#1238 Eric Langan | The Man Building $1 Billion Night Club Empire

Eric Langan is the President, CEO, & Chairman of RCI Hospitality Holdings. They are a publicly traded company that owns bars, restaurants, nightclubs, and strip clubs. In this conversation, we talk about how this business works, revenue streams, margin, tech products, M&A, the streak of 31 consecutive quarterly cash dividends, private jet, and what they think about the rise of loneliness in young males in America. ======================= Sign up for a StartEngine account today using the link below and explore live investment opportunities where you can start investing with as little as $100:⁠⁠⁠⁠https://invest.startengine.com/?utm_source=podcast&utm_medium=anthonypomp&utm_campaign=startengine-own⁠⁠⁠⁠ The information provided in this marketing material is for illustrative purposes only and should not be considered as financial advice. Past performance, including the success of certain individuals, is not indicative of future results. Investing in any market, including startups, involves risks, and there is no guarantee that similar opportunities will yield comparable returns. Number of Users is determined by counting user profiles with unique email addresses which are active and have been confirmed*Includes $760M in funds raised as of May 9, 2023 via Reg. CF and Reg. A+ combined through StartEngine’s funding portal and broker dealer, StartEngine Capital, LLC and StartEngine Primary, LLC respectively, as well as StartEngine’s own raises. Also includes $470M in funds raised previously through offerings conducted on http://www.seedinvest.com outside of the StartEngine platform. In May 2023, StartEngine acquired assets of SeedInvest, including email lists for SeedInvest’s users, investors and founders seeking to raise funds. ======================= Get Better Crypto Data: Do you want faster, easier crypto data? Sign up for Velo Data, a new product that we have been working on to solve this problem: ⁠⁠⁠velowaitlist.com⁠⁠⁠ ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Eric Langen is the President, CEO, and Chairman of RCI Hospitality Holdings, a publicly traded company that owns bars, restaurants, nightclubs, and strip clubs. In this conversation, we talk about how this business works, what are the revenue streams, how does he think

• 0:44Anthony Pompliano?

  about margin, why they're building certain tech products, how he thinks about M&A versus building from scratch, the streak of 31 consecutive quarterly cash dividends, why they have a private jet, how he learned to fly, and what they think about the rise in loneliness among young males in America. I really enjoyed this conversation with Eric, and I hope you guys enjoy it as well. Here is my conversation with Eric Langen. This episode is brought to you by StartEngine. The biggest fortunes aren't made on Wall Street, they're made way before startups hit the stock market. Consider Mike Walsh. He was just a regular guy, but then he invested $5,000 into Uber, and that investment money it grew to a staggering $24.8 million. Such opportunities were once behind closed doors,

• 1:29Anthony Pompliano?

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• 2:15Anthony Pompliano?

  Before we get into this episode, I also want to tell you about a brand new product called Velo. Velo is faster, easier crypto data. Everyone in the industry is always looking for, what's the price? What's going on on the exchanges? Where are assets flowing or not flowing? How is things like open interest and derivatives actually playing out in the market? Well, that's where Velo comes in. It's faster and easier crypto data. You can go to velowaitlist.com today. Myself and a couple of friends, we invested in the business. We're advising the founder and we think it's pretty cool. This one is something that keeps me informed on a daily basis. So you should check them out at velowaitlist.com. That's V E L O waitlist.com.

• 2:59Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:22Anthony Pompliano?

  All right, guys. Bang, bang. I've got Eric here with me. Eric, I thought a great place to start is you guys own a ton of nightlife restaurants and strip clubs. What exactly is the business model for these strip clubs? Is it just ticket sales and then some sort of fee that you're taking from all the tips and kind of the girls earnings? Or what exactly is the business model for these nightlife establishments?

• 3:43Speaker 02

  Well, the business models obviously sell alcoholic beverages and food merchandise, the VIP room rentals. You know, of course, you know, up sales of, you know, premium, premium liquors, tobacco products. I mean, we, we, we sell basically everything. We can't cover charges. There's lots of, lots of ways to make money in our, in our industry.

• 4:08Anthony Pompliano?

  Is there anything that would stand out for people who aren't familiar with the business in terms of something that's much more high margin than they would think? Or is it really just alcohol sales and kind of the things that you would assume are the high margin items?

• 4:21Speaker 02

  I mean, typically we're 40, 40 some percent alcohol sales. Excuse me, 40 some percent service revenues, which are, you know, cover charges, VIP room rentals, dance dollar commissions, stuff like that. And then the rest is basically food and merchandise, which is typically eight to 12%.

• 4:42Anthony Pompliano?

  Got it. And then how do you think about marketing in today's day and age, right? You have these kind of establishments that a lot of folks would say, obviously, the American economy is going to continue to use all sorts of different vices, et cetera. But at the same time, we have these new tools where you can use social media, you can use, you know, email newsletters, all that type of stuff. How do you guys think about, you know, kind of old industries that obviously are still as prevalent today as they ever have been, but there's new the marketing channels to go ahead and leverage?

