THE QSR INTERVIEW
This is a shortened version of an interview that
appears in the June 2005 issue of
QSR. To get the full
QSR interview
delivered to your door twelve times per year,
subscribe to
QSR.
Suburban into Urban
By Sherri Daye Scott
Even before he retired—the first time, Earvin
“Magic” Johnson was laying the groundwork for what would
eventually become Magic Johnson Enterprises. Back then it was a deal
here, an investment there. Today, it’s 82 Starbucks and 30
Burger Kings— all in urban neighborhoods.
The temptation is to use sports metaphors when writing
about Magic Johnson Enterprises CEO and chairman Earvin “Magic”
Johnson. But to do so seems, in some sense, disrespectful to the
46-year-old man who these days prefers to be called Mr. Johnson and runs a
holding company worth an estimated $500 million. Not that he minds
questions about his playing days or hearing “Magic” called out
by a fan, but Mr. Johnson is no longer a ball player (though as vice
president and stockholder of the Los Angeles Lakers he is still involved in
the game). Today, he is an entrepreneur, one who is changing the way
corporate America thinks about urban markets. Thanks to Mr. Johnson and the
group he has put together at Johnson Development Corporation (jdc),
storefronts in predominantly African-American neighborhoods like
Dallas’s Oak Cliff sport Starbucks’ neon signs and Harlem has a
movie theater.
Also included in the Magic Johnson Enterprises
portfolio are 30 Burger Kings, a T.G.I.Friday’s, 6 Magic Johnson
Theatres, and a host of other assets including a piece of a real estate
investment fund, the Canyon-Johnson Urban Fund, whose holdings are valued
at $1.5 billion. Each venture is adding to the bottom line of Magic Johnson
Enterprises and, at one time, was an undervalued opportunity. The very type
of opportunities that JDC has made millions taking advantage of.
As the first anniversary of Magic Johnson’s
latest foray into quick-service approaches, QSR talked with Johnson about those opportunities and the
role our industry can play.
Why did you decide to focus the attention of Johnson
Development on entertainment, restaurants, and retail?
Let’s go to the beginning, starting about 15
years ago and looking at what were the opportunities for me as a
businessman. I said [to myself] the opportunities are definitely in urban
America. So I had to do a lot of research to find out what could be
successful and what was missing.
I found out that we didn’t have a lot of quality
retailers in urban America. We were traveling outside our communities to go
grocery shopping or to get a salad. We had to go outside our communities to
go to the movies, as well.
I said, “Let me explore those
opportunities.” And that’s what I did.
I started off with the movie theaters. Peter Gruber was
running Sony at that time. Now we have six theaters across the country.
Then I approached Howard Schultz up in Seattle. A lot of people said,
“Minorities won’t pay four dollars for a cup of coffee.”
We proved them wrong. From there, TGI Friday’s because, again, we
didn’t have a place to have salad. We needed a place to workout.
That’s why I approached 24-Hour Fitness.
Then came the real estate side. Mayors were coming up
to me saying, “Look, we have a lot of opportunity in urban America,
and we need you to come in and start developing some of the land we
have.”
I got together with Canyon [Capital Reality Advisors
LLC], and we started an urban fund. We started building apartments, lofts,
and condominiums, as well as malls, in urban America. That was four years
ago or so. We now control about $1.5 billion worth of land. It’s been
incredible. We just went out recently and raised $600 million.
There are so many opportunities. We’ve showed
developers, we’ve showed everybody, that you can make money and still
do good at the same time.
By doing good, I mean hiring people from the community
to work inside the mall or to help build the mall. We’ve got about
2,000 permanent jobs that help people within the community. That’s
been a wonderful situation. Plus, the fund is doing extremely well so all
our partners are happy. We’re really excited about what we’re
about to embark on with the second fundraising efforts.
It’s changed the mindset. People see that
we’re building quality buildings. We’ve been selling out all
over the country. In San Diego, we sold out in a day. In downtown L.A., we
sold out in two days. That was 165 units. People are happy with what
we’re building.
How personally involved are you in the daily operations
and marketing of your quick-service ventures?
Very, very involved. That’s what I do every day.
You’ve got to get out there and let people know that you own these
restaurants and they are there for the people. I’m on radio. If I am
speaking in that community, I let people know all the time that I have a
restaurant there. You have to stay on top of it. There should never be a
day when you’re not marketing your business.
If you go to church, after church, you tell people,
“Hey, we’re open. Go over and have a cup of coffee.” Or,
“Go have a Whopper.” You stay marketing your business.
That’s number one.
