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Investing with the stars: Celebrity backing brings cachet, challenges

Investing with the stars: Celebrity backing brings cachet, challenges

Paparazzi cameras will no doubt be flashing when Danny DeVito throws open the doors of his new Italian chophouse in Miami Beach, Fla.

DeVito, who achieved recent notoriety for his limoncello-fueled appearance on ABC’s “The View” after a night of drinking with fellow actor George Clooney, is scheduled to open the swanky DeVito South Beach with restaurateur David Manero in February, joining a growing number of movie, music and sports celebrities putting their investment dollars into restaurants.

As DeVito South Beach investor Michael Brauser of Boca Raton, Fla., told the Palm Beach Post recently: “He likes to have fun, which is what happens in a restaurant. But his Name still carries a great image, and people love ‘clean’ celebrities.”

But for all of the panache a celebrity can bring to an operation, the trend of partnering with luminaries can be a double-edged steak knife, where egos and reputations can sometimes get in the way.

Restaurant partnerships with celebrities can be a risky business if big egos get in the way, but the glamour, fame and money that actors, musicians and athletes bring can also spell sweet success for operators

For every successful venture—such as movie star Robert DeNiro’s investment with restaurateur Drew Nieporent and chef Nobu Matsuhisa in the Myriad Restaurant Group’s Nobu, which has expanded across the country—there are flops like Nyla, the Southern-style eatery backed by pop singer Britney Spears that went bankrupt in 2003 after being open only seven months.

The secret to success in such ventures, says Lee Maen, partner in Los Angeles-based Innovative Dining Group, or IDG, is in “choosing the right people.”

IDG boasts such celebrities as actress Tori Spelling, producer Brett Ratner, “American Idol” host Ryan Seacrest and actor Rob Lowe among investors in its restaurants.

“You don’t want people who will treat the restaurant inappropriately,” Maen says. “You don’t want to have someone with a huge ego who would push the manager out of the way. You want someone who will add value to the restaurant by being there.”

IDG’s eight restaurants in California and Nevada include four Sushi Rokus in Las Vegas and Hollywood, Pasadena and Santa Monica, Calif.; three Boa Steakhouses in Las Vegas, Hollywood and Santa Monica; and Katana in West Hollywood, Calif.

For the celebrity’s buy-in, the returns on investment can be as handsome as a leading man.

“We price our deals so the investor is going to make about a 33-percent ROI,” Maen explains, adding that IDG endeavors to exceed that. “Sometimes we’ve blown that away,” he says.

The celebrity-eatery connection is not new. Herbert Somborn, husband to actress Gloria Swanson and president of Equity Pictures Corp., owned the famed Brown Derby restaurant, which drew cinema luminaries and their admirers from the Silent Age of film well into the 1960s.

DeVito’s project in Miami Beach joins a long line of star-studded restaurant ventures. Tom Prakas of The Prakas Group, a brokerage firm in Boca Raton, Fla., helped seal the agreement with DeVito. The actor created a company, DeVito South Beach LLC, to buy about 9,000 square feet of space in a deal estimated at $1.2 million. The site formerly housed Joia restaurant, and the new concept will accommodate 200 and include an adjoining patio.

Renovations are estimated to cost $3 million to $4 million, including outdoor cabanas, an outdoor communal dining table, a street-side private elevator to a second-floor dining space, and what investor Brauser calls a spot that will “cater to VIPs and high-end clientele.”

Prakas, president of The Prakas Group, says movie stars add a definite punch to the opening of restaurants and help increase sales.

“They bring a lot of cash in, just by the use of their names,” Prakas says, though he cautions that food and service must be high quality to keep customers returning.

Prakas’ other clients include the South Florida restaurants Sopra, City Oyster, Tarpon Bend and Gusto’s Grill & Bar.

Not all of the celebrity-backed restaurants have lasted. Actors Arnold Schwarzenegger,  Bruce Willis and Sylvester Stallone were investors in the Planet Hollywood chain, which flew high for a time but later crashed to earth. Bobby Ochs, who worked with Britney Spears on the now-closed Nyla, also assisted Patrick Swayze at Mulholland Café in California and Marla Maples at Peaches in New York, both of which have closed.

But the list of celebrity restaurant successes keeps growing. Actress Jeri Ryan is backing Ortolan in Los Angeles. Singer-actress Jennifer Lopez opened Madre’s restaurant in Pasadena, Calif., in 2002. Director Francis Ford Coppola has Ross & Bianco restaurant in Palo Alto, Calif. Actor Wesley Snipes owns China One in West Hollywood, Calif. Musicians Nickolas Ashford and Valerie Simpson—better known simply as Ashford & Simpson—own the restaurant-entertainment venue Sugar Bar in Manhattan. “Saturday Night Live” alum Jimmy Fallon is part-owner of Mo Pitkin’s House of Satisfaction in the East Village of New York City. Rapper Jay Z owns 40/40 in New York City’s Meatpacking District. And Ridley Scott, producer Harvey Weinstein and Robert DeNiro own Ago restaurant in Los Angeles.

