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COVER STORY

Trying to Realign the Planet

Movie-themed restaurants promoted by actual stars. How could that lose? Robert Earl kcstands by the recipe as he tinkers with the ingredients.

November 26, 2000|PAUL LIEBERMAN | Paul Lieberman is a Times staff writer

Robert Earl believed in celebrity. And parties.

He believed that if you put them together--with red caxrpets and spotlights--people would come. More importantly, they'd buy. Not only food, but T-shirts and sweatshirts and $14 baseball caps.

Earl called it "the formula," and he kept believing in it even as good fortune turned to crisis at Planet Hollywood, the restaurant chain he founded with movie producer Keith Barish, but which the public invariably associated with a trio of movie stars who didn't need last names, Arnold, Sly and Bruce.

That trio and a who's who of guests waved to mobs of onlookers on Oct. 22, 1991, when the first Planet Hollywood opened on New York's 57th Street, just down from Carnegie Hall, the restaurant's walls and ceilings decorated with movie memorabilia such as Stallone's boxing gloves from "Rocky," Schwarzenegger's motorcycle from "The Terminator" and Judy Garland's dress from "The Wizard of Oz."

By 1995, when the chain put an outlet in Hollywood's backyard--Beverly Hills--there were 22 around the world. Three blocks of Rodeo Drive were closed off for that grand opening, and Elton John was flown in to perform, right on the street. Some 150 valets were needed to handle the Rollses, Mercedeses and limos that brought everyone from Shaq to Fabio, Jean-Claude to Cindy, Oprah to Brooke. Whoopi and Demi were there too, of course, for they had been among the first of 20-odd celebrities eventually given a piece of the action for use of their names and promotional work. "Nobody knew it would be this big!" exclaimed Bruce Willis, speaking not so much about the party as the proliferation of Planet Hollywoods.

A year later, with the number still climbing--and lines of customers at the doors--the chain hit Wall Street with a frenzy to match the night on Rodeo Drive. In the busiest opening for a Nasdaq public offering to date, its stock soared to $32.13 before closing at $26. At its peak that day, Planet Hollywood had a paper value of $3.5 billion.

At that instant, the 17% of the stock distributed to celebrities had a paper value above $500 million. And Robert Earl, the CEO whose own name was largely unknown to the public, was able to say, "I'm worth a billion dollars."

He had reason to believe in his formula then, even if earnings began to slip. The very year of the initial public offering, there was a 2% decline in same-store sales, the measure of how business is faring at established locations. That dropped 11% the next year. When the slippage continued, the stock slid too.

A range of theories was offered by financial analysts and the media: Perhaps Planet Hollywood had opened too many units, some in non-tourist locales like Indianapolis. Perhaps it spread itself thin with costly side ventures such as All-Star Cafes packed with sports memorabilia from Joe Montana, Wayne Gretzky and others. Maybe customers became disillusioned when they didn't see the famous faces after the parties--only their cardboard figures on a diorama.

Or maybe the entire theme-restaurant craze had run its course, overstuffing the public until it lost its appetite. At one time, you could pass a Harley-Davidson Cafe, a Motown Cafe and a Fashion Cafe--backed by celebrity models--as you walked to the stretch of 57th Street that already offered the first Planet and a Hard Rock Cafe, the pioneer of the genre.

As the bottom line continued to slide, others suggested a simpler explanation: the food.

This became almost a mantra--that Planet Hollywood couldn't cook a decent hamburger.

Such talk enraged Earl, an Englishman. He saw it as mob thinking based on a fiction. He never pretended that people would flock to his places because of the burgers or the chicken strips coated with Cap'n Crunch--they'd come for the show, the alien spaceships hanging from the ceiling and the knickknacks from "Titanic." But he was sure the food was fine, cooked by the same chefs who, if they weren't working for him, would be over at TGI Friday's.

The problem, as he saw it, was image. Planet Hollywood had lost its "cool."

This showed up in the number whose dip worried him most--in sales of that logo gear. In good times, the T-shirts and jackets accounted for 25% of the take.

"The need to buy my clothing has disappeared," Earl said. "They just say, 'We don't need to buy it.' "

He knew the solution, though. Wasn't it obvious? He came up with it even before the company's plunge reached that dreaded B-word, bankruptcy.

Earl's answer was: new celebrities.

Arnold, Sly and Bruce needed help. He needed new stars. Younger stars. And not B-listers.

So even while his company was fighting for its life, he would go after the day's hot names. He would use them to signal to the world that his restaurants were again "sufficiently cool to associate with."

Getting these recruits was no simple matter, however, when their agents were whispering that your stock was heading toward zero, and your company was fast becoming a punch line for Jay Leno.

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