The Big Splash - Charles Kabouth plans Nightclubs, Restaurants, Hotel Brand

[yyzer]

Interesting article in today's Globe....wonder where he is planning the first 'Bisha' hotel?

The Big Splash

Amy Verner

From Report on Small Business magazine, Thursday, Jun. 04, 2009 12:19AM EDT

Among the many things Charles Khabouth has learned over his quarter century as a nightclub impresario is that novelty is crucial. Take Tattoo Rock Parlour, one of his latest experiments on the Toronto entertainment scene. The year-old venture is an unusual hybrid: part club, part live-music venue, part restaurant. Oh, and then there's the tattoo shop, for scenesters looking for a permanent souvenir of their night on the town.

When Khabouth says “there's nothing like it anywhere,” it's easy to believe him. The funky interior–designed by ahead-of-the-curve local designers 3rd Uncle–draws curious club kids out strolling Queen Street West, but on a recent evening Tattoo Rock Parlour also hosted a lively crowd of 400 being feted by an advertising firm with dinner, music and temporary tattoos. Companies vying to make their events the talk of the town have flocked to Tattoo's edgy atmosphere, making it a popular spot for corporate functions on the Queen West strip.

All of which means that so far, the innovative space is working. But the man behind the concept admits that a little unorthodoxy can be a dangerous thing. “Novelty is something you have to be very careful with,” says Khabouth, who currently owns six venues. In the entertainment business, today's trend can quickly become tomorrow's failure. So if business drops at the tattoo shop, he'll move fast to put in something else.

For Khabouth, gauging a new spot's prospects isn't so much about opening-night receipts as the vibe in the room: “I watch people, their reactions, their faces, how fast people are leaving.” He'll often stand near the door to catch what customers are saying as they walk out. (Eschewing flashy three-piece suits for understated rock-inspired style, the low-key club owner fits in with most crowds.) He'll tune out the gladhanders to eavesdrop on strangers' conversations, hoping to learn what they think of the music and decor. When Tattoo first opened, he says, attendance was low: fewer than 150 people on average in the first couple of weeks, in a venue licensed for 450. But he saw that those who came stayed for hours, and he knew he had another winner.

Once he'd established that, he set out to do what he always does: Start planning another. And another, and another. His Toronto-based company, Ink Entertainment, is poised to launch a handful of ambitious new ventures, including three restaurants (one a high-end relaunch of the once-trendy foodie destination Rain) and a 45,000-square-foot event space in Coral Gables, Florida, a co-project with fellow impresario Nick Di Donato (who also owns a stake in Tattoo Rock Parlour). There's also talk of the pair establishing another live music venue on Queen West. Not to mention the creation of an international hotel brand, which Khabouth plans to inaugurate with the opening of Bisha boutique hotel in downtown Toronto. All in all, he's aiming for a 20 per cent increase in Ink's business this year, on annual revenues of more than $30-million.

The prolific string of start-ups, in the worst economic climate in memory, suggests that the 48-year-old entrepreneur has either been touched with hubris or he's glimpsed a unique opportunity. And while Khabouth is the first to describe himself as a striver, his more than 15 venues to date–several of them risky departures from the till-then tried and true–have taught observers to curb premature skepticism. The fact that he has no direct experience in the hotel industry, for instance, doesn't faze him. “I'm very, very open-minded to bringing people on board to teach me and show me what I don't know,” he says. “I think it's crucial that before you get started on any project, you say, ‘This is what I can do and this is what I cannot do.'“

So what can Charles Khabouth do? His formula for success combines a few strengths that others in his industry envy: Identify a promising market, conjure up an aesthetic vision that's one of a kind, and find the right partners to help him create it. After that, all it takes is a 70-hour workweek to keep the places running.

Given his family background, it's not surprising Khabouth ended up in the nightclub business: His father owned a club called Les Trois Tonneaux (the Three Barrels) in Beirut, where Khabouth was born. After civil war broke out in Lebanon in 1975, his mother moved the family to Canada. (His father died of a heart attack before the war began.) Khabouth's first job was at a McDonald's, and his penchant for working gruelling hours soon emerged: At one point during high school, he held down three part-time jobs.

