provide employees with new types of devices. “One of the issues in the Quon case is that the police force’s policy had been written to apply to e-mail, not texts.”

Reduce expectation of privacy. “Employers should have a policy that says employees have ‘no reasonable expectation of privacy.’ That’s the key phrase,” Miller says. The policy should be distributed to employees at regular intervals, and they should be asked to acknowledge their agreement. “Some employers make that consent interactive,” he adds. “It could be part of the employee’s log-in process.”

Specify who can change policy — and who can’t. In the Quon case, the police force had a formal policy that said texts weren’t private. But a lieutenant told Quon informally that if he paid for any texts beyond the 25,000 characters a month on his pager plan, no one would read his texts. “You should have in your policy that no one but a designated senior official of the company can change the policy,” Miller says.

Train managers about the policy. “You want to make sure managers get proper training so that when they inform employees about the policy they’re doing it in a uniform fashion, consistent with what the company wants to accomplish,” Gavejian says.

Specify how equipment is to be used. This is a tricky question. You can’t define unauthorized use too narrowly, Gavejian says. For instance, if you write a rule against sexually explicit text messages, it won’t apply to sexually explicit images. Instead he suggests a rule that company equipment be used only for business communications. At the same time, he acknowledges, such a rule may not be realistic. “You can’t stop someone from sending a message home saying ‘I’ll be late for dinner,’” he notes. “I don’t think there’s one universal policy everyone can apply. It has to be analyzed on a case-by-case basis, and depending what technology you’re using.”

Keep messages on your own servers. This is a potentially costly solution that isn’t right for every small company. But, because its clients’ data is always highly confidential, OnSite Consulting chose to route all e-mails and Blackberry messages through its own servers. “We worked with our general counsel and did a lot of research,” Sinclair explains. “By default, if you’re going through our server, you’re accepting our terms and conditions, and the messages are automatically copied and audited.”

This solution may become more popular in the wake of the Quon case: One of the questions at issue is whether his employer had the right to demand his text messages from their pager company, and whether the pager company was right in acceding to that demand. OnSite’s server is hosted and maintained by a hosting provider, but it does physically belong to OnSite. “We made it a priority and spent a significant sum for a technology we can’t see or directly use and that does not contribute to our return on investment,” Sinclair says. “But it provides another layer of protection for our clients.” It also provides a real-world model of how to most safely handle employee communications. “We have to do it,” Sinclair says. “We can’t walk in there as a consulting company and have a less-than-perfect system ourselves.”

West Hollywood reaches out to gay and lesbian tourists

The city is trying to shore up revenues by wooing a ‘very lucrative segment.’

Newest hot spot for a $78 steak: A shopping mall

by Megan Finnerty – Oct. 26, 2009 12:00 AM
The Arizona Republic

Malls are destinations for spending on new shoes, jeans and purses.

But now Valley residents are asking themselves if they’re ready to go to the mall for a $78 steak and a fancy cocktail.

Modern Steak opens today at Scottsdale Fashion Square with all the opulence of a high-end steakhouse – mirrored ceilings, glittering chandeliers and even a concierge desk. There are cozy leather booths for canoodling couples and an airy patio for those who prefer to be more conspicuously observed.

But the patio is topped with a white-metal awning that blocks the view of the parking lot. And, while diners at interior tables hear a trendy music mix, those who sit overlooking the mall get Muzak.

Yes, it’s a glamorous steakhouse, and it’s across from Banana Republic. But several signs say this might be just the right fit.

Dozens of high-end shopping centers across the country have added elegant dining during the past few years, and it’s worked when the restaurants are as swanky as the stores, says hospitality consultant James Sinclair. Malls want the new customers, and restaurateurs want the critical mass of prospective diners.

“More retail outlets are pursuing destination dining, name restaurants and name chefs, opening up the market for diners, tourists, dates, not just people going to the mall,” said Sinclair, president of Los Angeles-based OnSite Consulting.

