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June 28, 1999

First Prize Winner

Brian Moore
Packey on the Fool Boards

When you look at Planet Hollywood <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PHL)") else Response.Write("(NYSE: PHL)") end if %>, you just gotta wonder: "What the hell are they doing?" They seem to go around and invest in any venture that they come across. They run from one project to the next like chickens with their heads cut off, while losing focus on their core business. They need to stop and think. They need a new game plan. Here is what I suggest:

1. Stop with the new business ventures - ever heard of Sound Republic, All Star Cafe or Cool Planet? All ventures that PHL entered into, but have now called to an end (they are trying to exit all leases, sell assets, and terminate agreements). Yes, PHL has a brand name, but not a "golden" one that will make any venture successful. Did you know that PHL is getting into the movie-theatre business? STOP IT! Just selling assets/bad sites is not enough, because that is just a remedy for past problems. They need to prevent future bone-head moves. Re-focus on the restaurants and leave the start-ups to others.

2. Eliminate restaurants - this is not the blanket "sell bad sites" comment. PHL is a relatively high-end restaurant, where repeat business is minimal. People go to the stores once, buy a silly T-shirt, eat ok food, and don't return. Thus the demand is not there. PHL should capitalize on scarcity value. Don't put a store everywhere, because there is way too-much cannibalization of sales! Why would I want to go to a restaurant in NYC or LA when I can visit PHL at the local mall? Dust off the old Econ 101 books and learn how to counteract the low consumer demand by reducing supply. You have to re-build consumers' desire to visit the restaurants. Make it more of a unique experience at each store. Focus on main metropolitan areas: NYC, LA, Chicago, London, Berlin, etc. Forget the Gurnee, Illinois-type sites.

3. Stop acting as a bank - did you know that PHL has $5.9 million in loans receivable from celebrities? What the hell are they doing? Stick with the restaurant business. Cook the burgers - don't cook the books!

4. Get some useful directors on the board - one director made only half of the meetings last year, while another did not make it to one! Other directors were previously employed by PHL, but aren't anymore. GET PEOPLE WHO CARE! Yeah, I know that the directors all care because of the number of shares they own, but maybe they view this director-role as a cash cow, hoping to get their money back one day. Oh yeah, by the way, each director gets $20,000/year base. That's about normal for other companies... except most other companies have people who care on their boards.

5. Quit issuing stock! - last year, PHL issued stock in order to pay "consultants" for help with advertising and entertainment advice. HUH?? Cut a check! Don't dilute everyone's stake in the company! Equity is the most expensive form of capital, so why would PHL use it to pay a bill? If they would stop entering into ventures with everyone, and if they would stop dropping capital into new stores in shopping malls, they would have the money to pay cash instead of stock. This way, the shareholders do not pay for bills through increased dilution.

I could go on and on, because this is just a taste. However, I think I'll hold on to my other suggestions. In fact, I think I'll just sell my consulting services to them... I'll tell them to pay me in cash.

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