So You Wanna Buy a Strip Club?
Updaze
North Carolina
Thursday, October 9, 2014 12:00 AM
So, you wanna buy a strip club?
Adult club broker and commercial Realtor Winston Hines talks about the perils of first-time buyers and ill-prepared sellers, and explains the key components for a successful adult nightclub sale.
I’ve been a commercial Realtor since ‘92, and sold my first adult club in ‘97. My first buyer, a gentleman by the name of David “Slim” Baucom (of MAL Entertainment), referred some other people to me, and as they say, that’s all she wrote.
Since then the deals have gotten squirrelier, the buyers crazier, and the sellers .... well, let’s leave them alone for the moment. Along the way, I became a Candidate in Commercial Real Estate, and a Certified Business Intermediary (CBI) through the IBBA (International Business Brokers Association). I’ve worked on deals all over North America, represented both sellers and buyers, and averaged about 4-7 deals a year over the years.
“Buyers are liars, and sellers are worse.”
— attributed to an anonymous broker
Buyers tend to come in three distinct groups: The first-time buyer, the club owner looking to move up from his or her first one to ramp up two or three clubs ... and then there are the Great White Sharks who gobble up clubs like popcorn.
First-time buyers require a lot of attention, handholding, and scrutiny. The first question I ask: “Do you have any money?” If I get back, “Yeah, well I got some people (feel free to substitute family members, buddies, or his dog Leo here) who are gonna back me,” I tend to already start backing off. This is a serious business, not for the faint of heart or the thin of wallet.
When a first timer tells me has no management/ownership experience (at least in the restaurant or nightclub industry), I really push them to attend the ED EXPO’s legal and management seminars in Vegas for our industry. As has been proven in the past, that first timer can be a serious danger to his club, to the other owners in the area, or even a danger to the entire industry. Quite honestly, if a first-time buyer has no experience and won’t invest the time to understand what he’s getting into, I personally pass on him as a client. If he lets me know he’s looking to act like a rabbit in heat in a club — and you’d be amazed at the number whose prime motivation is tagging a dancer by owning a club — he’s going to be a problem and very possibly he’ll find himself defending a sexual harassment suit.
Ugh ... the ill-prepared seller
Once upon a time, a seller woke up after a great night of business at his club, and said, “I have made so much money, so easily, with absolutely no problems — legal, regulatory, governmental, or otherwise — that I have decided to share the wealth! I am going to sell my club for a fair market price, based on real numbers, and on top of that I will finance it 100 percent! I will provide my buyer all my real sales numbers and never ever will I lie to him about the condition of my club. My numbers have consistently risen every year even during this recession, and on top of that, none of my dancers ever get PMS. I’ll just call Winston right now.” Of course the Easter Bunny and Santa Claus are on a first name basis with me, too.
In reality, no club owner/seller sells unless he or she is pushed or motivated to sell. There are legitimate reasons: family, death, health reasons, etc. But more times than not, that motivation is rooted in problems with management, governmental or regulatory intrusion, landlords and/or a whole plethora of evils that can befall an adult club owner.
The glory days of not just getting a deal (let alone a steal) on a club are over. Sellers typically overprice the club at high multiples of their real earnings (Sellers Discretionary Earnings, or SDE), and then wonder why someone doesn’t materialize or beam down to snatch the club out of their hands with a 100 percent cash deal. It just doesn’t happen like that.
A truly knowledgeable and motivated seller will have an income and expense sheet from his accountant or bookkeeper that really does show the cash flow of the club. When a seller tells me the buyer can “come in and watch the operation for a couple of weeks” because he has no “real” records, I usually decline to represent that seller. It’s not worth my time or license, or a legitimate buyer’s time, to screw around with a seller who isn’t on the level. Sellers have been sued (and have lost in court) for concealing material defects or problems with a business. “Caveat emptor” — let the buyer beware — doesn’t hold water if the seller conceals a material fact.
Sellers usually go through a learning curve; a learning curve of high expectations sometime created out of their own beliefs and hopes, sometimes out of unrealistic valuations provided by unknowledgeable brokers, sometimes just an attempt to salvage some of the money they’ve invested in the club. I turn down more listings than I take on. Ultimately, the value of a club is the price that a buyer is willing to pay for it. There are all sorts of formulas and definitions and equations. In the end, that sale price will be a negotiated number, based on realistic numbers, between a motivated seller and a motivated buyer.
Both parties, using a broker as an intermediary, get a deal — however it is structured, whatever the terms — that serves the needs and requirements of both the seller and the buyer. An experienced broker, with real numbers, and knowing the whole story about the club, can come up with a Most Probable Sales Price, or MPSP, for the seller. The buyer gets a fact based, realistic legitimate opportunity to purchase, subject to his or her financial, management and personal abilities.
Just by the nature of the industry, each club is a unique entity-in location, clientele, management, and atmosphere. In the same way, every deal is unique, every deal is one of a kind. A real deal is one where every party to it comes out feeling like a winner.
Winston Hines has been a licensed commercial real estate broker in charge since 1992, and has specialized in adult nightclub and adult retail store sales for the past 17 years. Hines has represented both buyers and sellers in adult operations transactions, from Texas to New York to Colorado. He can be reached at (864) 580-3826.
(Previously published in Exotic Dancer Magazine, reprinted with permission)
Adult club broker and commercial Realtor Winston Hines talks about the perils of first-time buyers and ill-prepared sellers, and explains the key components for a successful adult nightclub sale.
I’ve been a commercial Realtor since ‘92, and sold my first adult club in ‘97. My first buyer, a gentleman by the name of David “Slim” Baucom (of MAL Entertainment), referred some other people to me, and as they say, that’s all she wrote.
