The Business of Scarcity: Nightclubs, Trading Cards and Collectible Drops 📉 E171

The Money Mondays

This episode of Money Mondays explores the business of scarcity through the lens of nightclubs, trading cards, and collectible drops. Jay Rock shares his journey

Key takeaways

• Jay Rock built his nightlife empire by identifying and capitalizing on trends like bottle service and celebrity-hosted events.
• Investing in nightlife or restaurants requires trusting the operator and being prepared for long-term commitment.

Main topics

• Nightlife industry business models and investment opportunities
• The economics of celebrity-hosted events and bottle service

Notable quotes

"The most valuable asset we have is time. Getting the staff's time to go and work at one of these charities, you know, help raise funds."

Conclusion

This episode offers valuable insights into the business of scarcity across multiple industries, highlighting the

Transcript preview

Speaker 1 (0:04) Ladies and gentlemen, welcome to a special edition of the Money Mondays podcast. We cover three core topics, how to make money, how to invest money, how to give away to charity. This next guest I've known for two decades all throughout the industry. But first, I'm going to give you guys some quick tips. Number one, these episodes are not just for you. It might be for someone from your past, present, or future. It might be for a child, a parent, a friend, an employee, or a coworker that you're having lunch with six months. months from now that you might learn something from this episode and you share it with them, they could literally change the course of their life. That's called the butterfly effect. And so as you listen to these episodes, keep that in mind, not just for you. The industries, the specifics that we go through are for the people in your ecosystem, even if you haven't even met them yet. You could share this podcast with them. Also, the average workout or commute is 45 minutes. The average commute to work is 45 minutes. This episode will be between 32 to 36 minutes for your listening pleasure. without further do. Jay Rock, give them the quick two-minute bio, so we get straight to the money. Yeah, right. Big Money Mondays, people. Good to be here, Mr. Fleshman. Am I giving my elevator? Yes, the two-minute bio. Two-minute bio. I'm a guy who came up the hard way. You know, worked kind of every position. Started in nightlife and, you know, started as a janitor, worked my way up to ownership, started my own companies from there, been involved with stitched, a brand, for 13 years now over at the Cosmopolitan. And I'm an entrepreneur by heart, and I'm still chasing dreams. I love it. Okay. The make money side, how do people make money in the nightlife space? Let's walk through from the front door to the back door. How do people make money in the nightlife space? There's a lot of money being thrown around in there. You know, for me, I started out as, you know, in a service position where I was getting tips and, you know, trying to just save my money, like everyone else and continue to move up. For me, it was, you know, just working hard through the positions that I was in to continue to move up. And that's what I wanted to do was eventually, you know, even starting as a trash guy, I wanted to own the club, you know. I had that vision. I saw, you know, yeah, honestly, like, you know, and I'll always say like Mike Myers, you remember, you know, kind of took matters into their own hands at the time and just kind of seeing how the nightlife world was exploding at that time. And it was changing. Everything was changing. So there was like this white space. You know, and for me, it was being a part of that initial trend that really kind of launched Nightlife in Vegas, you know, and really around the U.S. First getting big-name DJs, big-name celebrities to be hosting. Bottle service was invented by a gentleman named Stevie D. Yeah. I like to say Andrew Sasson will have his battle with who invented it. But these were my partners, you know, some of the godfathers of the game, you know, were my mentors. And I learned a lot from these guys. And, you know, there's a lot of old school methodology that they applied, you know, and really sales training. You know, the sell, right? It's can you sell this pen, right? But can you sell this bottle? This bottle. Or this ticket to get in. Yeah. But you're really selling lifestyle. You know, you're selling the experience that comes along with that bottle and, you know, the area that you're in, you know, and filling it with the right people. You know, there's a lot of things that happen within the nightlife space that, you know, the outside wouldn't, wouldn't understand, you know, all these kind of things that are happening. But it's definitely a symphony that needs to be orchestrated in the right way. And there definitely needs to be, you know, funding specifically here in Vegas because of the talent. Right. And, you know, the competition to compete with those guys. So when I was talking about Stevie-D, I was talking about him booking Britney Spears. He was one of the first. and he did a famous article, they're like, how could you pay Britney Spears a million dollars to host an appearance? That's insane. He's like, well, it's New Year's Eve. The tickets are $200 per person. There's $300,000 people. That's $600,000. The tables next to her on each side were $50,000 each. The surrounding tables were $20,000 each. And then