How do you select a location for a new stripclub? Here are the pro's and con's of existing buildings vs existing clubs and the facts about building permits.
Today we’ll discuss the advantages of purchasing existing stripclubs vs existing buildings, the costs and necessary information to make an educated decision.
sTRIPClub Acquisitions: Existing Clubs vs Existing Buildings
So what’s the best choice for a new stripclub: an existing building or another existing club? I’d say that most adult nightclub industry veterans prefer existing clubs, but this isn’t always the case. What if the given market doesn’t have available inventory that meets the buyer’s criteria? What we’re talking about here is selecting an existing commercial building which isn’t already a stripclub (I discussed the option to build in an earlier edition, which you can read below). While nearly any commercial building can be retrofitted to become a gentlemen’s club, the real question is what are the advantages and disadvantages of each? Here are some things to consider:
· The adult use permit – singularly, the most valuable industry commodity – has already been granted. This is also true if you’re intending to serve alcohol (and I can’t imagine anyone who wouldn’t). These are the vital components to getting into the adult nightclub business and they aren’t issued routinely. If the subject building you’re considering doesn’t have a full liquor license there are many options for pursuing this you may wish to consider another. Your attorney can provide you with the best advice.
· There is high potential value in purchasing a fully-fixtured building, i.e., one that includes stages, bars, VIP rooms, kitchens, restrooms, etc. It’s less costly to re-surface and replace existing fixtures than to start from scratch.
Existing Commercial Buildings:
· A specific building may be more suitable to your long-range plan.
· Although this type of building lacks (finished) definition, this may be its strength. Many existing stripclubs have stages and bars that are improperly situated. For instance, you’ll make far more money if you have a multi-sided island bar than any bar that’s propped against a wall. I covered this discussion in an earlier blog post which you can read below.
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As you can see, either building type can be an advantage (or disadvantage) depending on your short-term and long-term goals. The common thread with either selection is that new ownership will bring changes that will trigger a building permit. Building permits can be nearly impossible to acquire in certain markets. Evaluating other clubs in your target market, particularly if they’re relatively new, may provide a clue as to the receptiveness of the local building department.
What STRIPclub Owners Need to Know About Building Permits
Whether your decision is to purchase an existing commercial building or an existing stripclub, each generally requires change. As evidenced by the ‘Generation Next’ theme of the 2011 Gentlemen’s Club Owners EXPO, the adult nightclub industry is in a transition phase, where older clubs are either being taken over (by children of the original owners) or sold. Many of these clubs haven’t had significant capital improvements for many years. In order to update an older club, some cities will allow you to decorate, and avoid a building permit. This would tilt the scale heavily in favor of purchasing an existing adult nightclub. The requirement for building permits varies from city-to-city. If your preference is to acquire an existing commercial building, without doubt this will require you to pull a building permit.
Building permits serve as a check-point for building departments, enabling them to verify implementation of the latest major code changes. A few of the more notable changes many new club owners can anticipate are:
· ADA compliance, which deals primarily with accessibility issues, such as proper clearances and fixtures in restrooms and proper parking lot accommodations. The restrooms of nearly every existing gentlemen’s club I’ve seen are not in compliance with ADA standards.
· Energy code compliance mandated by the Clean Energy Act of 2007, imposes new standards on buildings under 5,000 sq.ft. and additional requirements on buildings over 5,000 sq.ft.
Bars are best if they’re accessible to all patrons. If the stripclub you’re considering has a bar on a platform, get rid of the platform! ADA now requires that you have at least one seat at your bar for wheelchair use. I have a very simple solution for this.
I’ve covered both of these topics in earlier blog posts, which you can reference below. Some people are of the opinion that buildings over 5,000 sq.ft. will trigger the need for an automatic sprinkler system. For the record, the International Building Code requires this in new nightclubs over 5,000 sq.ft. (referred to as ‘Assembly A-2’), but I haven’t personally experienced this on any major club remodeling project. One thing that’s true about the building code and the way it’s implemented is that each building department seems to have particular items of interest. The best thing any owner can possibly do is develop a working relationship with the local building authority. They are very likely to work favorably with you if you’re upfront and honest.
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sTRIPClub Ownership: How Is It Accomplished?
I’m certainly neither a legal expert nor a real estate expert, but I have some information to help you get started. First, I’ve been told by clients that banks will only provide limited financing, as the banking industry is not favorable to the stripclub sector. Leasing would seem to be the preferred method for those new to the industry. According to my good friend and industry real estate expert, Winston Hines. owner of HWH Properties ((864) 580-3826), any offer to lease or purchase should contain the following four clauses:
1. The agreement is subject to the lessee (or purchaser) successfully acquiring an adult use permit, as well as a liquor license.
2. That the building will be able to receive a building permit for the intended modifications (applicable to regular commercial buildings).
3. In the case of a lease, the landlord must agree to the building’s intended use (applicable to regular commercial buildings).
4. A walkout clause.
You should also know upfront whether the building’s parking lot has the required number of parking spaces to match its occupancy. In more populated areas it’s common for gentlemen’s club owners (as other nightclub owners) to secure supplemental parking agreements (with the owners of other commercial buildings in the given district) to satisfy the city’s requirements.
The adult nightclub industry looks deceivingly simple to enter. Whichever type of building appeals to you, the last thing you want is to fall into the trap of the numerous ways that will kill your deal or run you into financial exhaustion. There are many issues that can surprise and disappoint you. Being prepared is essential to becoming an adult nightclub owner. The best money you’ll ever invest is with a first amendment attorney who can guide you through all the critical issues unknown to most. Several notable attorneys have significant industry knowledge and acclaim, and here’s a short list:
· Clyde DeWitt (702) 386-1756
· Luke Lirot (727) 536-2100
· J. Michael Murray (216) 781-5245
· Brad Shafer (517) 886-6560
· H. Louis Sirkin (513) 721-4876
· John Weston (310) 442-0072
In closing, the value of acquiring an existing gentlemen’s club (with adult licensing and liquor permits) offers the most streamline path to getting into the industry. The value of this licensing varies regionally. Existing buildings offer more flexibility, but require greater capital. In my opinion, it would seem logical to pursue all existing clubs before looking at other commercial buildings. I wish you the best of success!
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