Shopping at Scottsdale Fashion Square is decidedly luxurious: Shoppers might spend $975 on a sleek trench at Burberry or drop $395 on a Comme des Garçons dress shirt at the new Barneys New York.

The mall is one of America’s 10 most profitable, with $618 in sales per square foot vs. the national average of $420, according to a study by U.S. News and World Report and Green Street Advisors, a Newport Beach, Calif., investment-research firm.

Similar upscale dining-shopping mixes can be found at other top malls such as the Forum Shops at Caesars Palace in Las Vegas, with a Sushi Roku and a Spago, or the Ala Moana Center in Honolulu, with a Morton’s the Steakhouse.

So, when rebuilding the east wing as part of the Barneys expansion, mall-owner Westcor invited longtime Valley restaurateur Sam Fox to develop something to “wow customers,” said Greg Cochran, Westcor’s vice president of leasing.

“We want it to be one-stop shopping . . . the movies, bookstore, department stores and a unique dining experience. It keeps them in the mall longer,” he said.

Fox says it’s the perfect location. He has already been successful with Olive & Ivy (the destination for the trendy over-35 set) at the Scottsdale Waterfront, and the fast-casual pizza chain Sauce (six locations Valley-wide).

The corner of Scottsdale and Camelback roads is close to luxury resorts, expensive homes and similarly style-conscious restaurants. And that’s a mix that’s already proven successful for restaurant-and-retail pairings at less traditional Valley malls. Phoenix’s Biltmore Fashion Park has always been as much about dining as shopping, anchored by foodie favorites like Christopher’s Fermier Brasserie, now updated as Christopher’s & Crush Lounge. Kierland Commons is home to upscale eateries including Mastro’s Ocean Club, NoRTH and the Greene House. The latter two are also Fox’s.

But those are both outdoor shopping spots, not traditional malls, and neither has a restaurant with two “Conspicuous Consumption” wines at $140 per bottle.

So, at the 9,420-square-foot Modern Steak, Fox has tweaked some steakhouse conventions to speak to the mall crowd. During the day, it’s ladies-who-lunch friendly, with an $11 Cobb salad, a $10 Margherita pizza and a $15 maple-bacon-glazed salmon, placing it just a few dollars above the food court’s Pita Jungle.

Dinner is pricier but familiar, with an $18 warm Maine lobster salad, a $95 seafood tower, and that $78 HeartBrand Akaushi 8-ounce filet.

It’s the decor that makes this place as fancy as the sequined camisoles at the nearby J. Crew – and as appealing.

“It has to be used by all kinds of people . . . so it has to be gorgeous, welcoming, lush, vibrant and gracious,” Fox said.

Fox worked on the designs with Phoenix architect and interior designer Catherine Hayes, creating a space for everyone.

Older customers will like that many of the chairs have arms. Men will appreciate the extra-big stools at the bar. Moms will enjoy the stroller-friendly wide aisles and the airy brightness of a room finished in shimmering drapery, blue lacquer walls and a custom, white latticework ceiling. And fashionistas will swoon over the breathtakingly pink women’s restroom.

Eric Schaefer, writer of the Valley food blog Eric Eats Out, said he’s impressed with Modern Steak’s distinctive vibe.

“The common perception is that we don’t need another steakhouse,” said Schaefer, 36. “But (Fox is) making it a little more friendly, a little less stuffy, a little hipper and better for a wider range of price points.

“Bottom line, I would pay $70 to eat a steak anywhere if the food was good.”

September 18, 2009

Sam Nazarian’s Mi-6

The club maestro is back on the L.A. scene with Mi-6 in West

Hollywood, a sleek space with visions of James Bond.

By Scott T. Sterling

Just call it the Sam Nazarian experience.

After three years cultivating hotels and restaurants as the head of famed hospitality firm SBE, Nazarian has returned to the Los Angeles club scene this week with his new West Hollywood club Mi-6 — named after the British Secret Intelligence Service (a.k.a. MI6) and meant to conjure the sleek luxury of the James Bond movies.