• 5:12Speaker 02

  I mean, we, most of our marketing is sold to me now, whether it's Google's keyword searches, whether it's, you know, TikTok videos, whether it's, you know, my, my personal Twitter account, I actually, you know, my Rick CEO Twitter account is, is a big part of marketing. I'll, I'll post that, hey, I'm going to be at the fight tonight at Scarlet's in Miami. Anybody want to come have a drink with me? And, you know, when I first started doing that a year ago, I'd get four or five people show up now, I mean, you know, sometimes we get 20 plus people show up, hang out, you know, we drink, we watch fights, we hang out with the girls, have a good time. So it's, you know, all these methods are, have been fantastic for us.

• 5:52Speaker 02

  Instagram, I know a lot of the entertainers and waitstaff, you know, have big Instagram accounts and big Instagram following the feature entertainers. We're starting to embrace more of these feature entertainers because they have, you know, three million, five million, eight million plus followers, you know, following their accounts, following them, you know, around the country. They do clubs all over the country. And when they come into a certain market, their followers in that market, and sometimes people travel to see them. It's, it's actually been really amazing to see the, the scope and level that these entertainers as far as followings have.

• 6:31Anthony Pompliano?

  Yeah, well, what's fascinating to me is just looking at this from a pure business perspective is there, there's a number of different things you all have to deal with or have to kind of navigate that I think other businesses are going to have to navigate two, five, 10 years from now. And so one of these you're hitting on right now, which is that the folks who are coming into these nightclubs.

• 6:50Anthony Pompliano?

  They are employees, they may be contractors, but they actually may have bigger megaphones than you all have as an individual business or establishment. And so how can you leverage it? And then also, like, what are the things that you wish you could do, but because you don't own the channel, you can't actually use it to promote the establishment?

• 7:07Speaker 02

  I mean, they absolutely have a bigger megaphone than we do. You know, one of the, I think one of the challenges in the future is making sure that your influencers are happy that work in your business because they're influencing a lot of your business, right? If they're unhappy, they're going to influence it that way. If they're very happy, they're going to influence, you know, in a positive light. And so these influencers are growing, the amount of influence they have is growing, especially in the demographic 35 and under. Traditional radio doesn't work anymore for very many demographics, maybe some of the Hispanic

• 7:48Speaker 02

  market, you know, radio is still good for Spanish speaking clients. But other than that, I mean, it's all on demand. It's all streaming. It's all immediate. And if you don't have ties into that, you know, I guess that marketplace, how are you going to draw those customers into your business? I think we're seeing it everywhere. And I think you run risk, right? Because now you've got to be careful politically, you've got to be careful, you know, socially, and you've got to be careful who you back and who you use to influence your customer base, because if they

• 8:30Speaker 02

  influence them, you know, the wrong way, you know, you're going to have negative effects from that. So it's a much more complicated landscape than we've ever faced in the past, where you just caught up the newspaper and put an ad in the sports section, right? Those days are gone.

• 8:47Anthony Pompliano?

  Yeah, one of the things that, you know, as I was kind of thinking about this conversation is you have the blessing and the curse. You've been doing this a long time, right? 20, 20 plus years as a

• 8:57Speaker 02

  Almost 30.

• 8:58Anthony Pompliano?

  Public company.

• 8:59Speaker 02

  Yeah.

• 8:59Anthony Pompliano?

  Yes. Yes. You've been doing the, in the industry for 30 years.

• 9:02Speaker 02

  20 years as a public company, 28 as a public company and about 36, 37 years total in the industry.

• 9:08Anthony Pompliano?

  So if you think about that, like you have a bunch of institutional knowledge, you've got a bunch of stuff over the years that you've learned and kind of perfected and become an expert. At the same time, technology shifting, the market shifts, you know, that there's different political climates, et cetera. How do you stay kind of on top of the new stuff while also understanding what to take from the experience and the expertise built up over decades to continue to build out a great business?

• 9:31Speaker 02

  I say the best part is our, our, our staff. You know, the majority of our employees, majority of our entertainers are 18 to 30 years old. And, and, you know, if, if they've been in the industry past that, they're typically moving into management or moving into, you know, other positions in the company. But we still have the majority, 80% probably of our, of our, our staff is under the age of 35 for sure, probably under the age of 30. So we're very in tune and we listen and we talk and, uh, you know, we have to take guidance

• 10:09Speaker 02

  from, from, from these new generations on how things are working for them, how their peers are, are viewing, not just our industry, but just, you know, how they're going to spend their money, where they're going to spend their money and why. You see a major shift from, uh, you know, material possessions to experiences. And I think that using social media and using our current staff and entertainers to get that message out that we are an experience to be had, not a product to, you know, to take home, so to speak, is, is doing wonders for our, for our business overall.

• 10:44Anthony Pompliano?

  Now, one of the aspects of the business that you seem very concerned with, very obsessed with is free cash flow. And obviously, given kind of the rise of tech companies over the last decade or so, it's been growth at all costs, but growth really of equity value. How can I appreciate the capital but not necessarily drive free cash flow? Talk a little bit about what you all are doing inside the business to continue to optimize for that free cash flow.

• 11:07Speaker 02

  Sure. Well, you know, prior to 2015, we were operating like a tech company, growth at all costs. Let's buy this. Let's say, you know, yeah, it's not making as much money, but we'll grow our revenue. We'll grow our revenue and our free cash flow, especially on a per share basis, was stale for about three years, stuck at around 14 to 15 million dollars. In 2015, we developed our capital allocation strategy and said, look, it's not just what we do on a top line, how do we get that to flow down? And we want about a 20% free cash flow margin at the bottom line. So if we do a dollar revenue, we need to get 20 cents in free cash flow from that, from that sales.

