Destination: Divergent

Initial Assessment & Strategic Plan Draft

Introduction
The cost of developing and operating a venue in this field represents a significant outlay
of capital, and thus requires sound and comprehensive research into the levels of return
expected and the likelihood of success, both long and short-term.
By extension, it necessitates the highest levels of transparency to investors on the risks,
rewards, and the processes used to make the most accurate analysis possible. In addition,
to better assess risk and reward alike, we asked for and received detailed data from
businesses operating in similar niches.
To be clear: none of these exist in the immediate local area and only a few of which
operate on this Coast to begin with. The closest venue in our market segment is Bar XIII
in Wilmington, Delaware, and while it is similar enough and close enough to provide
useful data, its operating model is more of small bar/pub with a makeshift live music area
and themed nights that include our target market. However, it is profitably and privately
run, engages and employs the LGBTQIA+ and Kink communities, and contributes
substantial insight on both the viability of the idea and the principles of success.

All-In Playhouse was another successful operation, and managed to overcome far harsher
local regulations than we would be facing, the ire of the locally influential elitist
community, and the relatively remote location. It has operated successfully through the
Coronavirus pandemic and continues to be profitable. Their data has helped inform our
approach, and the lead SBA had formerly served as a Managing Partner to assist AIP in
development and implementation of a strategic plan for both their venue and content
creation efforts.

Also included in this report are standard operating models of various businesses in Los
Angeles and San Francisco. Given the need to make as accurate a comparison as possible
across the coast, during our risk assessment phase we have focused largely on those
businesses that opened during the initial phase of privatization in the 1980s and early 90s
and have remained open and profitable since. This is due to the state of the community
and the ethos of its members being very similar to that of the East Coast before and at the
beginning of this time.
However, we have made an exception in inclusion of Kink.com only in their functions as
an alternative nightclub complex, bar, retail space, and live music venue, and eschewing
their main offering (niche adult AV content). We felt the exception was warranted as
Kink had made the shift to licensor due to the other, more visible side of its business
undergoing the effects of an industry-wide change in distribution, and during its tenure
at SFA, it became somewhat of a local community leader and model framework for
smaller clubs along Folsom Street.

We looked for the following factors in particular when developing this assessment:
a. Range of services and experiences offered
a. At the venue’s first opening
b. As venues matured and integrated into the local culture
c. Reactions to and impact of changes, improvements, and
rebranding/remodeling/refocusing
d. Ratio of downsizing/elimination of services vs expansion and addition of
services
b. Novel approach to sometimes-hostile local regulations and community
resistance to entrepenuer-driven districts vs private social groups.
a. We have found that in both coasts, the vast majority of customers would
prefer this proposed model, and have no real loyalty or affinity to the
spaces and private social groups.
b. The reliance on volunteers for almost all functions provides organic &
coordinated marketing opportunities (we support the local queer
community and provide economic opportunity to oppressed
individuals)
c. It is primarily the cadre of status-seeking individuals who have
developed this model and have utilized their status to attempt to
sabotage for-profit enterprises
i. In both case studies here, the businesses targeted on this coast
suffered little from these attempts, and continue to operate at a
profit
d. We also discovered that of the number of individuals who have joined
said groups, almost 50% of the local market elected against attendance
due to onerous vetting procedures or costly yearlong commitments
alongside high price of entry. In essence, they are 501s using “donations”
and “contributorships” as cover charges.
e. Capex is virtually nonexistent in terms of these venues, and the only
compensated employees of each are the executive directors and other
 high-level leaders, whose salaries constitute the majority of year-to-year
profit.
f. Of that percentage, surveys indicate that almost all would have been
open to an ID check/bag check and entry system over a system currently
requiring disclosure of past partners for “vouching” reasons.
g. Current regulations in ideal locales present a far lower hurdle than even
three years prior
c. A high reputation & rating of safety and security, both quantifiable from public
safety reports and subjective, from surveys of guests
a. ALL successful venues in this space, on both coasts, require extensive
training and familiarity with minority communities across race, gender,
sexuality and orientation for security personnel
b. In conversations with owners, we discovered that the most successful
approach to security is a multifaceted one: as protection, hosts and
hostesses, guides and perhaps even social company. “First face you see is
them, so if they just get a big burly jerk demanding ID and scoffing at
pronouns, they’ll head next door and tell all their friends to, and we’ll be
beaten up on social for months. We get too many different kinds of faces
here to take a gamble that’ll just be tolerated.”
c. Thus, we theorized this approach is critical to determining success
regardless of location, and the data bore our assumption out.