“It’s good to be back,” Nazarian laughs inside of a black custom Mercedes-Benz Sprinter minibus, which SBE uses to shuttle VIPs from the SLS Hotel of Beverly Hills to any of his growing stable of area properties, which includes clubs Area and Hyde, as well as the restaurants Katsuya and XVI, both of which are partnerships with designer Philippe Starck.

The scene that trailed Nazarian from the club to the minibus was worthy of HBO’s “Entourage”: A phalanx of publicists, handlers, a videographer and even a waitress with a tray of sushi paraded through the crowd straining to get inside. Many called out Nazarian’s name, and he stopped to greet some guests before hopping inside for the interview.

“It was very important for me to focus on the SLS and Katsuya, because I wanted them to be world-class establishments,” he says. “So I stepped away from night life for three years. Now I’m ready to take the L.A. club scene to yet another level of sophistication.”

It’s hard to see anyone other than Nazarian pulling off something as ambitious as Mi-6. It’s in the old Foxtail space, wedged in between two institutions: music venue the Troubadour and restaurant/lounge Dan Tana’s. The klieg light-saturated red carpet crush of willowy models, discreet celebrities and swarming paparazzi is exceedingly conspicuous on this generally low-key corner of Santa Monica Boulevard.

“We’ve developed a really good relationship with the city of West Hollywood, which is the only way we were able to pull this off,” says Bill Tremper, SBE’s vice president of sales and marketing. “They already know us through our partnership with the Abbey Food & Bar right down the street.”

“I realize it’s especially competitive in L.A. night life right now, with fantastic new clubs like Playhouse, H.wood and MyHouse,” Nazarian says. “But I believe I have something special to offer the scene. I’m working with the company MomentFactory, who produce unique multimedia environments. They did the visuals for the Nine Inch Nails tour last year, which was outstanding. What they did inside Mi-6 is really impressive.”

The fruits of MomentFactory’s labor aren’t easy to see: massive (and hidden) mirrors that double as video screens and switch between the two at intervals. The dark, three-story club was so packed that just moving around was akin to a high-fashion rugby match with the entire roster of actors on the CW network. DJs pumped a mix of Top 40 hits while tattooed waitresses brought huge bottles of alcohol festooned with sparklers to tables on the first floor. The lighting system has the ability to emit a wide array of color schemes at the push of a button.

“Competition is always a good thing. It forces innovation, better pricing and more amenities,” says James Sinclair, former club owner and now the president of night life specialists OnSite Consulting, commenting on Nazarian’s new club. “In the end, it benefits the consumer.”

Where Nazarian has a real advantage, says Sinclair, is his solid portfolio.

“Unlike someone whose entire life is invested in one location,” Sinclair explains, “Nazarian has enough profitable ventures that he can close a place for a few months while he decides what to do with it. His is a hugely mitigated risk.”

Back in the minibus, Nazarian rattled off a slew of upcoming projects, including renovating La Cienega club Halo, SBE’s recent acquisition of stalwart Malibu restaurant Gladstone’s and the impending launch of a club Hyde space inside Staples Center.

“It’s all about creating world-class establishments,” Nazarian reiterates before wading through the crowd outside of Mi-6. “I brought a level of sophistication to the Sunset Strip with XIV, which people said couldn’t be done. The SLS Hotel won best achievement in design from Virtuoso magazine, putting us next to establishments in China, Dubai and Italy. Being responsible for helping make Los Angeles part of that conversation is extremely gratifying.”

Mi-6

Where: 9077 Santa Monica Blvd., West Hollywood

When: 9 p.m. to 2 a.m. Tuesdays and Saturdays

Price: Varies according to night; call ahead

Contact: (323) 655-8000, www.sbe.com

Bringing in an experienced restaurant consultant can save money, find money and create money.