The trend is not isolated to New York and California. Hip-hop entertainment mogul Sean “Diddy” Combs founded Justin’s Restaurant & Bar in Atlanta’s Buckhead neighborhood.

Sports figures also have launched their investments in restaurants. Magic Johnson, Hank Aaron, Don Shula, Mike Ditka and Michael Jordan all have added their star power to eateries. Even sports announcers, such as Harry Caray in Chicago, have turned their names into marquee draws.

One of the most recent stars of the celebrity restaurant firmament is The Dolce Group, headed by lifelong friends Lonnie Moore and reality television star Mike Malin. In 2001, they opened a small tapas lounge called Belly on a strip of Santa Monica Boulevard in Los Angeles.

“The business, built on equal parts sweat and credit card debt, became the entertainment industry’s hangout of choice, thanks to Malin’s concurrent appearance on CBS reality show ‘Big Brother,’ ” the company says in press materials. Malin used his time on the popular show as an opportunity to promote his business on every episode. As a result, Belly was packed.

Malin and Moore assembled a slate of famous investors in order to create Dolce Enoteca e Ristorante on Melrose Avenue in 2003. Celebrity backers included “That ’70s Show” stars Ashton Kutcher, Wilmer Valderrama, Danny Masterson and Laura Prepon, as well as Chris Masterson from “Malcolm in the Middle,” Dulé Hill from “The West Wing” and comedian Jamie Kennedy. Then, Moore and Malin partnered in 2004 with Shereen Arazm to create Geisha House, a two-story Japanese and sushi restaurant set in Tokyo 2050.

Since then the company changed its name to The Dolce Group and opened Bella Cucina Italian in Hollywood. It expanded to Atlanta with Dolce and a lounge concept to open later this year called Ten Pin Alley. The group also plans to open Ketchup, a contemporary American restaurant, on Sunset Boulevard and is considering plans for expansion to Las Vegas, Reno, Nev., Dallas, Phoenix and Santa Ana, Calif.

On a less grand scale, actor Chris Noth of “Sex and the City” and “Law & Order” has operated with Steve Walter a small space for food and entertainment called The Cutting Room in New York since 1999.

“Both Steve and I had a lot to do with the aesthetic of how the place looks; I even brought in some of my own furniture,” Noth says. “In a gradually teenageified city where hip-hop rules, we wanted to have at least one place where you could go where that wasn’t going to be the name of the game; there are so many other places for that.”

The venue also offers serious food. “We have a real chef,” Walter notes. “Everything is made to order; there are no frozen French fries.”

The celebrity restaurant owners try to make a strong statement that it’s the food, not the famous people, who make their operations truly notable.

Justin Timberlake is one of the investors behind Chi in Los Angeles and Destino in New York City. While many celebrity-linked spots end up being a bar-scene hangout, Destino at the outset said its food would be serious.

“This is not a club, this is not a bar, this isn’t a nightclub,” said Destino’s representative Lizzie Grubman at the time. “This is a real restaurant.”

Innovative Dining Group’s Maen said Sushi Roku, Katana and Boa Steakhouse all emphasize their food over the celebrity backers. The former nightclub creators who started IDG said that when they opened Sushi Roku 10 years ago, they wanted to create a “fusion of design, energy, service and food.” The celebrity investors came afterward, he says.

“We knew a few people among friends from the nightclub business,” Maen says. “When we were raising money for the first restaurant, we knew that if they were involved they would bring people and help add to the marketing.”

That’s one saleable part of celebrity backers, he says. “They bring their friends,” Maen says. “Having them hang out there is a good thing for other customers to see and that helps the marketing and P.R. We don’t advertise with them or ask them to advertise for us. We look at it as if they are making an investment, and we are providing them a return on that investment.”

One of IDG’s investors, Seacrest of “American Idol,” has a special interest in restaurants, Maen adds. “Food is a hobby for him,” he says, “so he’s taken it upon himself to really do his own thing on the Food Network and magazines. The restaurant has also given him something back as well.”

One drawback to the restaurant celebrity, Maen says, is that the operation could “end up with a lot of ‘lookie-loo’ people who want to see celebrities, and if they aren’t there, they won’t come back.”

One such victim of that syndrome was the Fashion Café in New York.

“We don’t do the whole red-carpet-paparazzi thing and the Star magazines of the world,” Maen says. “But when you have Brett Ratner come in with Jackie Chan or whoever he’s doing a movie with at that time, it’s good for all the other people in the restaurant because they can say they sat next to the star.”

That word-of-mouth publicity is invaluable, he adds.

Maen foresees the future “celebrity” being chief executives and chief financial officers—people who already are celebrities in the business world. “They can bring as much business as the movie and rock stars,” he says.

Maen says he might consider partners in other industries, such as sports.

“If you invest in smart deals, I think you will do well,” he says.

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