• 11:51Speaker 02

  And so we started really reevaluating everything. It started with assets and, you know, invested capital. We sold off a bunch of clubs. We weren't making the money. We changed, re-reformatted. And we really started focusing on free cash flow. We locked down our equity. We paid off all convertible debts. We stopped warrants. We stopped, you know, stock options, anything that would dilute our capital structure. We went from total outstandings, we started buying back stock because our, you know, our free cash flow yield was over 10%. So we went from 10.8 million fully diluted shares down to 9.4 million that we're at today.

• 12:29Speaker 02

  And when the stock's below a certain threshold, we continue to buy back stock. If that's what we think is, you know, the best use of the capital. We've been in stock buy, we bought some stock back in the last quarter. We're going to be buying stock in this quarter, you know, with our stock at what sixty five, sixty six dollars a share now. So we will continue to to follow that capital allocation strategy, but what was really, I guess, transforming for me was at first it was just the assets. Then we started looking at the human capital, right? If we're paying a person X, what are they doing to bring in future revenues, right? And that really changed what I call the entitlement

• 13:12Speaker 02

  culture at our company or any company, really, right? Oh, I've been here for twenty five years. I've done all these great things for the company, and I'm entitled going forward to continue, you know, collecting that money forever.

• 13:28Speaker 02

  And which is fine to a to a point, but at some point, you're bringing negative ROI, and so we have to figure out, you know, what you're gonna do to bring forward. And I think, you know, I ask myself that question all the time. What am I doing? If I'm gonna get this much pay, yes, I did all these great things for the company. I've been paid for doing those great things for the company. And if I want to continue to get that pay, I have to continue to do great things for the company. And has that really moved through our culture in two thousand sixteen, two thousand seventeen? You really kind of saw as we, right before COVID hit, we were in our stride, right? We were now sprinting down the down the runway, so to speak, and

• 14:10Speaker 02

  COVID hit, we had to reevaluate, we had really taught us the next lesson of how much fat can we cut? How much fat do we really have? How many things were we doing? How many processes do we have in place? How could we lower costs of processes? Were we renegotiating every single aspect of every dollar we spent? And during COVID, we had to do all those things. And so now every year, we sit down. And we go through and we question every dollar we spend, especially if we're, you know, getting to the point where our free cash flow margin is not 20%. We want to keep that free cash flow margin both through it about 20%, 30% EBITDA, 20% free cash flow. And so that's our, that's our internal goals.

• 14:55Anthony Pompliano?

  Talk about the stock buybacks. One of the things that over the last couple of years has obviously become much better known is some of the best performing stocks, some of the best performing CEOs, they did a fantastic job on the capital allocation front. They bought back stock when it was cheap and it was able to kind of engineer a financial return for investors that was very, very attractive. And so being able to pull down your shares from just under 11 million to, you know, kind of just under nine and a half million now. Is there a number that you're trying to get to eventually? Is there such a thing as having too few shares out in the market? Like, how do you think about, you know, taking it to the extreme on the stock buybacks?

• 15:30Speaker 02

  Well, if you have too many shares, you just split, right? I mean, I can make more shares tomorrow. Just split the stock price, stock price cuts in half. There's twice as many shares outstanding when we buy back, we're buying back at a lower price. But, you know, we can keep, we can keep the count up as high as we want. It's not, to me, it's not about the count. It's about how much free cash flow per share are we generating? And so we take our free cash flow versus our, you know, our number of shares and we, you know, you end up with a, with the free cash flow yield of, of, you know, we, it's over 10%. We tend to buy back stock more. If it's under 10%, we tend to, you know, make other acquisitions. When it gets down to 6% to 8%, we'll use it in, we'll use it in transactions. Like the last transaction we did in March where, you know, we issued shares at $80 per share, you know, $16 million of

• 16:13Speaker 02

  the stock, 200,000 shares. We just bought all those shares back under $60 from a previous acquisition. So we used 200,000 shares in one acquisition. We bought them back. We issued them at 60. We bought them back under 60. And then we turned around and issued them at 80. When you're doing those types of things, very accretive to the free cash flow for, for existing shareholders. And I think, you know, like I said, at financial advisors, you know, grow, grow, grow. And, you know, equity was cheap because you didn't have to pay it back. Well, actually, your equity is the most expensive thing you can, you can issue if your, your, your free cash flow yield, if you're buying stuff at a, at a, at a, you know, lower yield than you're yielding on your own current assets, you're basically trading some of your own assets to, to, to acquire new ones. And that didn't.

• 16:59Speaker 02

  Once I figured all that out, it just didn't make any sense. And I think it's a, you know, it's a common mistake out there in growth companies that you must grow and you must grow and you must grow. And, you know, we've come to the point where, yes, we must grow, but we must grow right. We'll pass on transactions if they don't make sense. If the math doesn't work, if we don't feel confident that it'll add to our free cash flow per share, we'll, we'll, we'll walk or pass on a transaction or an acquisition. We're building new stuff, but on our new stuff, we demand cash on cash returns of 25 to 33%. We will use leverage returns. I mean, if I'm using bank financing, but I own the real estate, to me, that interest

• 17:40Speaker 02

  expense is just rent, right? And, and my rent goes down because every time I make a principal payment, my interest expense decreases. Whereas average, you know, company out there, restaurants, chains, whatever, they're leasing everything. And so their rents continue to go up, right? Two percent, three percent every year. I tend to get five year fixed rates or my, my rents could go up, you know, in five years because my interest expense could be, could go up. But right now, we're locked through about 2026 on most of our financing. We will be looking in, in 20, middle of 24 through the middle of 25 on, you know, what we're going to do on a refinance of that real estate. If the interest rates are low enough, we can,

• 18:24Speaker 02

  we can pull cash out, but something that, you know, your landlord doesn't give you any of your money back or let you borrow any of the money back to, to, for future growth. So I think our real estate has become an incredible asset for the company in that regard as well.