Soon, he was itching to start his own business, and launched a clothing line, which showed some early promise. But he quickly realized it would take years to build a name in fashion. He loved style, music and dance, and clubs encompassed all those interests. Plus, in the nightlife business, you could succeed overnight.

Club Z (pronounced “zee”) opened with little fanfare in 1983 near Yonge and Wellesley Streets. The bank gave him a $30,000 loan against his car, and he decorated the basement space with merchandise from Canadian Tire, the best his budget could afford. He aimed to build regular crowds through specialty nights: house music on Saturday (during the week, Khabouth says he would drive to New York or Chicago to bring back the latest tunes) and gay nights on Sundays. But it was the tiger incident that really put Club Z on the map.

To build buzz for the venue, Khabouth rented a tiger and a cougar. The cougar caused a stir when Khabouth walked it through the club, but the tiger earned him even more attention: It broke a window after the club had closed for the night, and when police investigated, the sight of the animal prompted the arrival of officers with rifles, the Humane Society and local media. After that, the club took off.

Even as Club Z continued to draw crowds, Khabouth saw an opportunity for something new–something Toronto lacked. The clubs in the city tended to sport tired brass-and-glass decor and cater to suburban youth. There was nowhere for more mature, sophisticated urbanites to cut loose. Khabouth knew that to attract them, he needed an air of exclusivity, top-notch service and class–professional male bartenders rather than scantily clad female eye-candy, for example. In 1986, he leased a space with a dirt floor for the über-cheap rate of $4 a square foot in a rundown part of downtown. Today, that corner, at Richmond and Duncan, is ground zero of Toronto's entertainment district.

The city's club-goers had never seen anything like Stilife. Khabouth commissioned Canadian designers Glenn Pushelberg and George Yabu, who had created a splash with the first Club Monaco store on Queen Street, to design the space. They visited New York for inspiration, bringing the emerging trends–concrete interiors with edgy, industrial design details–back home. “Everyone went to see the chain walls,” recalls Raymond Perkins, who worked as an event promoter at the time. “It was the first time design was brought into that environment in Toronto.” The space was so sophisticated, Perkins made it his venue of choice for entertaining hip out-of-towners. He remembers being there the night that Prince came and held court.

Stilife made Khabouth one of Toronto's hottest new club operators. Emboldened by his success, he decided to bring some of the club's sexiness to a restaurant setting. He opened Oceans next door, recruiting the best new talent in the food world: chef Greg Couillard and, later, Susur Lee (though the latter only stayed a few weeks). The hires drew people in–and the restaurant was featured on the TV show Lifestyles of the Rich and Famous–but neither of the star chefs stuck around long. “He didn't intend to have food be important there,” says Joanne Kates, restaurant critic for The Globe and Mail. “And when it became clear he couldn't run it as a club and efficiently make money and have all that fancy food, the thing imploded.” Khabouth says the real problem was too many egos in the room: “I had a hard time working with some of these chefs. With celebrity chefs, it's like you work for them.”

Eventually, he merged Oceans with Stilife and moved on to other ventures, but financing was a challenge. Banks didn't see nightclubs and restaurants as good risks. “I was lucky enough to have a friend who owned a mortgage company, but it was tough,” he admits, adding that things got so rough 12 years ago, he stopped driving his car because he couldn't pay the insurance. “For the first 10 to 15 years, I was short-financed–if I needed to borrow a million, someone would lend me $300,000 or $400,000 and then I would have to juggle,” he says. “It was always me stretching it.”

As his business grew, Khabouth sought partners who could contribute both money and different skills. Steven Levy, senior vice-president of MMPI Canada, a Toronto-based event management company, recalls meeting Khabouth in 1986. Levy was running the Festival of Canadian Fashion (a precursor to Toronto Fashion Week) at the time, and the young go-getter approached him and offered to host a pre-party at Stilife. Nearly 25 years later, Levy now owns a “small per cent” of Tattoo Rock Parlour. “I think some people in his business put cash before creative, and some put creative before cash,” says Levy. “I can tell you, in my business, I prefer the second algorithm better.”

