State of the Union 2012 with John Gray
While opening 24 clubs in 12 years was certainly an accomplishment worthy of recognition, what truly separated Spearmint Rhino from other club chains was that half of those clubs were located overseas in England, Russia, and Australia, establishing John Gray and Spearmint Rhino as a true worldwide presence. Over the years, Spearmint Rhino clubs have taken home a number of ED’s Awards, including the Overall Gentlemen’s Club of the Year award for their Las Vegas location, which has a reputation as being one of the most popular adult nightclubs in the world.
John Gray has kept a low profile in the industry in recent years, but at EXPO 2012 he presented his unique views on where the industry has been over the past 20 years and where he sees it heading in the next 20.
Let me start off by saying that this is a great industry, it truly is. The future is bright, the problems are manageable. It’s a simple gauntlet that, I think you will find from my talk today, actually serves a purpose for us.
We make a lot of money in this industry. Most every location that we can think of as an adult business makes more money than its contiguous neighbor that is a dry cleaner or a convenience store. Indeed, I don’t know of much of anything that makes as much per square foot as an adult club, other than maybe gambling. The bar of the moral majority that keeps many of the society out of this business and the toughness of zoning actually works in our favor as well, because the competition is not there. The competition to many of us aren’t necessarily as astute of an operator as they would be if they were a non-adult business industry. When we hear about all the negativity, which I’ll touch upon, it is all manageable.
Twenty years ago, what John Weston and I would do in an ordinance couldn’t be done today. Today if I challenged an ordinance in a zoning context and found that it was unconstitutional, the retaliatory response that wasn’t apparent 20 years ago will be that after we are victorious in fighting the zoning, the city would enact a conduct regulation; that is, six foot or ten foot distance requirements, clear line of sight, close at midnight, etc. So Spearmint Rhino has grown largely in the last 10-15 years by the acquisition of smaller clubs that were failing, but had the all important entitlements.
At the outset I told you that I have been gone for awhile. Well, I am 55 years old, and was a dad at 40. Today, before I came here, in Southern California I took my daughter to her first day of high school. And I have twins who are six years old. So I am a full-time dad and I’ve dropped back and I have done that.
But I did something else that was very interesting for the industry, I think, and for Spearmint Rhino. I went back to law school. So a year ago I graduated with a doctorate degree; so watch out First Amendment attorneys, there may be competition in the future. I got tired of the good ol’ boys club, to where we would be in the court audience and they would adjourn to chambers. It was too often the case that we weren’t designers or architects of our own fate at the legal filing, so we would get frustrated.
Today Spearmint Rhino is a leader. I think we are probably one of the largest grossing clubs in the world. We certainly have probably one of the largest rosters of dancers. We probably sell more drinks and do more dances worldwide than most of the clubs around the country.
So what has changed in the last 20 years, given this is the State of the Union address? Be positive about our business. Twenty years ago when I sat in your seats, there were probably, by best guess estimates, 2,000 clubs in the United States. Today there are by best guess estimates close to 4,000 clubs, so we have grown.
But something has always bothered me about our industry, and that is the anomaly of the leaders. The Harry Mohneys, the PT’s, the Rick’s Cabarets. The leaders in the industry, in regards to number of clubs or gross sales, have such a proportional small market share. Nobody has more than a percent and a half or two percent of the total clubs in the United States. Whether it’s this microphone, this podium, the carpet, the chair you sit on, most every provider of a service or a product has a double digit lead. There is lots of room for us to expand as club owners in this room.
Guys don’t want sex. Some of you may say I’m crazy for saying that. But (the customers) want the illusion and the fantasy. They want the woman to care about them. And that is the subliminal power that clubs have.
There are many, many club owners that are not participatory in ACE, that are not participatory in the ED Expos, and that’s a fallacy. There is strength in numbers. I realize that it is paradoxical. I have personally been a critic of keeping information near and dear. I was frustrated many years ago when I joined ACE from the prospect that I had construction experience, I had architecture experience, so if I looked at associations involved in those industries—the AGC, Associated General Contractors, certainly that AIA, American Institute of Architects—and I gave them my annual dues. I would get a notebook three inches thick with sample contracts, sub-contracts, sub-sub-contracts, prime contracts, everything that I needed to man my business.
Here, we don’t want to give you our dancer wage contracts because you might make bad law. The problem with that is, I think, it’s a Catch-22. Which comes first, the association members providing of the information or the benefit of being a member? There is no doubt that we do benefit by being a member of ACE. Things just like the ASCAP benefit alone offering reduced fees more than pay the dues each year, so it is worth being a member. But those that represent our industry at this convention are far, far too few for the 4,000 clubs that are present in the United States.
