Depends
If one were to buy a club, the price paid would already normally factor in the high profit nature of certain clubs
The clubs that are making it huge - are in situations where a party has owned the club for a number of years, and local ordinance or other laws now restrict new start-ups, for example ones that can both have adult entertainment and also serve liquor. Combining booze with naked women in one of these qausi-monopoly type markets where there are few clubs in existence yet very high entry barriers to new start-ups - can be very very profitable. You can often tell how valuable a club is by how closely the managers watch (nearly) every move by every customer and dancer, as they know one major blunder can bring down the the entire cash-cow franchise
About ten years ago, I tried really hard to get a club's manager to hire me. The opening pitch-his 15 year old run down car was broken down and I got it running again. Filling in the story-it was a small place.
The larger places reek of money, but I imagine the owners have a diversified investment-so that if the club goes through a rough patch his other investments will keep his club afloat.
Considering how high cover is and how much they make per lapdance sold, it seems like they can have it made. It all depends on what the costs are, like having a building to operate in and how much they pay for the beer they sell and whatnot. But to me, that doesn't seem like it ought to be a lot, considering the dancers are contractors.
I've written this before but not lately, so here goes again. The place where my ATF used to work is a tiny no-alcohol lap dance factory. The managers own the building, as did his father before him. He charges a $14 admission fee, and sells sodas, NA beer and bottled water for $4-5. There's a 2-drink minimum and each dancer must sell 5 drinks per shift. That's it, that's his income, he doesn't take anything from the dancers. Nor does he have any employee expenses, dancers tip out the only 2 employees - the girl at the door and the bartender.
The place is open 2 am to 2 pm, 6 days a week. Girls work 2 shifts, 2 to 8, 8 to 2. The place is packed SRO on Friday and Saturday nights, busy on week nights, and fairly empty on week days. Girls must work a day shift to work Friday or Saturday night, so there are always girls there dancing, even when the place is fairly empty.
So let's work through the owner's economics. He probably averages 30 customers (they come and go) during a typical week day, maybe 60 on a week night, and 120 on the weekend nights (these are pretty conservative guesses, the actual figures are probably higher.) Which means that 540 people walk through the door each week, at a take of maybe $22 per person = about $12000 a week or $600,000 a year. Subtract $100,000 for heat, light, insurance, maintenance, and other expenses (they're probably a whole lot less than that and a corner of the building is leased to a Chinese take-out place which probably covers all his ejxpenses but we won't count that.) So he clears conservatively $500,000 a year. Not bad for a tiny hole-in-the-wall cinder-block building kinda place that's been there for many years. Wish I owned it.
FONDL - Very Well Done.... I'll try a back of the envelope calc for my favourite (but failing) club in NW Penna....
This club is small and has the misfortune to be located in an area of low population and low economic growth. The club is open 4 nights a week and sells no alcohol and very few soft drink cans.
The cover charge is $15.00 - The club seems to get about 4 customers (each night) on Wednesday and Thursday and 12 customers per night on Friday and Saturday. They have no house fees for dancers but take 1/2 of the private dances that they can sell (Only about 10/week @ $40.00 each). Dancers are required to put money in the CD jukebox for their music...
So what do we have... About $480 per week cover charge. Add $200/week for private dances. Add $200/week for the jukebox revenue. This gives (gross) revenue of about $900 per 20 hour week ---> or $45k per year.
Figure expenses (taxes, heat, electriciy, maintenance, cleaning)
of about $1000/month. (The club building is owner-owned and not worth much - there is no DJ or bouncer, and there is now very little cleaning or maintenance) So my guess is that this business nets about $30 -35k per year --- > a good 2nd income, but possibly not worth the grief...
Club expenses seem somewhat fixed while the potential revenue is variable - if this club could double the (modest) attendance - the club would be a financial success... (Advertise ??)
Ask yourself this with the alcohol based strip clubs. How many patrons would they get if the club had no naked women and only served liquor. In some cases, relative to other nearby (non-strip) bars - they would probably lose 95% of their traffic and yet their drink prices are usually far higher than a regular bar
Also watch the register, and how many times its used per minute, and you realize the gold mine some of these clubs are
One fairly large club I'm familiar always has 2 or 3 guys on the floor at all time that look more threatening than Tony Soprano and his crew (plus regular bouncers), watching every move (except for private booths and VIP areas - they want that business to flourish. I've seen the Brinks truck pull up to this club on early weekdays right before opening. The club is a gold mine in a city that its now nearly impossible to start up a similar club
Having some background in corporate finace and banking, I have done the same type of projection as FONDL did above. The first one I did was about 20 years ago when both income and expenses were less than today. I think I came up with $300k/yr net for a medium-sized alcohol topless joint. Appeared that the bar was well run, and tip-out was a flat amount per day with $5 semi-private laps. (Those were the days!!!) City eventually closed that club.