• 18:39Anthony Pompliano?

  When you start thinking about M and A versus building some of these facilities, what is that really? Is it just come down to pure financials? Or are there certain things that you also incorporate into that decision making?

• 18:50Speaker 02

  No, I mean, it's basically fifth grade math, you know, everything goes on. I don't, like I said, get back to free cash flow. Uh, the issue is I can't guarantee a growth rate of 10 to 15% with acquisitions alone because I can't tell you when I'm going to get licensing approvals, when someone's going to be willing to sell to me at a price that I'm willing to pay. And so we look for ways to grow organically through the building of the new Bombshells Restaurants, maybe a new club here or there. Of course, now the casino properties that we're doing, uh, in Central City, uh, Colorado. And so we, we want to have

• 19:28Speaker 02

  the organic growth combined with the acquisition growth so that we can steadily and consistently grow our free cash flow per share at a 10 to 15% clip. Uh, when we were doing 75 million dollars, uh, in, in sales, 10 to 15% growth was not that hard. But in 15 million, you know, 15 million in, in free cash flow. But now that our free cash flow is, you know, getting into 60 million range. Now you're starting to have to buy a considerable amount of, of new, new EBITDA to convert down into that free cash flow and, and keep that growth rate going. Where we're getting to 80 million, 100 million, 125 million in, in, uh, in free cash flow. So it does get more difficult, uh, and especially to do it just through acquisition.

• 20:12Anthony Pompliano?

  Yeah. So there's more details here that I think, uh, people who are unfamiliar with some of these, uh, decisions, they're not quite aware of. So for example, you guys have Bombshells, uh, which is in Texas, I believe. Um, and for, uh, the kind of a layman description, it would be like a Hooters, but more military themed. Um, and it's a chain, uh, restaurant. Now, when you look at that, uh, location, you can go and you can build a, or, you know, a, a 27th or whatever it is, location, a 28th, 29th, the 30th location. You're basically taking an existing brand that you know works. You've got a system in place and you're essentially creating just another location, an extension of that. Versus if you were to go in and try to build a brand new brand, a brand new location, a brand new concept in some city somewhere and start from scratch.

• 20:54Anthony Pompliano?

  It would seem like the Bombshells kind of just another location would, uh, uh, be easier decision, right? Cause you kind of have a lot of stuff already figured out. But is it lower return profile versus building a brand new nightclub, for example, and, and a new concept, new brand in a new city? Like, how, how do you think about risk and reward when it comes to where you're going to go build something that?

• 21:14Speaker 02

  Sure. So with the clubs, obviously have a moat, right? No one's going to come compete with me anytime. With Bombshells, you know, you've got other brands out there that can come and build and compete. And so your longevity is not guaranteed as long as the nightclubs are. So we prefer the adult nightclubs when we can do them. But also, the Bombshells are not inexpensive to build. So to build a quality competitor has to be willing to spend, you know, a similar amount of money. And they have to be willing to come in and try to directly compete with us as well.

• 21:45Speaker 02

  So you know, there's a little bit of a moat there.

• 21:49Speaker 02

  Plus with the Bombshells, we're able to get bank financing. We buy the real estate, we're able to get bank financing on it. So our out front cost about 25% cost of the restaurant. So if a unit is $6 million to build, you know, we only have to come up with a million five in cash. Typically, we cash on cash return that anywhere from 14 months to 38 months. So our cash on cash returns meet our criteria of 25 to 33%. Sometimes it's 100%. We've had units. I've also had units where we built everything out in cash, then gone to the bank, got an appraisal on the property. And we pulled $400,000 more out of the bank loan than we spent to buy the land and build the entire thing. So we're $400,000 cash on cash up day one.

• 22:33Speaker 02

  Every dollar we make out of the restaurant is just, you know, infinite return, right? And so that's one of the nice things I think about Bombshells. We're going through a tougher time because we have really hard comps. We were one of the few places that opened immediately. We had all of our stores reopened by about May 15th after closing March 1st. So we weren't closed for very long with Bombshells. We're one of the few things open. Our sales were absolutely fantastic for about two or three years. So we're running against incredible comps. Against, you know, 100 degree heat outside in Texas right now. We're a patio, not door patio is a major portion of our late night business where we bring in DJs and turn our patio basically into a nightclub in the evenings. And so that business is suffering.

• 23:16Speaker 02

  That's all, you know, 40% plus margin business. It's all appetizers and alcohol.

