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Charles Khabouth, Toronto nightclub entrepreneur

Toronto nightclub impresario Charles Khabouth isn't afraid of the recession. The founder of Guvernment, Spice Route and Tattoo Rock Parlour is poised to launch a handful of ambitious new ventures.

Mr. Khabouth, who is on the cover of the new Small Business Magazine, has a proven formula for success: Identify a promising market, come up with an aesthetic vision and find the right partners to help him create it. (Find the article here.)

His Toronto-based company, Ink Entertainment, is working on three new restaurants, a 45,000-square-foot event space in Coral Gables, Fla., and perhaps another live music venue on Queen West. Then there's the launch of an international hotel brand in downtown Toronto.

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All in all, he's aiming for a 20 per cent increase in business for Ink, on annual revenues of more than $30-million.

The 48-year-old entrepreneur, who describes himself as a go-getter, is not the first member of his family in the nightclub business. His father owned a club in Beirut, where Mr. Khabouth was born. After civil war broke out in Lebanon in 1975, the family moved to Canada. Mr. Khabouth's first job was at a McDonald's, and at one point during high school he held down three part-time jobs.

His first entrepreneurial effort was a clothing line. But he loved style, music and dance, and nightclubs encompassed all those interests.

Charles Khabouth joined us to take your questions.

Dave Michaels, Thanks for joining us, Charles. Let's start off with the elephant in the room - the recession. The economy is sour, yet you are as busy as ever. Have hard times put any dents in your business plans?

Charles Khabouth: Of course they have. But our large marketing team came up with a promotional and marketing program to accommodate what we knew would be tougher times. In this business it's about being ready and being ahead of the game – to anticipate and adapt to the times with savvy promotions like $20 lobster specials or special themed events. As a restaurant or nightclub we have to work even harder to provide a memorable experience so that there is a perceived value. At the same time, what goes down must go up – and even in tough times there is opportunity. The key is choosing projects that are new and innovative and offer something that isn't already in the marketplace.

Dave Michaels, Are Canadians spending as much when they go out these days?

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Charles Khabouth: No. They are not. They are being a lot more careful. And just like three years ago when they were flashing expensive jackets and flaunting how much they spent, now they are bragging about their deals and when they got something for a better price. They have completely changed their outlook.

Canadians are spending, but they aren't going out quite as much. They are making choices about how they spend. People want value and so we are working hard to cut our costs so we can pass those savings on to the customer through lower prices or special offers. The big drop we have seen is in corporate dollars – budgets have been cut across the board.

Noel Hulsman, What do you look for in a strategic business partner?

Charles Khabouth: In a partner I look for someone who complements my skills and experience and adds values to the relationship and business. I never look for a partner simply for financial reasons – I don't need a partner to raise money for a business venture. A good partner needs to bring benefit to me and the business on top of covering their financial share. Ideally a partner is a level-headed business person who knows when they are needed and is not afraid to step back as well.

Dave Michaels, You are a hands-on guy, which undoubtedly plays a factor in your success. Tell us about that.

Charles Khabouth: I don't really know any other way to be. In high school I had three part-time jobs because I wanted to, not because I needed to. I feel like I have a good eye and good sense of a vibe and a room that I can make needed adjustments on the fly. I know how to take care of customers and thankfully my staff are usually excited to see me come into the room because I do feel that I add value to the operation. I always try to lead by example and I think the benefit is in building long term relationships in business and friendship.

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Given the size of the company now, however, even though I stay involved in every aspect of the business I do rely on my management team to be my arms and legs because I just can't be everywhere at once. That is where strong, experienced and loyal employees make all the difference.

Noel Hulsman, How has the restaurant business changed from when you first got into it? What do you absolutely need to do now, that you didn't need to do when you started?

Charles Khabouth: The restaurant business has changed in the last 20 years in that it has become a lot less formal. Dining in a high end restaurant is a lot more casual than it used to be – the "white tablecloth" has pretty much disappeared worldwide except for a few niche locations. Even service has become a bit more casual – but being attentive is still crucial. Prices have not gone up much over the last 10 years, and people's expectations are higher because they are travelling overseas and experiencing more. The Food Network and the World Wide Web have educated people and therefore their tastes and willingness to experience new things have allowed restaurants the opportunity to get more creative with what they offer.

