Community Doesn't Scale: Soho House & MiniClubs (Cafe Society #6)

Plus Gucci's New Ad Campaign, Mexico Cartel Coronavirus Aid & Universities & Offices are "Dead"

May 16, 2020

Cafe Society is Maxwell Social’s weekly magazine on the intersection of community and society — an anthropological look at the underpinnings of what makes the world tick, written by David Litwak (@dlitwak) and the Maxwell team.

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Now, This Week’s Update:

When I moved to NYC two years ago I joined Soho House. I had spent the last 7+ years living in San Francisco where there wasn’t any real tradition of social clubs, and I had spent a lot of time in London (though never lived there), which was the opposite, so I was excited to be part of one as an actual member. Plus, I heard the pool was quite the scene in the summer.

I was sorely disappointed. On acceptance I was given no onboarding. I realized it was basically a glorified co-working space during the day (and admit, that’s basically how I came to use it as well). No one seemed particularly interested in meeting people — it mainly seemed a way to show off to potential people young creative freelancers were trying to close that they were indeed hip enough to be a member.

My Soho House membership was, in short, a fashion accessory — you could get most of the same amenities in various other places, but you paid the premium for the same reason you pay for a Gucci label — it was fashionable to be a member.

I tried to meet people, I actually attended 3 breakfasts that Summit Series, who invested in my first company Mozio, put on in the space and met a few people.

But what I realized was that between 85,000 worldwide members (this has been confirmed by Soho House), 8,000 NYC members (this one is hearsay) the people staying in the hotel, everyone’s guests, well, you might as well have been at any other somewhat trendy bar in Manhattan . . .

Facilities, Not Communities

What we realized is that as Soho House has expanded, they’ve added gyms, spas, pools, cinemas, restaurants and more, and lost track of the fact that for every feature they add, that requires additional members to support it, and for every additional member, that degrades the community.

Traditional clubs get stale by getting on the facilities hamster wheel — once you give up on community, you need to have better spaces, more amenities, more locations. But every extra location makes the need for even more locations greater, every extra amenity makes the need for even more amenities greater because it degrades the main differentiating factor a private club SHOULD have going for it, which is the people.

The Facilities Hamster Wheel: Economies of Scale

And we believe that ultimately every extra member that adds economies of scale reduces the economies of community — the low churn that comes from feeling like it’s your spot and you see familiar faces, the sense of ownership that leads to references.

Economies of Community

Don’t believe me? Talk to ANY founding member of any private club, not just Soho House. I guarantee you something along the lines of “at the beginning it was a really cool group of people” will come out of their mouth. No one has ever said “it got cool once they added the ____.”

Now, I want to clarify — I was a member for a long time. I travel between LA, where I grew up, NYC where I mostly live, and London, where my first company does a lot of business on a fairly regular basis. All have multiple Soho houses. I work from home. I enjoy going to Soho house to have a place that is not my living room to work out of. When I’m in London I go to the White City House to workout in the gym and take meetings. If you don’t have an office, having a place to meet people that isn’t a random coffee shop and makes you seem a little more legit has it’s value.

But that’s exactly what these clubs are mostly good for — they are facilities, not communities.

Community Doesn’t Scale, and it Shouldn’t.

The idea of a “global community” doesn’t exist. Communities should be like town squares, your church, your local pub, college campuses. To quote Michelle Obama, “if everyone’s family, no one is family.”

The backbone of communities is serendipity, and you only run into people spontaneously if there is a relatively small group.

But how do you provide that level of community at a reasonable price? These clubs are as big as they are to keep prices relatively low ($200) compared to what they were historically ($500–$1000).

Miniclubs — The Future of Social Interaction

The future of private clubs are miniclubs — clubs that allow BYOB alcohol, don’t provide food or drink service, are limited to 600 people and don’t allow multiple memberships.

BYOB: No Incentive to Sell Alcohol

A core tenet of a miniclub is that none their profit incentives are linked to alcohol. If they are, the incentive will be to let more people in to spend on drinks, to crowd people in.

This doesn’t mean the club doesn’t also serve alcohol. But it needs to be viewed as a service the club is providing at cost, so feel free to bring your own.

Membership Fee is Primary Profit

Miniclubs will be primarily membership fee based. Sponsorship and Private event rentals will play a part, but we believe that viewing membership fees as the primary profit liberates a club to think about how to build community and loyalty over the long term, not make a quick buck off of bottle service and a $25 cocktail. If an alcohol brand wants to come in and throw an open bar, you are no longer thinking “but that is X amount of lost bar revenue” and are more likely to say yes. If more people want to crowd in who aren’t regular members of your community, you aren’t tempted by extra bar revenue on a Friday night.