the general tables are around $5,000, $10,000 each. We sold around $1.4 million of tables. He said, so think about it. $600,000 here, $1.4 million there. We did $2 million in sales before selling one drink. He said, okay, if they I give the girl a million bucks. And that story's been stuck in my head for so many years because he was like going and getting like people from the real world and road world shows that you were part of as well. Like getting them to be hosts. And you're like, well, why would someone go to that? The personal brand. The personal brand is why someone goes when Britney Spears is hosting or a certain person in a TV personality or an athlete is hosting or a famous model or Instagram girl is hosting. They can get people to come to the club. Walk us through the concept of, okay, where I'm going to pay this person. and let's say it's Paul E. We're going to give this guy $50,000. He's going to be the host or the DJ for the night. Walk us through the economics of how you think about that. So, you know, first thing, obviously, like Stevie D was ahead of his time. And, you know, having Peres Hilton and Kim Kardashian at the time, you know, we didn't have the social media we have now. So your only chance to see these celebrities. We're at these type of appearances off, you know, your regular television. So he really capitalized in that area. We try to do the same thing with the palms and kind of be ahead on those trends. Paul E.D. in like Jersey Shore and the popularity is the attention economy, right? The beginning part of that. You know, so nowadays it's, it's, you know, we're really digging through KPI's a lot deeper where we're looking into these artists, you know, we're seeing what their ticket sales look like in the region, you know, what's trending on, on their socials, you know, to try to tap into their, into their, into their fan base, right? And we look to see, you know, is this fan base going to be big enough to fill this, this venue plus our sales team? And general audience and also people that have money to spend. Exactly. You know, and so, you know, you're looking at who you're speaking to, like, who's your target audience, right, that you're trying to sell to in the first place. And, you know, stacking those around the right weekends. And then also, you know, because Vegas and, you know, some of these cities are so competitive, you're seeing what your competition looks like as well. And you're, and you're kind of vetting against, you know, who you're going against, you know, as well as the artists themselves, right? And then building, you know, engaging content with that artist engaging with their fan base, you know, to tap into everything and every resource that they have as well as, you know, all the resources you're getting through the casino and the marketing and, you know, all your efforts as well. So there's millions of restaurants. There's hundreds of thousands of brands. There's tens of thousands of franchises. But when you really think about it, there's like a dozen names that have been doing this for two decades. And when we go to a city, you know, Tao. You know, Marquis. You know this restaurant. You know that, like you know these brands that have burned to your mind, Carbon. And they're owned by like the same dozen or two dozen groups that are the brand. Look at Jason Strauss being two decades later, Tau is still the number one grossing restaurant on the planet. Like two decades later, it's still good luck getting into a lot of his nightclubs because it's just Marquis is sold out. Lava sold out. The brunch is sold out in the morning and it's also sold out at nighttime. Like walk us through, how does someone like a Jason Strauss, that you've known for so many years, how did they last for two decades when there's millions and millions and millions of people, better is that we don't know their names. You know, he's, he's, he's, you know, Jason's always been a pathfinder, you know, and looking at all the new trends and, and obviously on the music side, it's really staying involved in who's trending there, but also Tao group, you know, their process and the way in which they approach the venue from, you know, all the way from the aesthetic to, you know, the talent and the entertainment inside the venues, you know, that's a big, that's a big portion. You know, you're seeing, um, these venues are all. all taking remodels and they're getting upgrades constantly. You know, some people see those. Sometimes they're bigger where you're seeing, you know, this big kind of overhaul change. But Jason's always kind of, you know, trying to feed the market what it wants, you know. And then also expand. He's diversified in so many different areas and so many different styles of music that he's able to, with his operations team, go in and build a venue that's going to be, you know, what people want. And then it's really filling it with the right people, having the right kind of talent and programming that goes along with that. And they've just figured that out, you know, in every market. So you work with the company that actually builds the sound and lighting and the lighting and visuals that we see at some of the most amazing nightclubs, not just in Vegas, but around the world. Talk us about that company. Yeah, so TrustFall Technology Group, you know, been happy to get on the other side of the nightlife venues in a sense. You know, and really when I started working with Doug Green, CEO there, he was