• 23:22Speaker 02

  But you know, still in the last quarter, we made 1.7 million dollars. According to that, we made 1.9 million dollars. We're already cash on cash, over 100% ROI on our cash and cash investments and all the Bombshells. Concept's over 10 years old and we're building in another, in Houston right now, we're building in a Dallas area, we're building in Lubbock, Texas. We're building two locations in Denver now. So we'll be expanding into Colorado as well as a Bombshells Sports Casino that we're going to be building up in Central City with a full Bombshells restaurant in it. So a lot of exciting stuff for that concept. And like I said, the ROI on it is great. It's just been very difficult this last 12 months or so. But

• 24:06Speaker 02

  the comps will, eventually, we're going to hit the lower comps and things will get back to normal. And we should run 18 to 22% margins. Our margins are a little squeezed right now. We've been a little slower in bringing down our costs to the level because we kind of hoping the business would rebound. If it doesn't, we'll adjust accordingly as we're doing it this current time and bring everything back in line. Our catio business should come back as soon as the weather breaks and we'll be back to normal.

• 24:34Anthony Pompliano?

  And then when you start thinking about regulation, obviously, when you run a restaurant, you got the liquor license and things there. When you think of the nightclubs and those establishments, you've got a bunch of regulations you got to deal with. And then you start talking about casinos, there's all the gambling and it seems like the United States is becoming more receptive and sympathetic to gambling. But how do you navigate not only just regulation in general, you actually have three different types of regulation that you're having to deal with here, right? And it's highly complex, but you also got to run a business. You got to keep margin. You got to keep growing. Like, this is not as simple of a business, I think, as people may think on the surface. And so talk a little bit about the regulation, what you guys have done there.

• 25:13Speaker 02

  Well, you corporatize everything and you have processes, right? Uh, we have in-house legal counsel with, you know, three paralegals that work for a company full-time. You probably have nine outside law firms that we deal with on a, on a, you know, weekly, monthly basis. Uh, so you use a lot of lawyers, obviously, uh, but you create a lot of systems. Uh, we try to, uh, use technology to the best of our advantage to track and keep track, you know, uh, ERP system now in our accounting office that we can run financials and get data in seconds. Uh, versus the old spreadsheet days where, you know, it took a week to get, you know, if I wanted to know something, that'd take me a week to find out. Now I can get it in seconds.

• 25:55Speaker 02

  Uh, inventory control systems, uh, you know, I can tell you, I, I can go push a button and tell you how many bottles of any type of vodka you want to know, any certain whiskey you want to know. How many did we, how many did we buy in the last month, the last week, last 12 months? Uh, and so that data gives us, uh, unbelievable control and power over, uh, negotiations with vendors, for example, keeping our costs down, national buying power. Uh, you know, with, with, whether it's Coca-Cola or it's Pepsi, whether it's, uh, you know, Southern, Southern Wine and Spirits or Republic or, uh, you know, the different brands, we can go to different brands and say, you know, you want, we'll, we, we sell this amount of this brand

• 26:40Speaker 02

  and X amount of your brand. What could we do, you know, what would it be worth to you if we can get your brand from 1,000 cases to 3,000 cases? Uh, and, and, you know, here's how we would do it through our VIP, uh, VIP menus, uh, those types of things, you know, what kind of marketing support could you give us? Uh, you know, there's, there's laws that don't allow them to actually give us money, but, uh, but there are ways for them to help us sell their product. And if they're helping us sell their product, it makes our jobs, or makes our jobs easier.

• 27:13Anthony Pompliano?

  Yeah, that makes a lot of sense. And then when we think of kind of other parts of the business, technology is a huge piece. You're here talking about kind of inventory management and really having kind of granular understanding of what you guys have ordered, what you could order, what various sales are. But you've also built out a certain number of other products or services. So things like you essentially have an OnlyFans competitor to some degree to allow the entertainers to have direct connections with kind of their fans or their audience. Talk a little bit about the technology initiatives that you guys have underway.

• 27:43Speaker 02

  Yeah, well, that one's being developed right now. We're trying to get a product that we can actually live launch and really put some money in influencers behind. We do have some feature entertainers we're starting to work with to start to load some content on the site. We'll probably start buying and directing traffic to that site very, very soon. The idea is that not only, you know, if you're on a convention in Denver, for example, and you meet, you know, Suzie at the at the at the club, and then you go back home to Idaho, and you want to stay in touch with her, now you can follow her on her fans website at admire me.com and keep in touch. And then the next time you're in Denver, you can you can you come by the club and see her again.

• 28:27Speaker 02

  You know, and so it also helps our entertainers build not only their in-club presence, but I hope them build a business online as well to give them additional sources of income and revenue.

• 28:40Anthony Pompliano?

  Yeah, that makes sense. And then how do you think about how much of that is going back to just kind of serving the entertainer and trying to provide a place where they want to continue to work and come to the various clubs, etc., versus it's a revenue optimization? And it's, hey, how do we get money flowing through this and get transaction volume so that we then can take a fee and drive real revenue?

• 29:01Speaker 02

  I mean, I think the reality of it, it's it all feeds each it's all feeds at each other, right? I mean, one doesn't work without the other. And so I always have a saying with everyone, if you want, if you want more pie, we don't take somebody else's piece, we make the pie bigger. And I think admire me as part of making that pie bigger, right? We don't need to, we don't, the girls don't need to take our money, we don't need to take their money, we just need to make the pie bigger so that everybody is getting additional, you know, additional money that way.

• 29:30Anthony Pompliano?

