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Chain LeaderEditorial Archives2004 — March — Multiconcept Operators
To the Nines
Childhood friends target the young, hip crowd with clusters of concepts in popular venues.

By Margaret Littman

The Nine Group founders Scott DeGraff and Michael Morton
The Nine Group founders Scott DeGraff (l.) and Michael Morton.
It is the slowest two weeks of the year in Las Vegas. Along the famous Strip, casinos are pulling out carpet and installing new slot machines. Nearby, at The Palms hotel, sections of the casino lobby are sectioned off so scuffed wood floors can be replaced.

But on a Tuesday night, a typically slow night during this even slower period, more than 50 20-somethings stand in a line that snakes through The Palms’ lobby, waiting—perhaps up to 30 minutes—to pay $20 each for the privilege of entering Ghostbar. Ghostbar is The Palms’ 55th-floor nightclub, with seats for 130, room for 326 to stand and an outdoor bar with a view of the Vegas Strip.

Many of the fashionably dressed, albeit barely clad, men and women who are waiting to dance to the sounds of DJs R.O.B. and Hollywood are locals who work at other nightclubs in other area casinos. In fact, the staff from the better-known Bellagio hotel picked Ghostbar as the location for their company holiday party. Other guests are celebrities; Britney Spears and a friend plotted their recent short-lived nuptials in the club.

The Nine Group
2003 Systemwide Sales
$60 million*
2004 Systemwide Sales
$85 million*
Average Check
Nine, $85;
Ghostbar, $55*;
Rain in the Desert, $70*;
Skin, $30*
Expansion Plans
4 units in the
Morongo Casino Resort in 2004,
2 Las Vegas venues
in 2005, 5 venues
in Dallas in 2006
* Chain Leader estimate

Such is the buzz around Ghostbar, which opened in Sin City in November 2001. It is one of four concepts at The Palms conceived and operated by Michael Morton and Scott DeGraff, 39-year-old childhood friends who own The Nine Group (named after the age when they first met). The buzz is the kind that has followed Morton and DeGraff throughout their short but successful restaurant career and has lead to three multimillion-dollar expansion projects to be completed in the next 18 months.

Drinking it In
After becoming friends in a Highland Park, Ill., elementary school, the boys (as their colleagues refer to them) reunited after college. Morton, son of Arnie Morton, founder of Morton’s of Chicago, had the restaurant industry and the associated business contacts in his blood. Single and 28 at the time, the duo thought a nightclub sounded like fun, and in 1992 they opened Drink and Eat, Too in Chicago. They followed up with Drink in Vegas in 1995.

While the nightclubs were successful, they were thinking about what their next move should be. Morton was interested in leveraging his family’s steakhouse expertise but still wanted to capitalize on the following the two had with the hip, young crowd. That’s when they opened Nine, dubbed “a steakhouse for a new generation,” and Ghostbar in Chicago, in a sleek space originally designed by Daniel Burnham but updated for the Generation X crowd.

George Maloof, now president and owner of The Palms, was a frequent customer at Drink in Vegas. The same age as Morton and DeGraff, he was interested in the young vibe they were bringing to a city that, particularly in the early 1990s, had a reputation as being for convention-goers and senior citizens.

“They just got it,” says Maloof. “They had the same attitudes and ideas as I did about what a consumer wants from Vegas. I could tell they were bringing something special to this city.”

Nine Steakhouse in Las Vegas
Nine Steakhouse in Las Vegas brings a young vibe to a city that had a reputation as being for convention-goers and senior citizens in the early 1990s.

Maloof heard about the plans for Nine and Ghostbar, which opened in April 2000 in Chicago with the help of Michael Kornick, a third partner and chef and owner of mk in Chicago. When Maloof decided to build The Palms, he asked Morton and DeGraff to open a Nine and Ghostbar in Vegas, as well as two other concepts. In addition to the steakhouse and the 55th-floor nightclub, they came up with Skin, a poolside “dayclub,” with lunch and dinner service, mermaids swimming in the pool and dancing girls in the outdoor cabanas. They also developed Rain in the Desert, a weekends-only concert venue. With its 16-foot plumes of fire and other attention-getting devices, Rain was expensive to produce, but its high-priced skyboxes helped make it The Nine Group’s most profitable concept, according to Morton. Corporate VIP memberships to Rain cost $10,000 annually; individual memberships are $3,000.

“Scott and I sit here and giggle,” says Morton from Vegas, where he relocated last year. “We couldn’t believe it when George offered us this four-venue deal. We took it, and we thought we’d never get another four-venue deal.”

Gambling on the Future
The boys are giggling because they’re now working on several other multiple-venue deals. They will open Nine and Ghostbar, as well as a Rain-like nightclub and Belly, their new Italian concept in October in the 350-room, $275 million Morongo Casino Resort & Spa in Cabazon, Calif. As The Palms adds a new tower in Las Vegas, The Nine Group is helping to design the new 315 guest rooms as well as add a Belly to hotel in 2005. In 2006, Dallas will be home to Ghostbar, atop the W hotel (complete with heliport), plus Nine, Belly, Rain and a Tavern on the Green-inspired concept inside a new park.

The Nine Group
Morton and DeGraff's hands-on style touches everything from the decor to the food.

The Dallas project is part of a 70-acre development near the American Airlines Center, where the NBA’s Dallas Mavericks and NHL’s Dallas Stars play. The Nine Group was approached to build in the new project by Hillwood Development Corp., which is chaired by Ross Perot Jr.