On a business level, financially it costs more these days to open, but the bottom line hasn't changed – it's always been 10 to 15 per cent at best. Twenty years ago was not as competitive – it's a much faster paced industry now. Really the formula for a restaurant is still the same – the basics are absolute: good food and good service at reasonable prices. The demand for those things will never change; the competition and pace of today's industry means that there is just more to consider in everything you do.

Dave Michaels, If somebody was just starting out, and they could open either a restaurant or a club, which would you recommend? And what would they definitely need to know before starting?

Charles Khabouth: I want to say a lot of it plays on experience – both need experience, knowledge and dedication to make them work. However, a club is easier to run than a restaurant, and the potential for return is faster and more lucrative starting off. Target audience is the number one must-know when opening, as is having a unique hook for both a restaurant or club. You need to have a signature offering that people find memorable.

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Noel Hulsman, Can you talk about the importance of cover charges? You believed in them from the start. Is there not a risk of turning people off by charging them to get into a club when it is just starting out?

Charles Khabouth: No, it is not a risk to charge cover because that is the model of "the nightclub" worldwide. You pay for the entertainment, the music, the dance floor, the design, the access.

You can eventually let in a select number of your best customers, VIPs, etc., for free as time goes on. You need to set a precedent right when you open, because you set the expectation with your clientele. People do expect to pay when they go to a nightclub. It's very difficult to open and not have people pay and then ask them to pay a few weeks in. It just doesn't work like that.

Dave Michaels, Do you have any role models, either in this industry or others? Is Ian Schrager, the Studio 54 co-founder, the person whose career you would most like to emulate?

Charles Khabouth: Ian Schrager is definitely a role model for me because of his many accomplishments: He started out with a club and eventually became the icon of boutique hotels.

Guy Laliberte of Cirque du Soleil started as a street performer, but his dedication, creativity and hard work over 25 years has led him to now travel to the moon. It doesn't get bigger than that. What draws me to them is the fact that they are hard working, accomplished professionals. What I also admire about Guy is his heavy involvement in charitable causes.

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Let me condition what I just said above by acknowledging that there are people in the world making important strides in serious issues and causes like finding cures for disease and helping impoverished nations – but in the circle of my industry, Ian and Guy are true role models and represent aspirations in line with my own.

Dave Michaels, Talk about Guvernment, in downtown Toronto. It's been around for a long time, since 1997. What's the secret to giving long life to a nightclub? Can you give examples?

Charles Khabouth: Guvernment is the largest nightclub in Canada and ranked as one of the top 10 clubs in the world by international publications. When I opened it it was one of the riskiest ventures that I have ever taken on due to the sheer size and magnitude of the operation and investment. The secret to longevity? You must be willing to reinvest in the space – both physically and in the way it's operated. You need to be versatile and create different events that cater to different cultures and groups.

Being able to reinvent the wheel over and over again is an important skill to have as a nightclub owner. To give you an example, Skybar has been remodelled four times over 12 years. You must also invest in having mature and dedicated staff onsite to handle all events, a promotion and marketing team to innovate, and longevity of staff to make people feel at home and to be a familiar. Finally, consistency in everything you do to build your ultimate vision – quality, service, sound, design, promotion – is crucial.

Dave Michaels, How have you been challenged by the process of opening a hotel? How is it different from nightclubs and restaurants? How is it the same?

Charles Khabouth: One of the bigger challenges here is the intent to launch a global brand – where in the past everything we have done has been more focused on a local market. Everything from the name, to the logo, to the way of thinking, to pricing should appeal to someone whether they are from Canada or abroad. Definitely a big challenge. It's a completely different mindset. It's a completely different experience from my past ventures – other than the fact that catering to people and service still remains the same. Here we are talking about accommodations; people staying with you overnight, a few days, a week – so the needs become different.

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At the end of the day, restaurants, nightclubs and hotels are about taking care of people, and doing it to the fullest. But there are many more moving parts to a hotel; new staff that I have never used before, trying to manage reservations coming from all over the world, etc. Financially, the investment is much more substantial in a hotel – which also means greater risk and greater opportunity.

I want to say the challenge in this hotel, for me, is bringing a lot of local people into this space – especially in Toronto where typically local residents don't tend to frequent local hotels and their respective restaurants and bars. We need to apply our wealth of knowledge and experience working with Torontonians to this hotel so that it becomes something that is relevant to people living here in addition to tourists.

Dave Michaels, Well, that's all we have time for today. Thanks, Charles, for spending time with us today.

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