  Yeah, that makes sense. Private jets, I know that you are a pilot. It's something that you for a long time have been very passionate about. Talk about one, why is it so valuable for you guys to use the private jets and kind of get from location to location? How, how do you think about saving time and money from that standpoint?

• 29:46Speaker 02

  Well, I mean, you know, I could leave my house right now and be in Denver in two hours and 40 minutes. I can be in New York in probably two hours and 55 minutes. I can be in Miami in probably two hours and five minutes. With all the locations we have, and the real thing is I can travel at any time, day or night, right? If I want to go stay at the club till three o'clock in the morning and then jump in the plane and be home and be at a meeting at seven o'clock or eight o'clock in the morning when I get home, I'm able to make those types of things happen. If we get a call, you know, oh, hey, there's a club for sale in Milwaukee. You know, by the time I would

• 30:24Speaker 02

  book a flight, get to the airport ahead of time, check my bags, get my bags, uncheck my bags, pay for hotel rooms, all that type of stuff, because I can't get a flight back on that same night. You know, it's just, it's just a convenience and a quality of life thing as well as, you know, we're fast, right? If we need to react or move something fast, we can do so.

• 30:47Speaker 02

  You know, the overall cost, when you look at the tax benefits of corporate aircraft and some of the other things that, I mean, I'm not going to act like it's cheaper to fly in a private jet than it is commercial, but it's competitive. Especially the smaller plane, and we have a, you have a Vision jet, a Cirrus Vision jet, which now fuel burns about 70 gallons an hour, does 300 miles an hour. So if you do the price, you know, price per hour, that's a dollar something an hour or a dollar something a mile. It's, you know, it's not, it's not crazy, but it allows us to get, you know, I have 27 locations in Texas. It allows us to get, if we need to get to Odessa, Texas, I can be in Odessa, Texas in an hour or so.

• 31:28Speaker 02

  I can be in, you know, if I have to be in El Paso, I have to be in Austin, Dallas, you know, I can be in any of those cities very, very quickly.

• 31:36Anthony Pompliano?

  And then part of what I think is the most shocking is you're flying the plane yourself. Like you don't have a pilot normally flying you. Usually it's you flying?

• 31:46Speaker 02

  Usually, I mean, I've had, I, I, I only started flying about 13 years ago. I bought my first plane in 1991.

• 31:54Speaker 02

  So I flew in the back for a long, long time.

• 31:58Speaker 02

  But, you know, I have learned to fly about 13 years ago. Discover the freedom of it. Now I don't have to worry about pilot. I don't have to worry about, you know, if it's three o'clock in the morning, has he been sleeping? Has he been drinking? Can I get out of here? I need to be somewhere. And so that freedom to me is invaluable. Yeah, I gotta go to flight training every year twice, you know, for, well, two times a year because I got two different, we fly two different types of aircraft. I have two different type ratings. So I have to go to flight training for those. I have to, you know, stay current. I have to fly a certain amount, but I mean, we, I probably fly 200 hours a year on average right now. So it's, it's not, it's not really an issue.

• 32:41Speaker 02

  To me, it's, you know, everybody says, well, gosh, you're gonna go, you know, you're gonna go fly. It's two hours. I said, you're gonna drive an hour 15 minutes home. If you live in New York City, you know, or if you work in New York City, you live outside the city, you're gonna drive an hour 15 minutes home at four o'clock in the morning. I'm gonna get in a plane and fly for an hour 45 minutes. Who cares? You know, it's not, it's just my car, right? I mean, that's the way I look at it.

• 33:00Anthony Pompliano?

  Yeah. There's a Forbes interview that you gave a couple of years ago and in it you talk about loneliness. And kind of this idea that many of the people who come into the nightclubs, et cetera, they don't have a lot of friends. They, they're coming in for something that isn't, you know, material possessions. Talk a little bit about what you've seen there and maybe the contribution of the pandemic and people being locked at home and now trying to come back out and, you know, kind of reintegrate as a society.

• 33:29Speaker 02

  Yeah, I mean, I try to say, you know, everybody thinks that you're in the sex business or I mean, the sex appeal is definitely part of our business, but the reality is we sell human interaction. I mean, if you look at the, if you look at the numbers today, the birthing rate's down, right? The, uh, the number of men under the age of 30 that, you know, aren't sexually active, uh, you know, don't want to get married, don't want girlfriends, don't want, you know, so where do they, what, what is their release? How do they, how do they create that human interaction? Uh, and they don't know how, they spend so much time on computer screens, they don't really have the social skills. The beauty of going to a strip club is the girls have all the social skills that you need, as I would say, you know, to a customer.

• 34:13Speaker 02

  So a guy can come in, I mean, we've done a couple of big parties, uh, when we were launching our NFT project and, you know, in Miami, we had a bunch of guys come in, uh, for the NFTs and, uh, you know, they're very excited about crypto and the NFTs because crypto is very big in Miami. And they come into the club and they'd be like, you know, wow, I didn't know it was like this. This isn't what I expected. He goes, how come the girls are so friendly, you know, or am I, why do the girls like me so much? I was like, well, you know, it's, it's, it's, that's their job, right? That's what they do. Uh, he goes, yeah, but it seems, you know, they're, they're very sincere. I said, well, because they genuinely want you to have a good time. They're not, you know, they, yes, they want to make money, but they also, they're having fun.