Restaurant consultants have long argued that the food and beverage industry is overdue a major adjustment. Relentless growth over the last five years has led to over saturation in the food and beverage sector. In a buoyant market, anyone and everyone can take advantage of sustained high per capita spend on dining out and cover over the cracks of a flawed business model.

In a tougher climate, however, the laws of the jungle apply: only the strongest will survive. Food and beverage businesses are suffering and restaurant consulting services can help to find and ‘fix’ those fundamental flaws these business had previously been able to ignore because customers were spending money. Whether it is poorly thought out concepts, unsustainable leases or a lack of financial control, the recent economic downturn has provided the much needed catalyst that the sector needed to clean up its act and it is restaurant consultants who can provide the experience a management team needs to guide them through these murky waters.

OnSite Consulting expects the economic downturn to enable operators with strong concepts, consumer orientated focus and back of house diligence to survive and prosper and force those who do not, to take a serious look at their business – or suffer the consequences. The economic reality is inescapable and whilst economic doom and gloom has been the flavor of the month for some time, the outlook can be positive with assistance from OnSite.

Arguably, a recessionary environment can provide a platform for innovation and economic growth through entrepreneurialism and creative thinking. This climate provides an opportunity for lateral thinkers and those with entrepreneurial flair to excel. For those operators, a restaurant consultant provides an independent view on how the business can improve – because there are always improvements to be made.

Conversely, those businesses with flawed models who are struggling for any number of reasons can benefit from a detailed review of every element of their business and troubleshooting – indeed their survival may depend on it. How can a struggling venue justify paying a restaurant consultant when cash is tight? We advise our clients, whatever position they find themselves in, to stand back and look at their restaurant from a fresh perspective. We emphasize the need to go back to basics and evaluate each and every revenue stream or cost center from the bottom up. Through this exercise of intense scrutiny, we know that almost all of our clients have the ability to improve or achieve profitability from existing revenues, without reckless and short term promotions that their cash flow cannot sustain, and safeguard the future of their business.

All too often, we see companies implementing strategies with a ’shoot from the hip‘ mentality, without thinking of the repercussions of those strategies. Quick fixes to get customers through the door with too good to be true offers do not solve long term cash flow problems. Whilst labor is always the biggest overhead, getting rid of good staff to the detriment of customer service is also a short term solution which tends to lead to medium term problems.

With experience in dealing with struggling and often insolvent businesses, we are able to provide an emergency review of a business. During a first phase, we can identify immediate cost savings and reduce pressure on a cash flow. Whilst this is critical, equally critical is phase two of our review which entails creating the foundations for that business to run efficiently when we leave.

When we meet potential clients, we discuss ways to save money: vendor negotiations, procurement and inventory systems, dynamic labor recommendations. All too often, these customers simply go back to their business, slash costs and expect the business to right itself. The trouble for such companies is that slashing costs is not the answer. It is one of many benefits our services provide to immediately relieve the pressure however it is the ability to maintain this change and tighten up procedures that is a consultant’s value.

When we cross the road, we are taught to ‘stop, look and listen’ before we do so. Fixing a business should carry the very same message.  OnSite avoids short-termist strategies and focuses on the fundamentals of the business; a bespoke review of profitability, efficiency and sustainability.

This market is providing restaurant operators with an opportunity to revisit their business and conduct an audit from the ground up, identifying wasteful cost centers and untapped revenue opportunities. A good consultant is someone who walks in the door with information, teaches it to the client and leaves that wisdom behind. An experienced consultant can also save money, find money and create money and it is these benefits that OnSite’s clients capture by bringing us on site.

James Sinclair is the founder of OnSite Consulting, a nationwide restaurant consulting firm with a specific focus on insolvent or distressed locations, insolvency or concept repositioning.  OnSite’s work is across multiple fields including hotels, casinos, franchises, quick serve’s, casual dining and single unit operators. OnSite clients range from from celebrity chefs to up and comers all seeking to redefine their business model for profitability. Quarter 4 will mark the release of his debut book “How To Save A Restaurant In 10 Days”. For more information please visit www.onsiteconsult.com