[yyzer]

Part 2 of the article.....

As his business grew, Khabouth sought partners who could contribute both money and different skills. Steven Levy, senior vice-president of MMPI Canada, a Toronto-based event management company, recalls meeting Khabouth in 1986. Levy was running the Festival of Canadian Fashion (a precursor to Toronto Fashion Week) at the time, and the young go-getter approached him and offered to host a pre-party at Stilife. Nearly 25 years later, Levy now owns a “small per cent” of Tattoo Rock Parlour. “I think some people in his business put cash before creative, and some put creative before cash,” says Levy. “I can tell you, in my business, I prefer the second algorithm better.”

Business associates know that in teaming up with Khabouth, they're getting not just an innovative mind but a work ethic to match. “He's really a hands-on kind of guy,” says Nick Di Donato. Khabouth will personally adjust the lighting when he visits his venues, and he has maintenance workers, technical staff and painters always ready to make quick repairs. “He's in the clubs day-in, day-out until 4 a.m., and I tip my hat to him,” says Di Donato, “because I couldn't do that.”

Khabouth's co-ventures with Di Donato's Liberty Entertainment Group–on venues such as Tattoo Rock Parlour, which launched in a space owned by Liberty–play to each other's strengths. The partnerships give Khabouth broader business and media exposure–”any time the press talks about [Di Donato], my name is mentioned,” he says–and a colleague who is “a little bit better than I am at negotiating.” Di Donato, meanwhile, gets an associate who works “non-stop.” (The Tattoo partnership also entailed a swap of ownership stakes, with Khabouth taking majority ownership of Tattoo Rock Parlour and giving Di Donato the same size stake in an Ink property, an Asian resto-lounge called the Spice Route.)

Khabouth, who is married with two children, 10 and 6, admits he's only taken five vacations since he went into business. Even now, when he has 20 head office staff to oversee his venues, he finds it hard to take a holiday. It's not about the money or the celebrity party scene, he says. “I was really driven to achieve something–starting and going right through until the end,” he says. “I just want people to say, ‘That's a great place, Charles.'“

When Khabouth spent $3.2-million to open Ultra Supper Club in 2004, the visual impact was nothing short of stunning. Fortress-like exterior doors from India cost $15,000 (U.S.), and it cost another $15,000 to install them because the entire building had to be reinforced. Inside, red-hot design firm Munge Leung fashioned a moody space–a bar area panelled in mirrors and red fabric next to a dining room that felt like a posh garage. Not surprisingly, the restaurant quickly became a hangout for the rich and famous, with boldface names as varied as David Beckham, Paris Hilton, Larry King and rockers Nickelback paying a visit.

But, for all the praise the lavish interior received, the food was again pronounced inferior to the decor. “The people who go to his restaurants or clubs–whatever you want to call them, because they are in fact hybrids–they need to think they're cool, and part of thinking they're cool in this particular period in downtown Toronto includes thinking you're eating quote-gourmet-unquote food. But it doesn't mean you're a foodie,” says Kates, who gave Ultra a less-than-favourable review.

Khabouth insists Ultra was never supposed to be focused on the food, but he knows his record with restaurants has been less consistent than with clubs. “Restaurants require more patience,” he says. “In Toronto, those restaurants that have done better than others, the owner is there all the time. I've not been able to do that.” But determined to prove he can be as successful in the culinary realm as he's been on the nightlife scene, he's come up with a solution: Hire one of the best men in the business. Tony Longo, long-time co-owner of Toronto dining institution Centro, has come on board as Ink's director of food and beverage operations. “I've realized I need some help on the restaurant end,” Khabouth says.