Breakdown Of Risks By Category

We understand some of our plan’s cost-reduction efforts may well glean us more targeted
opposition and focus by phobic immediate area residents, etc. This cannot be avoided in
any city or state, and we plan to leverage expected reactions as a marketing focus.
Given the widespread acclaim and viral popularity of “Business who fights back”, taking
the “green” tax credits for ceramic cladding of our façade will reduce costs dramatically,
and adds the benefit of instant association (The Pride flag, the trans flag, Leather pride
flag) and general beauty.
However, we are applying for a liquor license and this necessitates a public comment
period prior to granting.
Steps might be taken to conceal the cladding due to a higher likelihood of local pushback.
However, we plan to reduce this possibility by effective area selection. We have already
engaged in discussion and dialogue with other businesses in the general nightclub
sectors, and identified three possible locations where prevailing local sentiment would
result in overwhelming support.
We also run the risk of not differentiating ourselves enough from our two main
competitors, both 501s, Baltimore Playhouse and Crucible. While our plan provides for
many cost-effective strategies to do so, of which many are revenue-positive and are
flexible enough to be made revenue neutral or loss leading depending on time,
holiday/event, or promotion/live music performance, etc. As we will be functioning daily
while they do not, operating and promoting our own events while they rely on promoters,
we run the risk of not communicating our value proposition simply enough or clearly
enough for the customer base.
We plan to mitigate in part by designing the space, setting employment standards, and
building our brand identity around values that this often-progressive community
embraces without becoming overtly political.
We have a slate of advantages in our plan that are unfeasible for our competitors to
replicate with ease and agility due to both their burdens as 501s and their extremely low
revenue despite high cost to customers.
We must also engage in effective communication of these benefits and our added value.
AIP offers an example of both the consequences of ineffective PR strategy and the benefits
of sound, clear communication to the market that maintains control of the narrative.
Before taking the position there, they had released a combative statement defending a
business associate who rented their space, regarding decisions made at the beginning of
the COVID-19 pandemic by said associate. They thus became entangled in a completely
avoidable mess, and earned the ire and subsequent avoidance of the local BDSM
enthusiast community, which distrusts them to this day.
When developing a plan, I implemented several changes
A) No renting of space, which is also in our plan. We plan the events and the parties,
book the guests and run the space daily as a bar and nightclub
a. This allows us strict control over what is allowed, control our messaging
and image, and eliminate associative reputational risk
b. Cutting “Party promoters” from the equation has succeeded all over the
West Coast. It gives us 100% of the take from admission and alcohol, and
allows us to work directly with musicians, bands, and other entertainment
c. We also avoid the pitfalls inherent with reliance on “contractors” to
populate our club. Many of these “party promoters” rise and fall over the
 decades, and in many cases dramatically so and with great damage to
associate’s reputations.
Crucible does sell alcohol, however it’s a very limited selection and they charge exorbitant
membership and admission rates.
To be competitive, we would be obligated to build a space that has concrete advantages
for the cost of admission while keeping that cost to reasonable levels for daily access.
We would, however, have the flexibility of other clubs in our niche by promoting and
increasing cost for special events and holidays, where we would have an advantage over
both our competitors, and would be able to charge within 50-90 per person for NYE, 45
for Halloween, etc.
Due to diversification of services and goods offered and sold, we are able to respond to
existing competition with a fluid and agile approach. Some examples;

 We include “drink tickets” as part of a hiked admission price, maintaining revenue

positivity
 Heavy capex in audiovisual equipment
o Speakers
o Sound consoles
o PA/Microphones
o Rear projection screen on stage
o Invest in a dedicated HTPC and audio interface hardware to enable
laypersons (bartenders, staff etc) to perform basic audio functions
o Establish a software layer over a preset, calibrated audio setup so that
laypeople have access to VJ/DJ options but not EQ or calibration or
advanced configuration setups. We’ve used frontends like KODI in past
projects to great success.
 Sell locally made art with a commission-based compensation structure (we feature
the works free of charge and take a cut on a sliding scale commission model)
o Sale price
o Size of piece
o Perceived value
o Socioeconomic situation of artist
 We can monitor attendance to our two main competitors, who use the social
network FetLife to manage RSVPs, which are almost always required a day/hours
before events and often made weeks prior by most attendees. At the last minute,
we could waive the cover or offer 3-5 free drink tickets with standard cover for the
first 2 hours of operation that night to draw guests
 Our for-profit, centrally managed planning means we would not similarly need or
be required to use FetLife ourselves, thus remaining opaque to competition while
gaining valuable insights on their attendance.
 Our 7-days-open strategy lets us cater to our guests schedules, and price
accordingly and flexibly, while our competitors generally have an event a week on
average and are closed otherwise.
 We would be able to book live talent well in advance of major events and include
everything from exotic dancers to bands. This gives us the best of both worlds: the
ability to sell tickets, the space and investment in equipment to make a viable
venue for talent, and the agility to host a “Talent Night”, poetry slam, trivia, etc on
the drop of a hat.
 We can theme each day of the week differently, consistently, so different segments
and sub-categories of the markets and communities have a sense of consistency
and can be targeted and catered to on a level of detail that surpasses the capability
of our competitors.