The Donnelly-ization of Vancouver Bars

With the Donnelly Group leading the way, Vancouver’s pubs and clubs are taking Canadian bar culture into the future. But is it a future anyone wants?

The unluckiest day of Jeff Donnelly’s life began at about 4 a.m. on August 17, 2003. The phone rang as he sat browsing on his computer in his Helmcken Street condo. A friend was on the line from Loft Six, the Gastown nightclub in which Donnelly was a partner. “He said, ‘Jeff, they’re shooting guns in here,’” Donnelly recalls. “I was there before the SWAT team.” Donnelly ran up the stairs against the tide of fleeing customers, and was told by a police officer to run right back down again. “I remember two of my friends who’d both been shot in the leg coming out on stretchers. I remember talking to them.”


In the aftermath, J.J. Johnson, a former bouncer at Brandi’s strip club, was dead on the floor. Mahmoud Alkalil, whose brother had been shot to death in Surrey just two years earlier, fled the scene despite his gunshot wounds and died the next day in hospital. Bystander John Popovich, a popular DJ from Windsor, Ontario, was killed in the crossfire. Five others were injured, including an L.A. dance teacher who took a shot in the back and faced a future in a wheelchair. Police, who told the media that three gangs were present at the scene, described the incident as the worst nightclub violence in Vancouver history.


Donnelly, just 28 at the time and a partner in three Vancouver nightspots, had thought that he’d found his calling in bars and clubs. But after the shooting he wasn’t so sure. “I thought I’d never do another nightclub,” he recalls. “I thought, ‘I can’t stand this city.’ I couldn’t leave my house. People were assuming I was a gangster, or involved with the Hells Angels.” Two weeks later, he and his partners decided to close the club for good. “It wasn’t much of a decision.” 


Donnelly is still rattled by the memories, but eight intervening years have changed his outlook. I meet him in Yaletown’s The New Oxford, where he’s having a gluten-free pastrami sandwich and a Phoenix lager with childhood friend and Donnelly Group director of operations Reid Ogdon. The New Oxford is the latest addition to the group’s dozen nightclubs, pubs and bars, including the Cinema lounge, Granville Room and the slick Republic nightclub on the Granville Street strip, as well as The Lamplighter, Post Modern and Metropole in Gastown. Scattered across the city are Bar None, The Academic, Library Square, Smiley’s and The Calling. In October, he plans to reopen the first of his Vancouver investments, the Kitsilano landmark Bimini’s, which was destroyed by fire four years ago. He expects to open three more new bars by the end of 2011.


Jeff Donnelly’s beginnings in Vancouver pubs and clubs

Jeff Donnelly was the face of change in pubs and clubs in Vancouver during the first decade of the 21st century. In that time, he has learned a few things about fortune and timing, front ends and back ends, and the balance between security and risk that defines his line of work. Donnelly has learned that there are two kinds of luck. “In the bar business, you have to have a lot of good luck,” he says. “We’ve been lucky.” 


Donnelly’s fine fortune began after Asian investors hired the wayward University of Victoria student to revamp the bar at Victoria’s Red Lion Inn. Circumstances forced them to buy out his contract before his work really started and, in 1999, with $150,000 of his own cash and some additional family money, he bought the Bimini’s Tap House business from its original owner, Peter Uram. Bimini’s began as one of B.C.’s first neighbourhood pubs, under provincial legislation passed by the NDP in 1972 that broke the stranglehold hotels had enjoyed on liquor service. 


Donnelly began buying pubs and bars at a time when many owners feared the worst. They thought a new round of changes to provincial liquor regulations, which allowed restaurants to serve drinks without food to 10 per cent of their patrons, were going to be painful for them. And they thought municipal smoking bans were going to hurt even more. Many pubs were moribund as the lucrative private retail liquor outlets the owners had been allowed to open distracted them from their traditional business. Some were for sale on Craigslist.


There was opportunity, and Donnelly knew how to capitalize on it. He’d learned a lot from his father, Brian, an accountant and former B.C. Lions defensive back who bought, fixed and flipped struggling hotels and their bars. As a 12-year-old, Jeff had cleaned up puke at his dad’s Mr. Sport Hotel on Kingsway; in Victoria, he managed his dad’s bars at the Ingraham Hotel. “I learned all the back-end sensibilities from my dad,” he says. But he differed in one critical respect: “My dad hated the bar business. I just love the bar business.”