I did a similar mental projection for my current fav club a couple of years ago, and came up with around $400k for this fairly small nude juice club. $20 laps, club gets a sliding percentage of dances counted.
I think it might have been $500k but I lowered it to $400k to allow for higher legal fees and municipal fines during "raid season(s)".
Bottom line is that these clubs can be very lucrative. Have to have a tip-out policy that results in substantial positive cash flow to the club; all other employment costs (mgr, bar, DJ) are as low as the law will allow (or lower). Tips from dancers and customers usually help with this. And finally bring in a reasonable number of customers, and watch the overhead costs closely. If the weekly model is good, the owner(s) can have their own happy ending.
Book Guy: I think Tony and his cousins own a lot of the clubs.
JayADay: Most cities have zoning ordinances and regulations that limit the density of adult entertainment establishments. The clubs that are already in existence have a sort of monopolistic position in that way. Sure, not all clubs are going to net multi-100k's; many will be less...and many will net seven figures.
parodyman: one way or another clubs probably pay for "look the other way". Put "Brooklyn, Illinois" in your search engine and see what Wikipedia has to say...
JayADay -
I agree with you that a 1/2 mil per year on that (low) investment amount is a big enough return to attract competitors.
I have seen (by accident) some operating figures for an urban Arby's and a Perkins near an interstate and they are (also) suprisingly lucrative. But it proves your point - there have been tens of thousands of fast food and franchised food places built in the US in the past 30 years - just because they DO print money hand over fist.
My guess is that Strip Clubs have difficult day-to-day operations (and the stigma of being a strip club) and that keeps club ownership that much more profitable for the ones who take the risk...
Cash business, like SC's, traditionally report about 50% of their real gross income. Protection, bribes and polltical pay-offs can eat into profits. Like banks and airlines, SC's are trying to charge for everything. Legal restrictions create an artifical shortage. A well run club could easily net $500-600m a year.
Yes, *if* real competition is allowed. In my area try and open a small club----the government doesn't allow it. Plus you have to make some fairly hefty payoffs to stay in business. The latest news is that Angels, which was easily making more than a half million is close to being shut down. All the other clubs were shut so this wouldn't come as a surprise except that I would think the payoffs should keep them in business.
The Trap, a tiny tiny tiny club, was according to the owner was making over a half million and he rejected an offer of $1.5 million for the club. Try and open a competing----small----club and let's see how far you will get.
Hard to believe people think you have the freedom to just open a club, but perhaps the rules are different elsewhere.
I can see that some additional information is needed for my example. First of all, the place I described has a pretty unique situation. Their location is nearly perfect - they are on a main older commercial drag in a large and growing metro area and they're the only game in town, there aren't any other strip clubs within 20 miles in any direction. Second, they've been there forever, at least 25 years, and therefore are probably grandfathered in and it would prbably be impossible for anyone else to open a similar place nearby. So they get not only all the customers in the area, but the pick of the available dancers too. And they keep the dancers happy by letting them keep all their LD money (some of the girls make a ton in this place without having to work very hard - my ATF did.) And they have virtually no investment in the place, they spend very little on improvements and everything is probably fully depreciated. Which allows them to keep prices fairly low which is essential b3ecause they're in an ethnically diverse relatively low income area. (They also have almost no turnover - the barmaid who really runs the place has been there for over 25 years, and the girl at the door who is either her neice or daughter has been there at least 12 years. Many of the dancers have been there a very long time too. Which makes it easy to manage the place.)
I don't believe that this place is at all typical, I think it's probably an extreme case, but there are probably other places doing as well out there, especially places in ethnic neighborhoods, small towns, and rural areas where there's little competition.
As I've said before, I think there are probably two winning strategies for strip clubs: the no-frills low investment low overhead low price model, and the exact opposite, the high frills high investment model that makes lots of money from hiring lots of girls and charging top dollar. But the model you choose has to match your location, the second model won't work in a low income area and probably vice versa. My guess is that the places that follow neither of those models are the ones that often don't do very well. It's what used to be called "being caught in the middle" in Marketing 101.
It is very very lucrative, I was a pecentage owner in a small club for a short time, and even though the guy screwed me, I still made some decent money. It is a very lucrative business, in my experience very few clubs get closed down because of money problems.
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