• 34:58Speaker 02

  This is a fun job for them, right? I mean, do they want to go sit in an office or in a cubicle or do they want to, you know, come drink and hang out with guys and have a good time and, and, and make money? Uh, so I said, it's a, you know, it's a win-win for everybody in that regard. Uh, and I think it helps, you know, it's amazing how many guys are actually afraid to talk to a female. It's like, guys, just go talk to her. I mean, well, she's pretty. I said, well, go talk to her. Well, she's too pretty for me to talk to. I'm like, there's no such thing as someone being too pretty. She's over there thinking you, that she's not pretty because you're not, you're not, you're not paying attention to her. You don't like her. Now she thinks something's wrong with her. You know, she's getting a complex, so you get, it's, you go talk to her.

• 35:40Speaker 02

  And, you know, it works out, uh, it works out pretty well for everybody, I think, in the end, so.

• 35:46Anthony Pompliano?

  When you start to think about kind of the business, it's gotten much bigger over the last couple of years. Where do you envision this going? What is the plan or kind of your future goals in terms of growing the business from a revenue and profitability standpoint, but also expansion? Is it going into more of the gaming stuff? Is it just more restaurants and nightclubs? How do you think about this?

• 36:08Speaker 02

  I mean, everything complements. Basically, the business we're in is the alcohol sales business, right? We're in the nightclub bar business. We sell, we sell alcoholic beverages, and that's where we make the majority of our money, probably. Definitely margin-wise. And I think that if you look, everything we've done, the casinos, the bombshells, everything kind of builds around that core business of using some type of entertainment to then, you know, to basically sell alcohol or sell a fun time, right? It's a good time out. It's a fun part. You know, I used to joke, I said, "Man, this is the greatest job in the world. I get paid to throw a party seven days a week." You know, where can you

• 36:51Speaker 02

  find a job like that? Unfortunately, my job's evolved, and now I actually have a corporate job. So I get paid to make sure other people throw the party seven days a week. But yet, I can go join the party anytime I want. And I think that's kind of the beauty of our industry is anybody can come in and join the party. You know, we try to treat everyone that comes to our business as a guest, not a customer, as a person, not a number. And whether you spend $50 or $50,000, we want to make sure you have a good time and that, you know, you're whatever level of, you know, customer or guest level you want to be that you're able to enjoy that.

• 37:37Anthony Pompliano?

  Talk about being a public company CEO. You've been doing it for now two decades, maybe a little bit more than two decades. How has it changed over the years? Like, obviously, the internet and social media, like, there's been a lot of change in society. But as a public company CEO, what are some of the things that have stayed constant? And then what are some of the biggest changes that you've had to navigate?

• 37:56Speaker 02

  I mean, audited financials are obviously very different than, you know, a private company. After Sarbanes-Oxley was passed, the amount of regulation, I mean, it takes four people to get a check cut in our company. You know, I used to go grab the checkbook and write checks with a pen myself, right? I mean, you can't even get a check. There are no checks. The computer prints them. And until there's four approvals, the computer won't print them. So there's not even a check to write any.

• 38:25Speaker 02

  So that's been a, that's been an amazing thing for me to get used to as a, as a, as the CEO.

• 38:33Speaker 02

  You know, you just, the checks and balances, but at the same time, I think it's fantastic because everything's documented, everything's followed. I mean, video cameras, everything's recorded, everything's set. So, you know, they're all the, all the he said, she said, all the, you know, the what ifs, it's all documented these days. And so it's very easy to defend any position that we have or any position we take.

• 39:04Speaker 02

  And so I really like that side of it. It's become a business. I mean, I remember when I first started out in the business, I mean, shoot, I was probably legally drunk. I didn't drive. I lived at the club, so I didn't have to drive. So that helped. But I mean, I probably drank every, every other day, three, four, five times a week. And now our management team's not allowed to drink at all. You know, waitresses would, would get drunk and then we'd have to like sober them up, get them rides home. You know, our waitstaff doesn't drink anymore. It's become very, very corporate in that regard. Which I think, like I said, has pluses and minuses to the, to the overall deal. But it's made it, I think, a safer, funner environment for everyone involved.

• 39:50Anthony Pompliano?

  And then you employ tons of young people. And if you were to go on Twitter or go read news articles, they'll tell you about how young people don't work hard or young people are complaining about this or that or they're too woke or they're too ESG focused. Or name your critique of young people. What are the pluses and minuses of having so many young people work for you? Like there's pros and cons. What do you see those being?

• 40:12Speaker 02

  Well, I think the beauty of most of the young people that work for us is they come to us with the necessity to work for some reason, right? Whether they're a single parent, whether they're, you know, there's something in their life that has brought them to our industry. And I think our industry empowers them to not only recover from whatever brought them there in the first place, but to allow them to excel and to create a much better life for themselves and for their families. And to me, that's my motivation. You know, people ask me all the time, why do you keep doing this? What's your end goal? You know, when are you going to retire? What's your retirement plan?

• 40:57Speaker 02

  You've been doing this, you know, 30, I started at 19. So I've really been in the business 36 years. It's like, no, I can't. There's too many people that count on me every single day. You know, too many families, too many, whether they're employees, whether they're entertainers. It doesn't matter to me. And our guests, I mean, our guests use our business as their, you know, that's their social experiences. And we have a lot of regulars that are, you know, that love our clubs. They love the entertainers. They love the management teams and the employees at the clubs. And they kind of become, you know, part of the family. And so to me, that's the motivation and the drive that keeps me working every day.

