Las Vegas Review-Journal (Sunday)
▶ RESTAURANTS
While experts say the themed restaurant industry’s bubble popped years ago, some continue to have a fan base on the Strip.
Themed restaurants’ heyday
The $15 million Dive! restaurant in Las Vegas held its grand opening on June 12, 1995, bringing in A-list celebrities such as Kurt Russell and Janet Jackson.
The restaurant worked to draw in crowds with special effects like a regular “dive sequence,” in which diners were surrounded by flashing warning lights, horns and video monitors that showed scenes of the LV Dive surfacing to encounter different scenarios, like a baby in a bathtub.
In the mid-’90s, a major investment in an extravagant-themed restaurant like Dive! made sense. Planet Hollywood International Inc. — best known for its restaurants with Hollywood memorabilia — had the backing of celebrities like Arnold Schwarzenegger and Whoopi Goldberg and reported a revenue of $373.4 million in 1996. That same year, Rainforest Cafe Inc. reported revenue of $48.7 million, just two years after it opened its first location inside the Mall of America.
“Those were the days, back when theme restaurants were really a hot commodity,” said Lyle Berman, former chairman and chief executive of Rainforest Cafe. “I think when we (first started) it, we were just thinking of one store … but it was so successful that we decided to make a big company out of it.”
Berman said the Rainforest Cafe that was in the MGM Grand between 1997 and 2015 had an annual revenue of about $30 million.
The industry’s rapid success allowed two themed restaurant brands — the Hard Rock Cafe and Planet Hollywood — to purchase Las Vegas assets. Hard Rock Cafe founder Peter Morton owned and operated the Hard Rock Hotel from 1995 to 2006, and Planet Hollywood was part of a joint venture that bought the former Aladdin property in 2003 and officially changed the name to Planet Hollywood four years later.
Tilman Fertitta, CEO of Landry’s Inc. — which now owns the Rainforest Cafe franchise — said tourism-driven cities like Las Vegas are some of the best locations to operate themed restaurants.
“People eat differently when they’re on vacation,” he said.
But even those cities are seeing a decline in themed restaurant brands. Earlier this month, the Hard Rock Hotel began to demolish the Hard Rock Cafe on the corner of Paradise Road and Harmon Avenue. The property itself will become Virgin Hotels Las Vegas next year. There is still a Hard Rock Cafe location on the Strip.
After opening the Las Vegas location, Spielberg and his partners said that they expected to open at least 10 more Dive! Restaurants within the next two years, but plans changed as customers started to lose interest in themed restaurants.
The industry’s downfall
Experts say the themed restaurant industry’s peak was in the mid-’90s, right as Dive! opened its doors.
But by the early 2000s, much of its business started to migrate elsewhere. By the mid-2000s, revenues started to decline, and many restaurants — including the submarine sub shop — shut its doors for good.
Even the most successful themed restaurants struggled in that time. Rainforest Cafe was sold off to Landry’s Seafood Restaurant for nearly $75 million in 2000. That same year, Planet Hollywood closed six of its restaurants, according to filings with the Securities and Exchange Commission. There are only seven left today, according to its website.
Aaron Allen, CEO of the restaurant consultancy Aaron Allen & Associates, said there has been zero growth in U.S. casual dining based on same store sales over the last 10 years.
“It’s actually staggering,” he said. Allen pointed to shifting consumer interests as one of the reasons these restaurants have struggled. He said many diners today are more interested in experiential spaces and new adventures when dining as opposed to chain restaurants.
“Nationally, the profile of these restaurants are really under pressure, and (they’re) closing,” Allen said.
Fertitta said a lot of the themed restaurants’ failures come from focusing too much on the theme, and not enough on the food or service.
You have to “know who your customer is, and then have the food,” he said.
Fertitta said that’s why some of Landry’s themed restaurants — which include Rainforest Cafe and Bubba Gump Shrimp Co. — have been able to last throughout the years. Allen said the initial success of themed restaurants also helps their longevity.
“It’s whoever got enough size and scale (during the boom) that there’s so much invested interest,” Allen said. “Sometimes you can just bite your way through problems.”
And it doesn’t look like there’s another boom coming for themed restaurants anytime soon. Berman said he’s been approached by people with themed restaurant ideas over the years but has so far declined them all.
“(I) didn’t think they’d be as good as the one we had,” he said. “I think the heyday has passed.”