In the lap of luxury

There are several things Philip Whitehouse, vice-president of operations for US-based table dancing club Spearmint Rhino, doesn't care for: agents, licensing committees, amateur strip club owners, and alcohol profit margins.

What he does care about is growing the UK arm of the Spearmint Rhino brand and his opinions on full nudity of the girls - a hot debate recently in the press. "We don't allow the girl's to be crude in showing their genitalia," and "If a customer's going to attack a girl, how will a G-string make any difference?"

When looking at the money to be made from lap/strip/table dancing clubs - or as they are known officially - "table-side dancing" clubs, it's easy to see why Whitehouse is so passionate. On average each Spearmint Rhino, which are owned by John Gray, turns over a reported £250,000 a week, while average margins on food and drink in other clubs can be as high as 90%. Whitehouse professes not to care about margins. "I don't care how much beer we sell; we make the money from the girls and the admission fees."

Given that it is, at least in financial terms, a lucrative business, it is not surprising Whitehouse believes the UK is ripe for expansion. And serious expansion there is going to be. Last month the company announced that over the next few years it wants to open an additional 100 clubs throughout the UK, adding to its existing portfolio of six.

"The market hasn't been tapped: 45% of this country is male, which represents 20m customers. The potential is huge if they are properly run." Whitehouse is of the opinion that some British owners run clubs "like they are licensed retailers trying to sell a bottle of beer."

The industry has it's problems, however, namely image, and this has held back it's growth. But even with Peter Stringfellow looking to expand, what does this mean for the industry?

Finding sites can be difficult, and there is the question of whether landlords and developers want them - especially given that Surrey Free Inns (SFI) announced last month that it is selling off its five For Your Eyes Only London-based clubs for £7m, reportedly because they are concerned about the image it gives to a corporate company. SFI refused to comment.

Bashful Brits
Britain, by it's nature, is fairly conservative when it comes to table dancing clubs. For a population of over 62m, there are only around 25 "quality" establishments, defined as being places where the service, food and drink is of a high standard. These include Spearmint Rhino, For Your Eyes Only and Secrets. In California alone, there are 41 Spearmint Rhino's.

Opening them is far from easy, and licensing is a clubs' biggest problem. According to Trevor Watson of Davis Coffer Lyons and agent for For Your Eyes Only, getting a license "is bloody difficult".

"First you need a liquor license, which isn't easy to get, second you need a public entertainment licence which permits the girls to either have full or partial nudity. And the thing is, local councils don't like the clubs because of the perception that they are seedy - which they are not." Last month, Peter Stringfellow won his challenge with Westminster council to allow his girls to go fully nude.

Whitehouse, accepts these prejudices will automatically occur. For him, the appeal system is his best friend when it comes to opening a club. He pins his hopes on the magistrate who believes Whitehouse, will make the decision on law and not morale grounds. "I make an application for a club based on the view that I shall fail, and I say 'OK, so when am I going to get the appeal'."

Maximising value
The license, however, isn't the first thing Spearmint go for. It prefers to get the leases first. The reasoning behind this idea is simple, says Whitehouse. "We sign leases first because we find that if we are going into a placeÉwe don't want people to pull the plug on us. This just increases the value of the property." And if he doesn't get the lease? "Then we just tear it up."

The lease depends on location. Not only in a certain area, but in a certain building and on certain landlord's and whether or not they want the club in their building.

Watson believes that some clubs like to base themselves near to hotels. "Proximity to a hotel is important. There is the conference and exhibition trade and also the conference centres - it's all good trade."

Whitehouse works along the lines of "demography, layout and location". They choose carefully, but this doesn't mean they still can't run into a spot of trouble with their landlord. Last month the Evening Standard reported that Spearmint Rhino, Tottenham Court Road, was having a petite fracas with Prudential Assurance. The report stated Prudential was unhappy that clients "were touching girls" which is forbidden in clubs.

Whitehouse grunts at the suggestion that anything is wrong. "Nothing is happening. We pay our rent and they are happy." Prudential says they don't have a problem as long as the club is complying with its lease.

But agents do tell tales of unhappy landlords. Jones Lang LaSalle's David Sanderson recalls the unnamed legal firm in the city which was aghast at the thought of a table dancing club taking the ground floor of their building.

This is where the debate all boils down to money. The bottom line is that most landlords' want good covenants. Watson says: "They don't want some Joe Bloggs coming off the street and trying to set up shop. The likes of For Your Eyes Only had covenant behind them." With rents high, it's unlikely someone without sufficient backing will open. Stringfellow pays a reputed £300,000 a year; Spearmint Rhino, Tottenham Court Road is £180,000 a year on the 22,000 sq ft building.

If the landlord's and council are happy, there is still the problem of educating the British public to the idea of the clubs. "Our experience is that the these clubs take a while to take-off because people are getting used to them. But, it's possible that as the market matures then new openings will mature more quickly," says Watson.

Ultimately, whether Spearmint Rhino will succeed in its goal of UK domination remains to be seen. Some agents are still very sceptical that the whole lap-dancing scene will be able to cope with this type of growth. As Ian McPhillips of Birmingham-based agents BK, who acts for the Legs 11 clubs, says: "My feeling is that the bubble will eventually burst." For the time being, however, it seems that the public's interest in the clubs - for whatever reason - will continue unabated, and it is matched by Whitehouse's determination to expand.

Spearmint Rhino, coming to a town near you...

As part of it's expansion plans, Spearmint Rhino's vice-president of operations, Philip Whitehouse, says the group wants to open 100 additional clubs across the UK. Six clubs are already open in Birmingham, Bournemouth, Harrogate, Heathrow, London, and Uxbridge in London, with one still to be open in Hull, while seven leases have been signed.

Whitehouse won't say where the new leases are, only revealing that two will be in Leeds. He did, however, list some of the towns and cities where he wants to bring the Spearmint Rhino experience.

These include: Aberdeen, Blackpool, Brighton, Bristol, Belfast, Cardiff, Crawley, Dublin, Edinburgh, Glasgow, Hull, Leeds, Milton Keynes and Sheffield.

But potential agents in these areas need not apply to help them achieve their goal. Putting it bluntly, Whitehouse states: "We don't use agents and we don't have any nominated agents."

Licensed and Leisure Property Supplement, Spring 2002

A joint supplement by Estates Gazette and Caterer & Hotelkeeper magazine