Since then the deals have gotten squirrelier, the buyers crazier, and the sellers .... well, let’s leave them alone for the moment. Along the way, I became a Candidate in Commercial Real Estate, and a Certified Business Intermediary (CBI) through the IBBA (International Business Brokers Association). I’ve worked on deals all over North America, represented both sellers and buyers, and averaged about 4-7 deals a year over the years.
“Buyers are liars, and sellers are worse.”
— attributed to an anonymous broker
Buyers tend to come in three distinct groups: The first-time buyer, the club owner looking to move up from his or her first one to ramp up two or three clubs ... and then there are the Great White Sharks who gobble up clubs like popcorn.
First-time buyers require a lot of attention, handholding, and scrutiny. The first question I ask: “Do you have any money?” If I get back, “Yeah, well I got some people (feel free to substitute family members, buddies, or his dog Leo here) who are gonna back me,” I tend to already start backing off. This is a serious business, not for the faint of heart or the thin of wallet.
When a first timer tells me has no management/ownership experience (at least in the restaurant or nightclub industry), I really push them to attend the ED EXPO’s legal and management seminars in Vegas for our industry. As has been proven in the past, that first timer can be a serious danger to his club, to the other owners in the area, or even a danger to the entire industry. Quite honestly, if a first-time buyer has no experience and won’t invest the time to understand what he’s getting into, I personally pass on him as a client. If he lets me know he’s looking to act like a rabbit in heat in a club — and you’d be amazed at the number whose prime motivation is tagging a dancer by owning a club — he’s going to be a problem and very possibly he’ll find himself defending a sexual harassment suit.
Ugh ... the ill-prepared seller
Once upon a time, a seller woke up after a great night of business at his club, and said, “I have made so much money, so easily, with absolutely no problems — legal, regulatory, governmental, or otherwise — that I have decided to share the wealth! I am going to sell my club for a fair market price, based on real numbers, and on top of that I will finance it 100 percent! I will provide my buyer all my real sales numbers and never ever will I lie to him about the condition of my club. My numbers have consistently risen every year even during this recession, and on top of that, none of my dancers ever get PMS. I’ll just call Winston right now.” Of course the Easter Bunny and Santa Claus are on a first name basis with me, too.
In reality, no club owner/seller sells unless he or she is pushed or motivated to sell. There are legitimate reasons: family, death, health reasons, etc. But more times than not, that motivation is rooted in problems with management, governmental or regulatory intrusion, landlords and/or a whole plethora of evils that can befall an adult club owner.
The glory days of not just getting a deal (let alone a steal) on a club are over. Sellers typically overprice the club at high multiples of their real earnings (Sellers Discretionary Earnings, or SDE), and then wonder why someone doesn’t materialize or beam down to snatch the club out of their hands with a 100 percent cash deal. It just doesn’t happen like that.
A truly knowledgeable and motivated seller will have an income and expense sheet from his accountant or bookkeeper that really does show the cash flow of the club. When a seller tells me the buyer can “come in and watch the operation for a couple of weeks” because he has no “real” records, I usually decline to represent that seller. It’s not worth my time or license, or a legitimate buyer’s time, to screw around with a seller who isn’t on the level. Sellers have been sued (and have lost in court) for concealing material defects or problems with a business. “Caveat emptor” — let the buyer beware — doesn’t hold water if the seller conceals a material fact.
Sellers usually go through a learning curve; a learning curve of high expectations sometime created out of their own beliefs and hopes, sometimes out of unrealistic valuations provided by unknowledgeable brokers, sometimes just an attempt to salvage some of the money they’ve invested in the club. I turn down more listings than I take on. Ultimately, the value of a club is the price that a buyer is willing to pay for it. There are all sorts of formulas and definitions and equations. In the end, that sale price will be a negotiated number, based on realistic numbers, between a motivated seller and a motivated buyer.
Both parties, using a broker as an intermediary, get a deal — however it is structured, whatever the terms — that serves the needs and requirements of both the seller and the buyer. An experienced broker, with real numbers, and knowing the whole story about the club, can come up with a Most Probable Sales Price, or MPSP, for the seller. The buyer gets a fact based, realistic legitimate opportunity to purchase, subject to his or her financial, management and personal abilities.
Just by the nature of the industry, each club is a unique entity-in location, clientele, management, and atmosphere. In the same way, every deal is unique, every deal is one of a kind. A real deal is one where every party to it comes out feeling like a winner.
Winston Hines has been a licensed commercial real estate broker in charge since 1992, and has specialized in adult nightclub and adult retail store sales for the past 17 years. Hines has represented both buyers and sellers in adult operations transactions, from Texas to New York to Colorado. He can be reached at (864) 580-3826.
(Previously published in Exotic Dancer Magazine, reprinted with permission)
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9 comments
Perhaps those that are entrepreneur minded may find it interesting; but for the most part we are about tits; ass; mileage; and extras; on this site - but thanks for the contribution.
My "3D" occupational hazard for Owners or Managers: Drugs, Drinking, and/or Dancers: either one or all or any combination thereof.
...I flashback to that total scene everytime I'm contacted by a first-timer....but next time I'll tell you about the guy I put in his first Club, and how strongly he is doing now!!!!
But club owners will also face the enormous challenge of retaining/recruiting strippers as young women exit the Industry for lucrative careers in nursing, real estate and cocktail waitressing.
I once considered becoming a strip club owner, but then I came to my senses. Being a customer is fun. Being an owner is a headache and requires you to have the character of a pimp.