[pagebreak]

Liquor reform and early Vancouver pubs

In the history of pubs and bars in Vancouver, many people have seized a moment, and many places have defined a change, beginning with John “Gassy Jack” Deighton, who in 1867 got the workers at Edward Stamp’s mill on Burrard Inlet to build a saloon in return for all the whiskey they could drink in a day. Liquor regulation, and sometimes the lack thereof, usually defined the opportunities. Some people make money from what’s newly permitted, others from the shakeup in what already exists.


The pre-Donnelly Lamplighter seized a moment way back in the spring of 1925, when it received the first B.C. beer parlour licence issued following the repeal of Prohibition. Of course, the Presbyterian strictures governing the new establishments (beer only, no loose women) left lots of room for bootlegger Joe Celona, whose cozy relationship with the police and mayor L.D. Taylor allowed his unregulated “disorderly houses” to persist well into the 1930s. The authorities averted their knowing eyes until the 1960s from any number of bottle clubs, where the rack for your mickey was tucked under the tablecloth. Or in the Chinese restaurants where customers put their booze in a teapot. 


Liquor reform often takes place at a pace that approximates geological time, as vested interests spout portents of an apocalypse and donate heavily to the political parties that might protect them from sensible changes. Hotels resisted pubs, and pubs in turn resisted looser restaurant rules. But when changes do arrive, shifts can be seismic.


Donnelly Group expansion

Two years after Donnelly acquired Bimini’s, he bought the Foghorn restaurant from the Granville Entertainment Group, owners of the lucrative Roxy nightclub, and gave it a makeover, reopening it as the barlike Granville Room. People were flocking to hip new restaurants that felt like bars, and many operators, including Donnelly, allowed more than just a few patrons to drink without buying food. Donnelly says the city closed the Granville Room “five or six” times for licence violations, and he figures that in addition to lost revenue he paid about $10,000 in fines. Which makes it easy for him to define his smartest management decision: “getting involved in liquor primary licences.” 


As his company grew through one acquisition after another, Donnelly focused on atmosphere (contemporary design), food quality (Ocean Wise-certified seafood), liquor selection (craft beers, hip cocktails), service (free drinks at 5 p.m., with some restrictions) and price (the Metropole has $2 appetizers). That helped his businesses compete with the restaurants that were becoming neighbourhood watering holes. Donnelly travels frequently with senior staff to clubs and bars around the world, and the biggest revelation for him came in London. “You’d walk into a 300-year-old pub, and some kids, some hipsters, had taken it over and made it cool. There was an element of design, there was good music, and they had decent food.” He saw what they had done and he brought the lessons home. 


Donnelly also knows that nothing of substance is built by just one person. At first, before banks warmed to him, owners of some businesses he bought stayed on as minority partners. Last year, he hired British-trained chef Michael Knowlson, who had worked locally at Bacchus and Sequoia, as the group’s executive chef. Since then he’s called on French Laundry-trained cook Robert Belcham, the man behind Fuel and Campagnolo, as a consultant. Donnelly is also attentive to the communities he operates in – 15 per cent of Donnelly Group profits support community and family services through a foundation run by his mother, Pattie.


While Donnelly respects and develops the individual character and clientele of his establishments, he does brand them collectively. It’s a subject of much internal debate, but in the end, he says, “we believe our customers have a loyalty to our product and will try our locations in different neighbourhoods.” The branding usually includes slick black-on-black design that Donnelly often developed himself, back when he had the time. When the similarities obscure the differences, some people are bound to take issue. Bob Burrows, who for a quarter century booked the music and did “whatever else was necessary” at the Town Pump, Sonar and Richard’s on Richards, is one.


Over a morning coffee in an empty downtown bar, Burrows rattles through the names of this city’s legendary nightspots: show clubs like the Cave and the Penthouse from the 1950s; hippie hangouts like the Bunkhouse and the Elegant Parlour in the 1960s; rock cabarets such as Pharoah’s, Rohan’s and the Body Shop in the 1970s; alternative live music venues like the Railway Club and the Pump in the 1980s. “All those clubs had one thing in common,” he says: “They had independent operators.” Of Donnelly’s clubs and bars, he says: “I never go into them for the same reason I never go into Milestones.”


In fact, part of Donnelly’s success is that he sees such mid-market casual dining chains – and Vancouver is a bit of a hub for the phenomenon – as an important competitor. “Earls, Joey’s, Cactus Club – on the one hand they’re getting very generic,” allows Donnelly. “On the other hand, I’ve grown up with them, and they’ve grown, and I actually appreciate their success. Frankly, they’re very good at what they do, and they raise our levels.”