Over the next two years, the company’s number of employees is projected to skyrocket from 600 to 2,000, and systemwide sales may double from an estimated $60 million in 2003 to $120 million in 2005.

“It is really kind of flattering that we get these kinds of deals,” says Morton, who is optimistic about their pacing. By only opening one project per year, Morton and DeGraff will be able to maintain their hands-on development style, which touches everything from the decor to the food to attached retail boutiques called Stuff that sell logo T-shirts, underwear (remember, this is Vegas), lighters and other souvenirs.

Maloof says Morton is being modest. “They are winners,” Maloof says. “When you look to partner with somebody, you look at their background, and you want someone who has always succeeded. They have a very special relationship, and they balance each other out, and they know how to develop things.”

Start with the Steakhouse
Over the last three years, Morton and DeGraff have, indeed, evolved the business plan from their bachelor nightclub days. All new venues will have Nine as their foundation, modeled after the Las Vegas unit. Nine’s hefty $85 average check in Las Vegas may be slightly lowered to the $70 to $80 range in future markets. Yet the chain will remain focused on the broiler, with high-end steaks and seafood. Local chefs will have some leeway in developing regional items for the menu.

“I love the energy at Nine. But it is also a fabulous steakhouse. I have never heard a single complaint about the food,” says David Tyda, editor of Las Vegas Magazine. There are a couple of other good steakhouses in town, but they are boring. And then there are some interesting places where the persona outweighs the food. Nine completely satisfies both.”

Additional venues, be they Rain, Belly or something new, will build off of the Nine foundation, and, like Nine, will be a twist on their genres.

“Just like Nine is not the average steakhouse, Belly will not be the typical Italian restaurant,” DeGraff says. “We’ve learned from everything we’ve done. Drink translated well from Chicago to Las Vegas. It was the grandfather. We had to do Drink before we could do Rain.” Drink Chicago and Vegas both closed in 2001. Chicago had been open nine years and Vegas six, and had run their course as happening spots.

Ghostbar in Las Vegas
Ghostbar in Las Vegas is located on the 55th floor of The Palms hotel and includes an outdoor bar with a view of the Strip.

Like they did in Las Vegas, The Nine Group concepts aim to become the “in” scene, with a mix of celebrities and celeb-seekers, as well as beautiful people looking for good food and drinks, as has been documented by InStyle magazine and others. “It’s not just the celebrities,” says DeGraff. “It is the environment of energy we create.”

More important than the concepts themselves, Morton says, is the way they complement each other rather than compete. In Vegas, a customer can spend the day at Skin, eat dinner at Nine, have cocktails at Ghostbar and then party until the wee hours at Rain. On a typical weekend in Las Vegas, The Nine Group venues serve between 7,000 and 10,000 people.

There will be no more “one offs,” DeGraff vows. Only multivenue deals are under consideration. The group will focus on expansion west of Chicago rather than in the Midwest or on the East Coast, because it will be easier for the owners to juggle travel schedules. They also feel there is more potential for growth in the West.

“The fact that The Nine Group has this whole package is an advantage,” Tyda says. “They can have these high rollers with all their special requirements and plug and play them to all of the different concepts, so nothing falls through the cracks.” On a recent visit to Nine, Tyda was impressed by the chef’s ability to remember which celebrities want smaller servings of butter in their sauces or special herbs and communicate that to his staff without disrupting the kitchen.

All in the Partnership
Having known each other for 30 years, Morton and DeGraff have a good sense of each other’s strengths and weaknesses. Morton manages back-of-the-house restaurant operations and DeGraff handles contracts and real estate. Together they make design decisions, everything from whether to repaint or strip weathered outdoor chairs at Vegas’ Ghostbar to what kind of special effects to create for Rain in Cabazon.

“When we presented our ideas to the Maloof family for these plumes of fire and fog and a 40-foot cascading waterfall in Rain in Vegas, I thought they might laugh us out of the room. But we got an ovation! I can’t imagine pitching these kinds of ideas to my dad,” says Morton. “We’ve been very lucky because we have partners who are young, even those at the Indian casino, and they want to do something different.”

Menu sampler from The Nine GroupFinding the right partners, like Maloof, is essential for The Nine Group’s expansion. Each project is structured as an independent business entity, with a different set of partners, liquor licenses and other specifics, all operating under The Nine Group umbrella. Morton and DeGraff, and often Kornick, have a share in each.

“These projects are in the tens of millions of dollars. They’re very expensive,” DeGraff says. Most investors in The Nine Group restaurants see a return on their investment within five quarters. That quick turn to profitability has made it easier to find new partners, even during a weak economy. The owners claim the company is oversubscribed for investors for the projects currently on tap for 2004 to 2006.

“I am knocking on wood as I say this, but if you have given large returns in the past, people want to come back for more,” DeGraff says.

Because The Nine Group is privately held, it doesn’t disclose some of its financials, but DeGraff says each of the Las Vegas venues generates annual sales of about $10 million. Rain and Ghostbar, with their high cover charges and high margins on liquor, are more profitable than Nine and Skin, which have high food costs. Unlike many restaurants situated in hotels, The Nine Group does not offer room service, mostly because, as DeGraff points out, $35 steaks don’t tend to travel well in the 30 or so minutes between kitchen and guest room. Special accommodations are made for VIP customers.

Going forward, Morton and DeGraff will be making some accommodations of their own, now that they’re both married and the fathers of two children. “When we developed Nine we wanted a place to sit down. Not like a nightclub like Drink where you stand all night,” DeGraff says. “We want to be able to grow old in this business. Things like the skyboxes at Rain let an older person, who has the money to spend, engage the wildness.”

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