> http://www.nydailynews.com/news/2007/07/08/2007-07-08_the_naked_truth...
>
> Special Report
>
> The naked truth about strip clubs
>
> BY WILLIAM SHERMAN
> DAILY NEWS STAFF WRITER
>
> Sunday, July 8th 2007
>
> Everything is dark walking inside from the street, straining the eyes.
> The music is loud rock with a throbbing bass.
>
> Slowly, the eyes adjust to see red walls, leather chairs and couches,
> a bit of fluorescence on the walls.
>
> Then, into the main room, in the bright light from above, a blond
> woman is dancing to the rhythm on a raised stage, naked save for a
> minuscule bit of lingerie, sinuous as a Slinky.
>
> Welcome to Rick's Cabaret in Herald Square, one of Manhattan's elite
> gentlemen's clubs, upscale from top to bottom; from the Kobe beef
> burgers to the flat-screen TVs, lobster and bottles of Scotch.
>
> This is the province of high rollers, a place where suits with expense
> accounts, rap stars and athletes such as Alex Rodriguez throw their
> money around - sometimes quite literally.
>
> High-end strip clubs offer prewrapped bundles of various denominations
> of cash, generally in $1,000 packets, for those who want to buy tips
> for the dancers and others who want to throw cash up in the air on the
> dance floor for anyone who grabs it.
>
> Rap stars and athletes popularized the custom, called "making rain."
>
> And then there are the women, "the product," as club entrepreneurs
> call them, the main attraction, often supernaturally attractive,
> available near-naked for a lap dance or conversation at rates that
> range from $20 for two minutes to $400 an hour.
>
> "One customer, a widower, spends $50,000 here a month, and no I won't
> tell you his name," said Eric Langan, the CEO of Rick's. "His wife
> died, he comes here, he feels he's the king. The loneliness is gone."
>
> "He always takes a VIP room," said Langan, referring to the secluded,
> curtained-off rooms on the third floor slated for more private
> entertainment and gatherings, including bachelor parties.
>
> There is no sexual contact with customers, management explains, no
> prostitution, no seediness like in the old-time strip clubs, and no
> organized crime hooks.
>
> Today, gentlemen's clubs in the city, and across the nation, are
> becoming big business and quite conventionally corporate. With profit
> margins up to 30%% they can rake in hundreds of millions of dollars.
>
> Rick's is part of a publicly traded corporation, Rick's Cabaret
> International Inc., with shares traded on the NASDAQ, and accountants,
> attorneys, Securities and Exchange Commission filings and a business
> model not very much different than WalMart, except for what's being
> sold.
>
> "For guys, it's male bonding, or an escape from reality," Langan said.
> "You want to believe this 19-year-old girl really loves you, is
> listening to you and maybe in another time, she could be your
> girlfriend. So you can spend $3,000 here and say 'Hey, I had a good
> time.'
>
> "We want you to come back. We want your money every week," he said.
>
> Rick's owns, operates or licenses, 14 adult entertainment clubs around
> the country, including venues in Houston, Minneapolis and New Orleans.
>
> Another such company, VCG Holding Corp., publicly traded on the
> American Stock Exchange, owns eight clubs around the country and
> manages another five - none in New York.
>
> The stock price of both - the only two publicly traded companies of
> their kind - have shot up remarkably over the last year or so. VCG,
> headquartered in Denver, is up 700%% from its low and Rick's,
> headquartered in Houston, has climbed 100%% from its 52-week low.
>
> Because they are publicly traded, unlike Scores and the city's other
> upscale gentlemen's clubs, Rick's and VCG must disclose detailed
> balance sheets: profits, losses, costs and investments.
>
> Those financials provide a unique look at the unusual economics of the
> modern strip clubs and the millions of dollars they generate.
>
> One factor boosting the bottom line is that unlike other businesses,
> there is no cost for the key labor force, the strippers. Quite the
> opposite, for the dancers pay the clubs for the right to work.
>
> The fee at Rick's is $100 a night, and in return, the women keep all
> the money they receive from customers, including credit-card charges.
> At Scores, better known and somewhat more luxurious, the dancers pay
> the club $300 a night to work.
>
> "They're independent contractors," Langan said. "We provide a safe and
> secure place for them to earn their money."
>
> He and Troy Lowrie, CEO of VCG Holdings, explained that the practice
> is accepted nationwide, and that dancers' fees account for about 10%%
> of revenues in their business model.
>
> The dancers say the fees, called "house charges," are a small price to
> pay when they consider their income.
>
> Jasmine, a lissome blond dancer at Rick's, said, "It works out well. I
> have a masters in psychology from LIU [Long Island University] and I
> need to pay off my school loans. Where else could I make $600 a day or
> more?"
>
> The other major revenue items are cover charges, food and alcoholic
> beverages, which provide the bulk of revenue.
>
> "Revenues at Rick's in New York were up 63%% in the first quarter,"
> said Langan, 39. He got into the business at 20, in Dallas, buying his
> first club with the proceeds of his rare baseball card collection.
>
> "It's all about the numbers," he said, quickly ticking off a few. The
> rent at the 10,000-square-foot club is $49,000 a month, he said, and
> gross profit margin on total revenues is about 35%%.
>
> Nothing is left to chance: To avoid day-after disputes with customers
> who decide they've spent too much, big-spending customers are
> fingerprinted, and sign separate approval forms for credit charges.
> Credit-card companies are telephoned in advance for approval on
> spending limits.
>
> And business is booming.
>
> "The top 30 clubs in the country are valued between $700 million and
> $1 billion," Langan said. "There's a lot of consolidation going on and
> we are expanding. I'd love to buy another club in New York."
>
> Lowrie has similar ambitions. "Our guidance shows us buying two more
> clubs this year and five more clubs next year because with our stock
> price, we can raise money and we have a pipeline full of potential
> acquisitions."
>
> There are about 3,600 strip clubs nationwide, Lowrie said. "And from a
> business point of view, it's all like Las Vegas was in the early '70s.
> Investors and banks are realizing that like gambling and casinos,
> adult entertainment and gentlemen's clubs are a legitimate business."
>
> "There's nothing we don't take into account," Langan said. "Club
> location, nearest competition, the legal environment in a city and
> zoning laws when we invest.
>
> "Ultimately though," he added, "you want to get into a market and
> dominate, just like any other business."