The opportunities to work with some of the top names in the business–including legendary foodie brothers Guy and Michael Rubino, who he's partnering with on the relaunch of Rain–are a major reason for Khabouth's renewed focus on restaurants. But he also sees more potential in them these days than he does in the club world. In recent years, he's noticed that Torontonians–at least those past the age of 25–prefer to go to restaurants with lively bars rather than lining up to get into nightclubs. “Most clubs in Canada are very young [in focus],” he says, “unlike in New York or Miami, which cater to more mature clientele.”

Perhaps because he's approaching 50 himself, he's also more drawn to businesses that appeal to affluent boomers and Gen-Xers–in Toronto, they represent an underserved, though challenging, market. “With older crowds, the most important thing is service,” Khabouth says. “You have to service the hell out of them.”

Pegging where a pocket of demand has appeared and finding a niche that lacks a supply seems to be Khabouth's particular talent. He travels a lot, and ensures his team includes a diverse range of ages and experience, but he insists there's no magic formula, other than being out there talking to people. “I'm not a guy who hires a big research company,” he says. “My research usually is me asking questions, feeling out the market and the mood of the city.”

Take his foray to the exurbs. Burlington, a fast-growing city west of Toronto, is filling up with newlyweds and professionals who don't always want to drive to Toronto for a nice meal and cool ambience. Khabouth thinks this affluent market is a good fit for his Spice Route concept–chic looks but affordable prices. So later this year, he'll be opening a Burlington outpost.

Launching a string of new venues in a sluggish economy may seem rash, but Khabouth points out that downturns are, after all, the best times to buy. The two things most important in his business–great locations and great staff–are more easily available now. On the phone in late April, he says that he has just hired two senior people that morning, and plans to add another two that afternoon. “I never turn down the opportunity to get great staff.”

While Khabouth has dabbled outside the Greater Toronto Area, he keeps coming back to his geographical comfort zone. A short-lived association with the Beatles Revolution, a glitzy giant of a nightclub in Las Vegas that he opened with MGM Mirage, Cirque du Soleil and the Beatles' Apple Corps Ltd., was successful, he says, but he sold his stake last year because he got tired of the travel. Whether his touch would be as potent in other nightlife centres is less certain. Jeffrey Jah, a successful New York nightclub operator who produced several events at Club Z, says many club owners who are big in their hometowns don't survive elsewhere. New York, for instance, is “very unforgiving,” he says. “If you want to be successful, you have to live in New York and pay your dues.”

Khabouth agrees. Creating a thriving venue requires an understanding of your city–its insecurities and its aspirations. “We've seen successful products come to Toronto and not work here,” he says. “People like to say, ‘I know the owner.' It plays a big role.”

Having stretched from clubs to restaurants, Khabouth is now ready to try yet another branch of hospitality: a hotel. And his plans are wide-reaching. He says Bisha is designed to grow outside Canada: “Can someone pronounce the name in Italy, or understand what we're doing in Dubai?”

If the trajectory from club king to global boutique hotelier calls to mind Ian Schrager (Studio 54 co-founder and the visionary behind the Morgans, Royalton and Delano Hotels, among others), Khabouth is happy to accept the comparison. “I've met a lot of real celebrities and I'm usually very calm, but when I met [Schrager], it was like I just met the Pope,” says Khabouth, with a rare glimmer of giddiness. “I really look up to what he's done over the years.”

Bisha – Khabouth's nickname as a boy – doesn't aim to reinvent the boutique hotel. It will be relatively small scale (fewer than 150 rooms), with huge emphasis placed on service: “Every touch point [will be] impeccable, accessible and approachable,” he says.

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and part 3....

Khabouth sees a hotel as the logical business progression: “[It] is the envelope for a restaurant, bar, hospitality business, rooftop patio and a residence unit. It's so multifaceted. It's everything that I've ever wanted to do in one property.” His partner in the project is Lifetime Developments, headed by Mel Pearl and Sam Herzog–another set of associates with impressive bona fides. (Their CV includes Toronto's WaterParkCity Condominiums, Liberty Market Lofts and the new Four Seasons Hotel and Residences.)