showing me concepts of things that they were building, working on. And it just kind of blew my mind because, like, I at the time was really looking hardcore in Dubai. I was really trying to understand, like, how the market's going to shift there, right? Because alcohol is not legal there. You know, entertainment is a focus and they're spending a lot of dollars. But like, how can you create entertainment without, you know, just the heavy factor of the alcohol being the only monetization point? So the technologies that are now being applied and what trustful has built, you know, this is what I think is going to lead in every kind of F&B hotel, food and beverage space is really these technology builds, you know, and being able to change the venue, being able to change the mood of that space, you know, at the flip, you know, at the snap of a finger, you know, so getting with trust fall, it was really exciting for me because I've been a part of, you know, designing venues and designing the flow and the entertainment side. For me, the side was always really important. You know, I, I still have a hard time going into venues and just relaxing. Right. I'm looking. I want to fix that? Yeah, I'm like, I'm like, uh, the lighting's a little off in here, the sound, you know, like I have that problem, um, good or bad. Um, but, you know, with trust fall, they, they've solved a lot of these issues, you know, from a production standpoint, you know, the technology's gotten better, right? It's like, it used to be like, how much LED can you have, but like now it's about hiding it. You know, and hiding the technology. You know, and hiding the technology, so it's still there, and you still get effect from it, but you're not seeing just a giant screen in your face. So, you know, Trust Falls is doing a lot of custom builds, you know, working with the wind, working with MGM, you know, built Zook nightclub, got a lot of big projects ahead, some exciting things, and working with Tau Group on some exciting, some projects coming out. Awesome. So let's go to the investing side of the space. Someone wants to invest into a nightclub a restaurant. We call that a lifestyle investment. They are high risk, mostly depending on the operators. That's where you can reduce your risk. If someone like you has done it for 20 years, it's more likely to succeed compared to someone that's just a passion for making cheeseburgers, a passion for making pizza, a passion for opening a bar, whatever, someone with experience. Walk us through someone's like, hey, you know what, I've been making a couple hundred grand a year in real estate or as a doctor. And I do want to invest 50 grand, 100 grand, 200 grand, into my friend's nightclub or restaurant, what should they be asking for? What should they be looking for? What should they be expecting this high risk investment? Well, I mean, it is a high risk investment specifically, right? And I think the first thing is who's the operator, you know, who's behind, you know, the planning and wanting to have that, you know, you want to have some wins and losses, right? Because the losses actually teach you a lot, you know. And so you need somebody who's had the experience and had that, you know, gumpshun to take the risk. you know, at times, you know, so for me, I look at, I look at the person, you know, behind the operation specifically. And then I'd say also, you know, you know, see what the marketing plan, you know, see what's unique about it? You know, what's your IP here? Like, what is, what is it that you're selling in a different way that no one else is, you know, and how are you presenting that? You know, I think content right now is, is, I always say content is king and data is God. So, you know, what kind of content compelling that you're going to get people to look at what you're doing, right, and get that attention to that space, you know, and then when you get them there, you got to, you got to deliver. So there's a lot of different options when investing into a restaurant nightclub, which is a high risk investment. So here's some things to consider. There's a structure called a FIFO, first in, first out. A FIFO structure is, let's say I'm going to put in $100,000. J. Rock's going to open a new nightclub in San Diego, California. J. Rock's going to raise $2 million for this new small boutique nightclub. It's kind of like a sidebar-sized nightclub. He needs $2 million. He needs about $1.2 million to build it, $300K for marketing, expenses, and staffing, and $500K to sit in the piggy bank to help with the run operations. Cool. I want to throw in $100,000. I'm going to get a few of my friends as well. A first in first out structure would be I put in $100,000 and J. Rock and the management team can decide a percentage to pay me back along the way, which reduces my risk. So let's say he's going to do an 80-20 split until I get my $100,000 back and then flip it where now I have, me and the investors have 20% of whatever the equity is of that deal. this example, let's say that we're putting in the $2 million, and it's going to be at a $10 million valuation. We're buying 20%. You follow? $2 million, $2 million, $10 million, $20. We get our money back along the way at an 80% structure, this FIFO, 80% of the money comes back in. So let's say that he does $6 million in revenue, profits $2 million, for example. Well, 80% of that $2 million is going to come back to us $1.6 million. Sounds fantastic. We almost got our money back in the