No More than 600 Members

The goal should be that every time you walk in the room you see someone you know, or at least feel like the community is small enough that you wouldn’t get weird looks just going up and introducing yourself to someone. We believe that you can’t get that past around 600 people.

Small Footprint: 4,000–7,000 Sq Ft

If you only have 600 members, you don’t need a lot of space. Definitely not the 25,000–100,000 sq ft+ properties many private clubs have.

Social Hours Only

Miniclubs will have one purpose and one purpose only — socializing. No coworking spaces, no day access. The best advice I got from a friend who owned a bar is that you can only be one thing to people — you can’t be the day party brunch spot and the late night spot, etc. This goes DOUBLE for private clubs — you can’t be the spot that people work out of, take dates, power lunches, pool days, happy hours, work out, stay overnight, get a massage . . .

One Location Only/Siloed Membership Base

No community should be more than 600–700 people, and the minute you let random people who are really part of another city’s community drop in, you are becoming a facility, not a community. Miniclubs might have loose affiliations but there will not be easy blanket privileges across clubs — it won’t make sense — if you store your drinks in a spot and one of the reasons you are going to your Miniclub/Maxwell in downtown Manhattan is because of the people you will run into, what are you going to really do at one in Brooklyn anyway?

No Food Service — Keeping Operating Costs Low

If you have a restaurant that does food service, which almost EVERY private club does at this point, you are talking about a massive expenditure on operational costs.

Soho House has 20+ staff members working on the 6th floor of their meatpacking location alone — waiters, runners, busboys, cooks, concierges.

Either you raise membership fees to $500+ a month, or you get more members to make sure those salaries are paid by the meals ordered. There will be clubs that decide to offer this as a perk that are more expensive and keep their small membership base, so this isn’t a hard and fast rule, but most clubs will decide to forgo regular food service in favor of a kitchen that can be used for special events or intermittent catering service.

You’re the Bartender — Keeping Operating Costs Low

Liquor lockers are about to come back in vogue. Miniclubs will lean into the participatory nature of nightlife, giving you a feeling of actually owning the place.

One More Time - Keeping Operating Costs Low

In one of our Something To Look Forward To newsletters we referenced Prune, the NYC restaurant that was struggling during Coronavirus and penned a touching essay in the NYTimes about it.

“The restaurant as we know it is no longer viable on its own. You can’t have tipped employees making $45 an hour while line cooks make $15. You can’t buy a $3 can of cheap beer at a dive bar in the East Village if the “dive bar” is actually paying $18,000 a month in rent, $30,000 a month in payroll; it would have to cost $10.
The girl who called about brunch the first day we were closed . . . She is used to having an Uber driver pick her up exactly where she stands at any hour of the day, a gel mani-pedi every two weeks and award-winning Thai food delivered to her door by a guy who braved the sleet, having attached oven mitts to his bicycle handlebars to keep his hands warm. But I know she would be outraged if charged $28 for a Bloody Mary.”

She’s hit on something — at some point people throw up their hands and say they will congregate at home instead of paying that much for a drink. 80% of Diageo’s sales are off-premise — that means people are already opting out of the $28 Bloody Mary, they have been for quite a while.

The key is by eliminating food and drink service you can minimize staff costs, use the space more efficiently (you don’t have to take up a lot of space with the kitchen) and provide a gathering spot that works economically, and socially, again.

Events Update

The Virtual Vault event with Jiggy went fantastic, had guests from Impractical Jokers and Wild N Out, and a lot of up and coming comedians. Stay tuned for additional events we’re launching in the next couple of weeks.

What We’re Reading & Watching

The New Gucci Ad Campaign, on Youtube Here, Harpers Bazaar writeup here.

Gucci Cruise 2020 | Featuring Gucci Mane, Sienna Miller and Iggy ...

I’m not really into fashion, and the few splurge purchases I’ve spent money on over the years have been a hell of a lot more subtle and understated than Gucci, but we absolutely LOVE their new campaign. For one, the final screen of that video says “Come As Your Are” which was a theme for a party Elsa Maxwell threw back in the day. But while some of the campaign is a little much there are a lot of scenes of what we talk about internally as “irreverent fantasy,” the type of night where anything can happen with a cast of characters, which are key elements of the brand we’re building at Maxwell, and contrast nicely with all the images of beautiful people cheers-ing their martinis and taking themselves way too seriously that you see every other brand going after.

Mexican Drug Cartels Distribute Coronavirus Aid to Win Support

In Mexico,"During the pandemic, the organized crime groups have handed out food in recent weeks in 11 states, and they have used threats and violence to enforce their own quarantines in two states." I’m going to give credit to NextDraft newsletter for what I think is a basically perfect caption: “See, you can be the head of a large, international criminal organization and still believe in science.”

