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August 20, 1999
Web posted at: 5:52 p.m. EDT (2152 GMT)

From CNN Financial News Correspondent Charles Hodson

(CNN) -- The number of restaurants offering food, entertainment and merchandising exploded during the '90s following the initial success in 1992 of Planet Hollywood, a venture backed by actors Arnold Schwarzenegger, Bruce Willis and Sylvester Stallone.

Within eight years, the company had 87 restaurants in 36 countries. Add the competition, and analysts say there are just too many theme restaurants in the market.

"They are not generating enough revenue," said Nigel Reed of Paribas. "The revenue pool that there is is having to be shared out between too many operators, and the merchandise sales are also disappointing."

This week Planet Hollywood filed for bankruptcy. It is just one of the themed restaurants that are struggling. Supermodel-owned Fashion Cafe is also undergoing financial difficulties.

Baywatch star David Hasselhoff's attempts to launch a chain based on the hit series also failed.

Fierce rivalries between chains have damaged sales. Planet Hollywood deliberately located its restaurants near Hard Rock cafes in many cities.

Analysts say the 25-year-old Hard Rock Cafe could pick up an extra $320 million in revenue annually if Planet Hollywood closes its doors.

Chains have also focused heavily on marketing strategies, encouraging diners to believe they could meet celebrity actors and models in some restaurants.

Food experts say the concentration on marketing has been at the expense of the food.

"The whole concept has been marketing, marketing, marketing," said Richard Harden of Harden's Restaurant Guides. "Eating is a basic human thing, and people know what a decent meal tastes like, and they haven't been getting it, or at least they haven't been getting it for a price that they've regarded as reasonable."

Experts say the novelty value of the themed restaurant sector cannot substitute for food quality and value for the money.