Branching Out of the ‘Hood
When Earvin “Magic” Johnson opens his new sports club today in tony Sherman Oaks, it will be a clear signal that the basketball-great-turned-businessman is expanding his magic kingdom beyond the ‘hood.
As founder and chief executive of Magic Johnson Enterprises, Johnson has spent the last nine years bringing theaters, restaurants and coffee houses to under-served communities--typically urban centers with large minority populations.
But there’s nothing under-served about Sherman Oaks, an upper-income community along Ventura Boulevard, one of the busiest shopping, dining and entertainment strips in the region. Or Brentwood, where Johnson recently opened a Fatburger restaurant.
Johnson’s heart, and the bulk of his development efforts, remain rooted in the urban core. But over the last several months his business portfolio has been gaining an added dimension--diversity.
“We have to show that we can be successful not just in urban areas,” Johnson said. “So that when we see a development opportunity in Beverly Hills, we can show that we can do that.
“I’m still the king of urban development,” he added, repeating a moniker given him in local African American newspapers. “This doesn’t change things.”
His company refers to the coffee shops--part of a partnership with Starbucks Corp.--as Urban Coffee Opportunities stores, and at least 90% are located in under-served communities, according to Johnson’s company.
But with the purchase last fall of the Fatburger chain, which has most of its outlets in non-urban centers, Johnson began gaining ground in suburbia.
Development experts said that, long term, if Johnson wants to play ball with the big boys, he’ll have to show that he can be successful even without home-court advantage.
“If you’re large enough, you need to be both urban and suburban,” said James Rabe, a principal with Keyser Marston Associates, a San Francisco-based real estate consulting firm. “You need to diversify that portfolio.”
And by opening a high-end, high-profile club north of the Hollywood Hills, Johnson, who has suggested he may want to run for mayor in 2005, also gains access to a new constituent group--and a different demographic.
Johnson joked that if he were mayor, he would have to be mayor of all of Los Angeles, not just South L.A. He insists that future political advantage played no role in his selection of the site, and he remains noncommittal about a potential run.
Still, political observers said expanding his base can’t hurt.
“If he’s going to run for mayor of L.A., he’s not going to be elected mayor of L.A. solely by appealing to people of color from underserved communities,” said David Bositis, senior analyst for the Joint Center for Political and Economic Studies, a Washington-based think-tank that tracks black political activity. “So opening [a club in a suburban area] could potentially have an upside in terms of his running for office.”
The Sherman Oaks outlet is the first of at least six slated to open this year as part of a 2-year-old partnership between Johnson and Pleasanton, Calif.-based 24 Hour Fitness, the world’s largest privately held fitness center chain. Another is set to open in June in Santa Fe Springs.
Last year, the first partnership club opened in Richmond, a working-class suburb of San Francisco. It’s doing well, operating at 127% of budgeted net revenue, a spokeswoman said.
Johnson, who has a seat on the club’s board, said he hopes to open six more 24 Hour Fitness Magic Johnson Sport Clubs next year. He is now seeking sites in the Crenshaw area.
Through his Johnson Development Corp. subsidiary, the former Lakers star also has inked deals with such industry leaders as Sony Entertainment, Starbucks and Carlson Restaurants Worldwide Inc., which owns the T.G.I. Friday’s chain.
Most of those outlets, especially the early ones, were placed in urban centers. And Johnson said the added portfolio diversity will not divert him from what he still sees as his mission.
“I’m never going to go away from what’s been good to me, what I know best,” he said.
“Our concentration will still be the urban market. That’s what I am about.
“But you venture outside of that community as well,” Johnson said. “We just want to broaden the mix a little. That’s just good business sense.”