For Khabouth, the chance to work with people he respects is one of the biggest payoffs of success. “It's this one single thing that gives me the most satisfaction: being able to say yes or no whenever I want. Now, when I partner up, it's because I want to, not because I need to.”

He also craves to have that respect returned. He says the first time he felt he'd really made it was when he appeared on the cover of the Toronto Star's business section. Success, to Khabouth, is “having someone well-known, a serious person in the city, cross the street to shake my hand. Was I invited to the [Art Gallery of Ontario] fundraiser? Did a lot of people cross the floor to meet me? That gives me satisfaction. Not financial success.”

At some point, he says, he might start to slow down a little, delegate to a few trusted colleagues, maybe even take a vacation. First, however, he wants to see Bisha launch. But even after 26 years, he still finds opening nights scary. “You can't launch in a small way–you get eaten up by all of the big guys. When I open the hotel, I'll feel like I've landed,” he says, his voice expressing equal parts determination and disbelief. “Nothing makes me cry. But the day I open the hotel, I know I'm going to cry.” – With a report from Joanna Pachner

Restaurants and clubs have distinct business models and challenges, and Khabouth, who has run both, has learned some lessons along the way.

CLUBS

It's all about the liquor. Since clubs often waive their cover charge to increase traffic, drinks bring in most of the revenue. An ounce of booze that costs Khabouth $1.10 sells for $7 in his clubs.

Spread the word everywhere. Clubs need constant promotion, making marketing the biggest expense. Khabouth uses all means possible, from kids with flyers to postered trucks to e-mail newsletters. And he aims for great word of mouth: He'll charter a private plane for an out-of-town DJ who has failed to make his flight rather than cancel the event and risk disappointing his clientele.

Don't scrimp on security. When Khabouth started 26 years ago, he had six doormen for every 1,000 people. Now, that ratio is 15 to 20 per 1,000. (The reasons: drugs, weapons and the increased vigilance required to avoid liquor licence infractions.)

Beware the “heart attack.” Clubs are susceptible to sudden deaths (Khabouth calls them “heart attacks”). Perhaps another venue has opened nearby or a competitor is using promoters to lure away your regulars. “Once you've lost half the clientele, that's it,” Khabouth says. “Bodies are crucial.”

RESTAURANTS

Make it sexy. Most Toronto restaurateurs fail to appreciate the importance of the vibe, says Khabouth. “Whether you're 19 or 49, you still want the room to feel a little sexy.” This is why his restaurants host celeb-packed events for the Toronto International Film Festival and Fashion Week: Sometimes they lose money, but they add to the venues' lustre.

It's all about the staff. Kitchen labour is the biggest cost in restaurants, and making the right choices helps keep the body count down. “For me, I can take over and design a space in my sleep. The difficult part is finding committed people.”

Get the ratios right. A successful restaurant will typically earn 60 per cent of its revenue from food and 40 per cent from alcohol. However, a lively bar can shift the ratio; at Ultra, says Khabouth, it's a more profitable 55/45.

Get the branding right. Khabouth closed the otherwise successful Strand Diner after realizing it had a problem: its name. People expected a diner experience and came with no intention of drinking. “Our alcohol ratio was 15 per cent,” says Khabouth. “I couldn't do it on that.”

[urbandreamer]

Bisha: On Ossington@Dundas West?

Ultra: passé: filled with ppl from the 905. Some of them rather trashy. yyzer are you satisfied?

[yyzer]

urbandreamer....uh....I live in the 905.....what is 'trash' is your comment...

[unimaginative2]

Bisha: On Ossington@Dundas West?

I'd heard that was the location. Will that be allowed with the new no-development bylaw on that street?

[interchange42]

It seems that the location of the Bisha is to be 56 Blue Jays Way.

42

[fiendishlibrarian]

Great, prepare for even more mass corporate spam-postering by the worst vandal in the city. Any other city that had even a modicum of pride in its appearance would have sued this asshole into oblivion long ago for all the damage him and his postering lowlifes have inflicted on our streetscapes.