This just in: Sex sells. A case in point may be the least-known standout success in the restaurant business, RCI Hospitality Holdings.
The company may be barely recognized outside of the investment and voyeur communities because its main businesses are politely known as “gentlemen’s clubs.” Some would know them as strip joints.
In recent years, it branched beyond nightclubs into the breastaurant market with a concept called Bombshells, which specializes in wings and waitresses in skimpy camo garb. Some might say the 5-year-old concept is a knockoff of Hooters.
Maybe, but the formula is working. RCI recently posted a second-quarter same-store sales gain for Bombshells of 4.1%, a gait that would be envied by many family-oriented businesses. Its nightclubs, which sport names such as Tootsie’s, Jaguars and XTC, generated a comps jump of 5.1%, which puts them in the rarified territory of Texas Roadhouse and BJ’s Restaurant & Brewhouse.
Unlike a host of other concepts, RCI’s gains are coming from a climb in traffic. “We have continued to see increased customer counts in nightclubs and restaurants,” CEO Eric Langan told financial analysts.
That boost, coupled with continued expansion of both its nightclub and restaurant operations, delivered a 33% jump in RCI’s food sales for the second quarter. Drink revenues were up 14%, proving that RCI is a legitimate food and beverage powerhouse.
There was also a 6% increase in what Langan termed “high-margin service revenues,” which he did not describe in detail. He attributed much of the quarterly gain for Bombshells to the more mundane factor of customers visiting to watch sporting events—in RCI’s case, the pro basketball and baseball teams of Houston, where the company has a concentration of outlets. Marketing for Bombshells has focused on the airing of Houston Rockets and Astros games.
Langan also cited the introduction of a new menu last quarter for the wings-focused chain.
RCI is also reaping the benefits of continued expansion, both through openings and acquisitions. Four Bombshells are currently under development, and the company continues to purchase gentlemen’s clubs at a quick clip.
“We can probably be about as active as we want to be over the next six months,” said Langan, noting that negotiations are in the final stages to bring several concepts into the fold near-term.
More opportunities will come at a convention later in August of club operators. “I have lots of meetings set up, talking with several people out there, [and] I expect several people that I'm not scheduled to talk to, to approach me because that's typically how it works,” he said.
“If we can't find the right acquisitions or Bombshells locations, we will sit, wait and let our capital build,” Langan said.
Net income from RCI’s 40 outlets totaled $5.4 million for the quarter ended June 30, an increase of 40.4% from the year-ago quarter. Revenues were $42.6 million, up 13.9%.
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