• 41:43Anthony Pompliano?

  My last question for you is today, the company is somewhere 600, 650 million dollar market cap. The billion dollar numbers out there. I've seen you tweet about building a billion dollar strip club empire, the whole thing. What is the importance of that number? And is there, you know, something that you think kind of that billion dollar mark unlocks other than just the fact that you can say that you did it?

• 42:06Speaker 02

  Uh, you know, I think, I think it's gonna add a, a validation to our company. Uh, I think some people still look at us as a strip club company. Uh, oh, they're just in the strip club business. Oh, they're just, you know, they're just strip club guys or they're just strippers. I think with a billion dollar market cap, corporate America has to go.

• 42:28Speaker 02

  Wow, and pay attention. Uh, we got very close. Uh, I think we got to nine hundred and some million. Uh, so we got very close, uh, this past January. Uh, I, I think we're undervalued right now. Uh, and I think that we'll start seeing the, the, the realization of the investment we're making. Uh, as we move into 2024 and hopefully we'll hit that mark. Uh, I think it's just a number. You know, my old number used to be thirty million dollars. I need my stock to be worth thirty million dollars. I want a net worth of thirty million dollars. Well, I hit that in two thousand eight. And I said, now what? Okay, wait, that's just a number. Let's go back to work, you know, uh. It, it, it's actually, you know, a billion dollar market cap is probably a meaningless number.

• 43:11Speaker 02

  And the overall deal, but it's also, like I said, it's a, I think it's a validation point for our, our staff, our employees, for myself, uh. You know, that, hey, we've actually created, you know, a billion dollar market cap company. I mean, you know, if it was thirty years ago, we'd probably be happy at ten million, right? That'd be a big, that'd be a big number, but today, you gotta get that B out there. Uh, and so, you know, that's, that's kind of the, the goal of it. I call it monopoly money. You know, you play the monopoly and, you know, the money stacks up into your side of the board. It looks good, but you can't really buy anything with it. You can't do anything with it, but so I think that's kind of the, I think that's kind of what it's about. Uh, and like I said, I, you know, it, it does have a nice ring, right? A billion dollars, so, uh.

• 43:54Speaker 02

  I always laugh, you know, when you think back to that, I don't, the old Austin Powers movie where, uh, Dr. Evil gets out and he goes, we want a million dollars. And the guy goes, no, no, no, that's not a billion dollar, oh, billion dollars, you know, so. Uh, you know, I think kind of, you know, just be fun, right? I mean, the reality of it is it's not gonna change anything, uh, other than probably the stock price, uh, what happened. Be up considerably, which will make a lot of people very, very happy, especially Adam Wyden of ADW Capital is our largest shareholder. Uh, you know, he's, he, I have to admit, he's been with us for bought our stock in COVID, stayed with us, other, other people sold, uh, one stock at 90s, he stayed with us, he's, he's backed us, he supports us. Uh, and, uh, you know, I can't, uh,

• 44:39Speaker 02

  can't thank him enough for, uh, for, for believing in us, you know, and I think that, uh, you know, we're gonna, we're gonna pay him dividends and when the stock gets that billion dollar, he'll, he'll get his validation too. For the people that give him help for, for owning part of Strip Club Company.

• 44:56Anthony Pompliano?

  Eric, where can we send people to find you on the internet if people want to follow along as you continue to build a company?

• 45:00Speaker 02

  Sure, I'm on Twitter at at Rick's R I C K S C E O. Uh, that's, that's my Twitter handle. I'm on Twitter probably every single day. I, I try to post, uh, especially now Elon wants to pay me and if I can get five million impressions, so uh, been spending more time on, uh, on Twitter than, than I have in, in the past few months, but I actually enjoy Twitter a lot. It's, it's a fun, it's fun, fun to hang out. Well, I'm sorry, X now, I better correct myself there. Uh, but, uh, you know, I enjoy posting, I enjoy the, the back and forth. And what I really love the most is, you know, I was an operations guy from 19 until, I don't know, probably 2010, 2012. Uh,

• 45:43Speaker 02

  and so I was daily contact, right? With it, with the guests, with the employees. And I think, you know, the, the platform X gives me the opportunity to get that feedback, to get that one-on-one, whether it's direct messaging or whether, you know, we're talking in public forums, but it allows me to, uh, you know, to, to basically get a taste of that, uh, that direct contact again and, and really hear from people. Uh, whether it's problems, uh, whether it's praise, you know, it doesn't really matter whether we're just, as they call it shitposting, it doesn't matter, you know, it's, it's just a way to communicate and, and, uh, and really get a pulse of, uh, of our industry, of the people that, uh, that follow us, of our investors, of potential investors and really get our story

• 46:28Speaker 02

  to the masses. Uh, and it's, you know, inexpensive, what, eight bucks a month, right? So, it used to be free, but.

• 46:37Anthony Pompliano?

  That makes sense to me. Well, listen, Eric, thank you so much for taking the time to do this. We'll definitely do it again in the future.

• 46:42Speaker 02

  Okay, appreciate you.

• 46:50Speaker 02

  Thank you.