first year, year and a half. That would be exciting, right? then once we've gotten the full $2 million back, let's call it two years into it, we then flip. So now we go back to our normal equity, which is 20%. We own $2 million at a $10 million valuation. Let's say he does $6 million again, net's around $2 million. We are now making, we're printing money at this $400,000 a year. That would be exciting, right? That's just the perfect example of a FIFO structure. Other versions are I put in $100,000, same $2 million total raise, same $10,000 in this example. I am an equity owner. I'm going to start making money along the way, but after, here's what's important, after the profit margin, what I'm really truly hoping for is a sale or an exit. I'm hoping one day Jayrock and his team get bought out by a management group or get bought out by a private equity group or they start to open up location two, three, four, five, and six in different cities, Chicago, New York, Miami, etc. What's important is when you're doing this type of angel investment, let's say $100,000, dollars. You have to be prepared to be in it for the long run. Sometimes you get your money back in a year or two or three. Sometimes you never get your money back. Sometimes it takes five years. You have to be prepared to put that capital in and prepared to be trustworthy of those type of operators. When they have experience, you reduce your risk. What most people don't understand is restaurant nightclubs, you have to love it and live it. You're going to be in there four hours before it opens and one or two hours after it closes day in, day out. It's not just on Fridays and Saturdays, a lot of these venues are open all week long. So keep in mind that you got to bet on an operator what I call ride or die. This person is willing to be there. Sunday mornings for lava brunch, Sunday afternoons prepare for opening, dinner setting for Sunday dinner, boom, now it's a nightclub and we're going to be open until two in the morning. You need someone that truly loves this business to want to invest into them. So J-Rock, brands come and go. Certain brands, like we've been mentioning, these legendary brands, excess nightclub, so many years, Tao group so many years, Marquis, so many years, Hakasun, so many years. There's certain brands that withstand the test of time. What do you think is different for those brands than the brands that come and go? You know, I'd say it's being able to adapt to the market. And, you know, we've gone through a lot of different changes throughout the country, you know, and it's about that adapting to change. Also, you know, being ahead of, you know, Tau has done major purchases of other nightlife groups and venues. You know, they've stayed, you know, really consistent on growing their EBITA, you know, and they've also, because they have the talent pool that they have, they're also now able to spread that talent pool throughout all of their venues, which saves them dollars, you know, from a Singularies type of a space. So they're able to spread their marketing. They're able to spread their network and those dollars across all these different cities because they have such a big footprint at this point. And a lot of these companies are doing. that they're building for the future. You know, it's really like what's your, what's your end goal here with this space? You know, are you looking to build it into multiple locations? Is it going to become a brand that you're looking to launch in that in that aspect? And they've done that with a lot of their, a lot of their key brands and been able to kind of keep those alive in multiple cities around the world. How do you choose now when people come to you? Because they know you've been in the game for a long time. They know you're an industry veteran. You've been through and seen all the ups and downs of so many different brands. You've done into multiple cities now. Let's say I had a brand. I said, you know what? I want to open up a high-end restaurant and on Friday and Saturdays. I to do this nightclub. But I actually want to do a sports bar on Sundays. And I also want to do like jazz night on Tuesdays. How do you decide to tell me bluntly, no, that's not going to work or you can't do all these different things? Yeah. So, I mean, every project we're going to do a deep dive market research on on the space itself, the area itself, on what you're looking to achieve specifically if it's jazz. or if it's sports, you know, really kind of understanding the comps that's like who's, who's in the market doing the same thing. And then also the viability of that, you know, in that city or in that area, you know, is jazz the right thing to speak to the right crowd? Right. It's a little bit probably skewed from 40 to 55 and is that your target market? Because if it's not, then, you know, you're booking the wrong stuff. Yeah. You know, so looking at the overall plan and trying to get you to a place where you're happy at the same time and maybe there's a a fusion genre, so it's more brought into the new school so that it's, you know, fresher for a younger audience, which we're trying to probably capture in the nightlife space. You know, so really kind of going through it and also understanding, you know, you know, what budgets we have. It's a big deal, right? Making sure that you have the right team alongside you from marketing perspective and all those other positions that you're going to need to operate. So for me coming,