[pagebreak]

Veteran nightclub operator John Teti, whose first cabaret was Hogan’s Alley back in 1970, and who with Roger Gibson developed Richard’s and the Shark Clubs, respects the way Donnelly has positioned himself. “Management is a very difficult, specialized field,” he says. While there are large chains in Britain where, as Donnelly’s colleague Reid Ogdon observes, a group of 175 properties might buy a group of 30, in North America, Donnelly’s loosely branded group of bars, lounges and nightclubs is much more of an exception. Teti ventures that building a loosely linked chain of drinking joints in one city is new territory.

Donnelly also sees his approach as unique in North America. He says he knows of no company that has branded a group of venues that includes restaurants, pubs, bars and nightclubs. Perhaps, he figures, idiosyncratic local liquor licensing keeps clubs and bars from becoming chains in the manner of restaurants. In any event, he makes no apologies for rewriting the rules on how things are done in the club-and-pub business. “We know who we are. We’re not a corporate culture. We want to grow that way, but first and foremost we’re bar guys. We stick to what we’re interested in.” 


In fact, even Burrows’s beef isn’t really with Donnelly so much as with how the nightclub business has changed. Once, a nightclub like the Pump or Richard’s (which Burrows describes as having been “held together with gum”) could thrive by putting the right musicians on the right stage at the right time. Now, he believes no one could open a strictly live-music venue: “You can’t do just one thing anymore.”


Vancouver live-music venues

The folks at the live-music-driven Rickshaw and Biltmore are trying to prove Burrows wrong, but there’s no disputing that in little more than a decade the landscape has changed dramatically. Vancouver’s once-independent but still-venerable Commodore Ballroom, for example, is now owned by Live Nation, a U.S.-based company that reported more than $5 billion in revenue for 2010. DJs have undercut the audience for bands, and live music in general is increasingly fragmented. Casinos have taken many bankable live acts to suburban theatres. 


Then there’s Donnelly’s chain. While all this evolution and consolidation may offend the music-first sensibilities of both old-school nightclub operators, or taste-making new independent entrepreneurs operating on the margins, or grouchy Donnelly customers posting online reviews on Yelp, it’s pretty hard to dismiss Donnelly’s hometown success. 


Music remains a big part of that success. In the three-room Republic on a Sunday night, the band Retrofit is playing on the main floor and there’s a DJ upstairs. Donnelly has just hired ace former Biltmore talent booker Aaron Schubert. But music is not the money-making part of the Donnelly Group. “We love to do live,” Donnelly says. “We lose money almost every single time. The people that come to live shows don’t spend money. But we hope the crowd that comes in likes our place and comes back.”


Burrows is skeptical about the prospects for such repeat business , but one thing that he and Donnelly do clearly agree on is the change for the better in nightclub security in Vancouver. Donnelly describes Gastown at the time of the Loft Six tragedy as “the Wild West.” Teti says, “it was ugly all over.” Burrows adds, “Something bad was going to happen.” Experienced staff helped clubs like the Pump and Richard’s stay out of serious trouble, but it’s never easy to say “no” to a guy who might have a gun. “The onus,” recalls Burrows, “was on the bar owner – your $15-an-hour doorman risking his life.”


Teti, a charter member of Bar Watch, a Vancouver program aimed at keeping gang members out of nightclubs, says Donnelly helped reinvigorate the nightclub organization’s downtown security initiative, as did fears Vancouver city council might roll back the closing time to 2 a.m. from 4 a.m. Today, on any given night getting inside Republic, a Bar Watch member club, is a lot like boarding an airplane. Searches are thorough, ID is scanned to determine if the patron is flagged in a police database and police can enter and remove those customers, prompting some high dudgeon among privacy rights advocates. But gang members are now sufficiently put off that they don’t often show up. Donnelly still laments that it’s prohibition – of marijuana instead of alcohol – that makes the drug trade so lucrative and gangs so ornery, but that’s a bigger battle. “Our clubs, the Bar Watch clubs, knock on wood,” says Donnelly, “are the safest clubs in North America.” 


All of which gives an ambitious entrepreneur leave to look outward. Donnelly projects revenue at $35 million this year and $40 million next. He figures his debt – the banks have been good to him – is less than 20 per cent of his equity, although he admits that’s an elusive number. “I guess if somebody made me an offer I’d know. But to be honest, we’re not selling.” Just growing. He’d like to create a boutique hotel in Vancouver, which sorely needs a few. He thinks there may be room for the Donnelly bar brand in markets like Seattle and Los Angeles.


Which means he gets to go to these places, to see the world’s great bars, and figure out where his might fit. “We’re interested in music, and were interested in travel, we’re interested in bars. We drink a lot.” Donnelly pauses, and for a moment the compact, boyish entrepreneur looks even younger than his years. “My mom’s really going to like that.”