First Hard Rock Cafe Going Up On Arbat

For years, street vendors on the Arbat have been doing a brisk business selling pirated T-shirts of a fictional nightclub, Hard Rock Cafe Moskva. They don't know it yet, but they are about to get a new neighbor -- the real Hard Rock Cafe.

Hard Rock executives said Tuesday that work is already rolling inside the tsarist-era building at 44 Arbat, and they expect to open with a bang in November.

"The timing is now good," Oliver Munday, Hard Rock's vice president for strategic development, said by telephone from Orlando, Florida.

The popular global restaurant/nightclub chain -- known for its extensive collection of rock 'n' roll memorabilia and funky atmosphere with locations in 109 cities in 41 countries -- had been looking to expand into Russia for years but backed off after the economy imploded in August 1998, Munday said.

"We have seen a slow and steady recovery in the Russian economy since the crisis, and it is clear things are starting to flourish," he said.

Among the key demographic factors that should make the Moscow project a hit are the size of the population and its large expatriate community, a clear indication of disposable income among "a small but important segment of the population," Russians' strong interest in rock 'n' roll and their familiarity with the brand name, he said.

"It's always a good sign of your popularity when people are selling illegal, knock-off T-shirts," Munday said.

Company officials declined to reveal total investment figures, but revamping the historic building alone will cost several million dollars, according to Doug Steele, a Canadian nightlife guru and Hard Rock's franchisee in Russia.

Steele, an entrepreneur active in Moscow since 1994, co-owns 44 Arbat, as well as Doug and Marty's Boarhouse, a popular expat bar and club. He is perhaps best known, however, as the creator of the Hungry Duck, a nightspot made famous in the late 1990s for its debauchery.

Munday said Steele was chosen over more than two dozen interested parties, ranging from Moscow hotel and casino owners to City Hall officials. "Doug had operating experience in Moscow for an extended period of time, understands the business and knows how to make it work," he said.

Steele said that he and Munday penned another deal last week that gives him the right to open two more Hard Rock Cafes -- one in St. Petersburg and the other in Riga, Latvia, in 2003. Rain Worth, a Cyprus-based holding company that Steele created with an American partner and a Russian partner, holds the three franchise contracts. Steele said he is also negotiating to open the chain in Budapest, Warsaw and Prague.

The Moscow project, however, is on the front burner, Steele said. Demolition is already under way, and the ambitious renovation is set to begin for real within weeks. The plan is to convert the property into a three-story, 24-hour restaurant and club with a stage for live music and seating capacity of 412, which would make it the second-largest Hard Rock Cafe in Europe, behind Berlin, and No. 8 worldwide.

Currently, the building's basement is home to Mexican restaurant Pancho Villa, which is operated by Korund, one of five companies partly owned by Steele. He said City Hall has yet to approve plans for the building's facade, but he expects it to do so in six to eight weeks.

Steele said the club will feature a special section devoted to Russian rock memorabilia and host regular concerts by both Russian and Western groups. "We will have big opening parties here, CD releases," he said. "Russian music stars will be showing up, and MTV may do a show from there."

"Well over a quarter of a million dollars" will be spent on a debut party that will feature a "big name" Western act "like Barenaked Ladies" or a "Rod Stewart type of thing," he said.

The financial adviser to the project is an Ernst & Young team led by Paul Murphy, who helped broker Dutch beer giant Heinekin's $400 million deal with St. Petersburg brewer Bravo last week, Steele said.

Atlanta-based Hanscomb Construction Consultants, which oversaw the construction of the new British Embassy in Moscow, will manage the project. "We are very proud to be associated with this exciting project and look forward to the construction works commencing," Richard Vaughan, manager of business development at Hanscomb's Moscow office, said Tuesday.

Steele said he is confident that the Hard Rock Cafe will avoid the fate of Planet Hollywood, another big name U.S.-culture-driven global chain that closed its Moscow operation on Dec. 31, 2000. "They were in a bad location, near the zoo. According to our study, 4,000 people per hour pass along Arbat," he said.

"For that type of international restaurant, the Arbat is one of the best locations," said Natalya Oreshina, head of retail at Stiles & Riabokobylko, which conducted the study. "The street groups that play along Arbat only support the theme of the Hard Rock Cafe."

Oleg Matveyev, retail analyst at Penny Lane Realty, said the location is ideal, but questioned the commercial viability of the project.

"Hard Rock Cafe couldn't find a better place," he said. "But it will be like IKEA -- Russians will come to see what it is, but after a couple of months, the wave will go down.

"[Besides], there isn't much parking around and Moscow doesn't have much of a hard rock culture at the moment," Matveyev said.

The first Hard Rock Cafe was opened in London in 1971. It went global in 1982 with the opening of locations in America and Western Europe. It is a full subsidiary of The Rank Group PLC, a London-based leisure company.