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Missouri Penguins Enjoy Morning of Fine Art at Local Museum

Scott Galloway Predicts a Handful of Elite Cyborg Universities Will Soon Monopolize Higher Education

I loved my college experience at UC Berkeley but it wasn’t for the actual education part —I value my Berkeley experience mainly for the growth I experienced over 4 years, for the campus, for the social life. So I’ve been intrigued about what the future of the college campus looks like. I loved a couple parts of this article, the first one was where Scott points out how extreme college vetting is:

“They have done a fantastic job creating the most thorough and arduous job-interview process in modern history, between the testing, the anxiety, the review of your life up until that point, the references you need. If I’m applying for a job at New York Magazine, I’d give you a list of references and you’d call them. You don’t ask the references to write a two-page letter. Universities now do background checks to see if you’ve ever had a DUI or been accused of a crime. They look at your social media to see if you’re abusing alcohol or if you’ve made racist or bigoted statements. We’re screening people like crazy.”

And the second part was his answer to what’s going to happen to campuses?
“I worry they’ll still exist, but they’ll be just filled with rich people. A four-year liberal-arts-campus experience is going to become something that’s largely relegated and positioned to the children of rich people.

. . .

I personally worry about how a little shit like me will experience what I did at UCLA. I tested my limits freshman year. I drank too much and threw up too often. I joined crew and pushed myself harder physically than I ever imagined possible. I fell in love for the first time. I gained resilience when I had my heart broken. I met people from different economic backgrounds who gave me a sense of empathy. All of those things would have happened, but unfortunately they wouldn’t have happened in such a gentle and joyous and safe environment had I not been on campus.”

We’ve thought about how the U.S. has a great tradition of universities being more socializing institutions than anything else. Keeping inline with one of our earlier newsletters about how COVID is Calling Our Bluff, I think there is a reckoning coming with universities - much like you aren’t paying for the drinks at a bar or for the panels at a conference, most of the time we’re not paying for the education at Berkeley, we’re paying for the affiliation, the network and the social experience.

What social structures arise to replicate the campus as more and more of the university comes online?

Future of Offices: Coronavirus Won’t Kill The Office But It Will Change Forever & The Office Is Dead

I had a call recently with someone well connected in real estate who said all his broker friends were preparing to start helping their former office clients find sub-letters - companies looking to go from 50,000 sq ft down to 25,000, and mentioned how that was going to be the majority of what many of his friends were going to focus on for the next 6 months.

We’ve been reading a lot about this, and found this paragraph particularly interesting for those of you who are trying to figure out when to pounce on real estate post-crisis, buy that office space or lock down a particularly advantageous long-term lease:

“That’s likely because rents are historically slow to respond to economic downturns, explains Jack Burns, managing principal of tenant representation firm Cresa, noting that in the past three recessions it took about a year after the recession’s peak before real estate costs reflected those downturns. “Real estate costs are driven by supply and demand, and when there’s a lot of vacancy, landlords get more flexible and drop the rents because they need a tenant,” he says. “But right now, vacancies are really low, and they will be until we sort of get through what we’re going through in the next six months. And then we’re going to see a lot of space up for sublease, and that will throw a wrench in the supply chain and force landlords to drop prices.” It also may be several years before the dust settles because so many companies have long leases (Groupon’s, for example, is through January 2026).”

Communities Can Grow Too Quickly

As someone who is part of a bunch of unused Slack groups that attempted to build community, I appreciated this brief article by Hunter Walk: “I was recently granted access to a Slack community associated with a newsletter I’ve been reading for a while. The kinetic energy of new members started on the #Welcome channel and then flowed to other discussions on themed channels. Whether intentional or not, the batched admissions – we were added as a cohort – created its own dynamics. It felt like an fun event. Reminded me of bit of when a startup we’ve recently invested in announces itself to the rest of Homebrew’s founder group.”

It’s Ok to Laugh Again

Viewers are getting tired of overly heartfelt ads expressing gratitude for front-line workers or detailing how brands are giving back, said Paul Marobella, chief executive of creative ad agency Havas Creative North America.

But nothing can convey a change in tone and that the worst is behind us like humor, marketers said.

In a commercial for hearing aid company Eargo, which was created by IPG-owned ad agency Huge, a daughter repeatedly whispers a private message to her young husband in the family kitchen that he is just not getting, when her father, wearing his Eargo hearing aids, blurts out, “Condoms, Charlie. She wants to know if you brought any condoms.”

We called it in our first STLFT: So small restaurants can open, some Cincinnati streets will close - and become outdoor dining spaces