What else has changed in the United States? Well, certainly the clubs are starting to come up with better designs. When you walk down this hall there are so many nice build-outs, professional architecture, serious money spent. Most clubs try to emulate that, whether it’s a national sports bar, whether it’s a Dave & Buster concept. What they do is they still build a strip club, for lack of a better word, and then they will put the dancers in and they will try to emulate one of the non-adult club tenant improvements.
Where we are finally headed, I believe, is to be smart enough to hire the space planner and the architects to take a true venue, like any of these that you [see in Las Vegas], and place a stage in it and make that your club. I think it comes round robin. I think the public, the dancers and the lawmakers will appreciate it better if we increase the perception that we are not seedy clubs where our feet stick to the carpet and there are all sorts of wrongs going on in the back corner.
We have moved from stage dances to chair dances to table dances to lap dances to champagne rooms today. We’ve gone from taking percentages from the dancers to flat fees for use of parts of the club. Being a dancer has far less stigma today than it did years ago. I’ve had some people tell me, “Oh, well there are not as many dancers.” I say “You’re wrong.” In my experience, we have never seen so many dancers. It is socially more acceptable to be a dancer than it ever was before. And dancers are plentiful in virtually any jurisdiction. So that is a positive from years ago.
What has the Internet done for the club? People talk about it and it’s a lot of garbage in, garbage out. If you weed through it, there are huge, huge benefits, however.
We, at Spearmint Rhino, have data capture from customers that we never had before. We have mailing lists that we never did before. We have information about the customer and their spends that we never had before. Our intellectual property is better managed by I.T. services now. The 2257 monitoring is better. The dissemination of information between our clubs, I don’t care if we are in Moscow, Russia or Australia, or down the street, it’s easier on the POS system that is Internet driven. Our accounting systems are much better run, and our paperless office is much more cost efficient. Our data retrieval, if I ask for an invoice from five years ago, it’s to my email in a matter of 30 seconds. That’s all super improvements, if it’s used right.
One of the things that I’ve always an advocate of, is the customer doesn’t care about the club. He doesn’t care about club advertising. He cares about the dancer. As my speech has gone for many years in front of public officials, “This isn’t a sex business, it’s a fantasy business.” I myself am in this business. I am in a great relationship. I have children. But if I walk into a club and the dancer is smart enough to walk up to me and say, “Gee, John, you’re younger than I thought your were,” or “Gee, John, we hardly get guys as good-looking as you in here in the club,” or if she stands just a little bit in my space or she’s watching my lips instead of my eyes when she talks to me. That’s what a guy pays for.
It’s interesting because as I started to open clubs around the world, in Australia for example, in Melbourne, there is a proper brothel immediately contiguous to us, built with Russian money, that looks like the greatest health club that we’ve seen in the United States. They don’t touch our gross. Guys don’t want sex. Some of you may say I’m crazy for saying that. But (the customers) want the illusion and the fantasy. They want the woman to care about them. That is the subliminal power that clubs have.
To that end, to advertise Spearmint Rhino doesn’t do as much as Jennifer calling a customer or talking to a customer and saying, “Come back in.” Twenty years ago we did not allow a dancer to give out a telephone number because we were concerned about pimping and pandering. We were concerned about the girl conducting an act of prostitution.
As a customer today, if I went into a club and some girl was talking to me, but I could hardly hear because of the music in the club, I’m thinking that she is only interested until the money runs out. But if she calls me, and I give her my permission to call because I have more privacy on my personal phone and email than I used to, and she says, “Gee, John, it was nice of you coming into the club today. I’m going to be here Wednesday and Thursday night,” I am taken back by that. I am more apt to come back into the club on Wednesday or Thursday night.
So, what else has happened in the past 20 years? Well, the legal fight. Many of us want to hear the EXPO legal panel talk about the minor of the two issues, probably the pole tax or the sin tax. The pole tax, I believe, will continue to be implemented against the clubs successfully.
Think about it. If the oil refineries couldn’t stop a gas tax, the tobacco companies couldn’t stop a cigarette tax, can we stop a pole tax? Probably not. As long as it is worded right, it will exist. We have to pass it on to our customers. What is the problem with it is what the law would call content neutral or content based, or if the government said adult clubs have to pay a tax. They said all entertainment venues have to pay a tax. They’ve won. The city I grew up in had a 10 percent tax on the adult theatre 25 years ago. It stood up. I think that something we just condone, don’t fight over, pass on to the customer.
The bottom line is, it’s a great industry. It’s made me rich. I’m proud to be in it. I have no social stigma to be in it. I have two minor daughters. The private schools they go to know what I do for a living.
The future is bright. The competition is minimal. The opportunities are huge. There are still very many good locations to be had. Don’t be a doomsday thinker. Be positive. Be participatory. And remember, there is power—there always has been in every other industry—in numbers. We should better band together in functions like this and all come together to fight anything that might be an issue.
Tags: expo 2012