They Oughta Be In Pictures!
How The Marcus Family of Milwaukee Built a Real Estate Based Entertainment, Lodging and Restaurant Business Spanning Three Generations
By Steffi Baker – The Family Office Real Estate Magazine
The Marcus family story has all the hallmarks of an epic Hollywood movie that could appear on the theatre screens they own across eight Midwestern states. Grab some popcorn and get ready for a journey through the worlds of Ben, Steve and Greg Marcus, the three generations whose vision and adventures in real estate built the company into the “franchise of Hollywood” (Greg’s description) it is today.
Scene I – Extra! Extra! Hardworking Young Man Makes Good!
Ben Marcus emigrated from Poland to the United States in 1925 with his mother and four sisters to join his father, who had gone ahead to make a new home for the family. The family wound up in Minnesota. Young Ben started a paper route that he turned into such a success that the Minneapolis Journal promoted him to the circulation department.
He left the Journal to attend the University of Minnesota but dropped out after two years, in the aftermath of the Great Depression. He went back to the Journal, this time as an advertising salesman who, as luck would have it, found himself servicing a number of movie theatre clients. He started writing ads for them and was soon in the thrall of the movie business.
Scene II – “Hey Kids! Let’s Put On A Show!”
In 1935, Ben pooled money with one of his cousins in Wisconsin to purchase an abandoned building in Ripon, which they converted into the Campus Theatre (still in business today). The theatre was a success and they opened more locations around Wisconsin. When the advent of television threatened their revenue, they opened drive-in theatres, starting in 1949. Eventually Ben bought out his cousin and continued running the business on his own.
The company branched out into the franchised restaurant business, obtaining the Marc’s Big Boy franchise rights for Wisconsin, Illinois and Iowa in 1958. The company later bought into Kentucky Fried Chicken after Ben happened to meet Colonel Harlan Sanders. KFC products were first sold within the Big Boy restaurants, and later at free-standing stores. The company also opened Captain?s Steak Joynt and Applebee?s units.
Steve Marcus, Ben’s son who later joined the family business in 1962, recalls the unusual nature of the KFC franchise agreement and payments. “We paid them 5 cents a chicken,” he explains. “They would go ask the chicken farmer how many chickens they sent us, and that’s how they calculated how much we owed them.”
At peak, the company owned and operated 62 Marc’s Big Boys. This writer herself enjoyed many family meals as a child at the Big Boy on Oakland Avenue in Milwaukee, and was particularly fond of Marc’s homemade cheese pie, developing a lifelong love affair with cheesecake as a result. The iconic statue of the smiling boy in the red and white checked overalls, white t-shirt and blue shoes topped with a tidal wave shock of brown hair, proudly brandishing the restaurant?s famous hamburger, was an instantly recognizable beacon to many hungry diners.
Business boomed, until the restaurant industry changed radically. “McDonald’s took a big bite out of our Big Boy’s business,” says Steve. “They were cheap and fast. We were neither cheap nor fast. We couldn’t mount a defense against McDonald’s.”
The company sold the Big Boy?s franchise stores and exited all of its chain restaurant businesses by 2001. It now owns half a dozen upscale restaurants around Milwaukee. In 2015, it bought the popular spy-theme bar and restaurant called the SafeHouse in Milwaukee and opened a second SafeHouse in Chicago in 2017.
Today, the movie theatre division has grown to be the fourth largest theatre chain in the U.S. The business unit owns or operates almost 900 screens in locations across Wisconsin, Illinois, Minnesota, Iowa, Nebraska, Ohio, North Dakota and Missouri.
Scene III – Motel, Hotel, Holiday Inn…
Because Ben was traveling frequently to visit the theatres and needed a place to stay overnight in Appleton, he bought the company’s first motel and called it the Guesthouse Inn.
“This was around the time Holiday Inn had just started, and he thought it (the Holiday Inn concept) was a good idea,” says Steve. “He picked a great location, Highway 41 and College, and got 40 acres. He added two restaurants and a bowling alley, too.”
The Guesthouse Inn did well, and Ben took the company further into the lodging business. In 1962, a unique opportunity arose for the company to acquire a classic Milwaukee jewel, the Pfister Hotel. German immigrant Guido Pfister and his son Charles built the hotel, which opened in 1893 on its current Wisconsin Avenue location. Guido had purchased the land in 1871 for $200, wanting to open a “grand hotel of the West.” The Newhall House, Milwaukee’s most elegant hotel at the time, had burned down in 1883, close to the plot of land destined to become the Pfister. The Pfister opened to tremendous fanfare in 1893, at the cost of over $1 million.
Sadly, the proud Pfister Hotel had seen better days by 1962. The property was ripe for takeover, according to the local grapevine.
“If you’re in the hotel business, you’re also in the laundry business,” says Steve. “We knew Adelman’s, the cleaning business that did all the laundry for hotels in the city, and they tipped us off that the Pfister’s suppliers weren’t getting paid anymore, and there was going to be an opportunity to get it (the hotel) coming up.”
Ben did indeed manage to buy the hotel at auction, and called Steve home from California to help run it. The company undertook a $7 million renovation to restore the property to its former glory. They would later find out the art collection – 80 paintings carelessly stashed in boxes in the basement – were worth more than the hotel itself. These stunning pieces are now on display around the hotel.
The Marcus drive into the lodging business continued. A little over a decade later, Steve oversaw the creation of the economy hotel chain Budgetel, with the first location opening in Oshkosh in 1973.
“At the time, the Motel 6 and the Super 8 Motel chains were the competition. They had the prices in their names. We wanted to sound more upscale so we called it Budgetel,” says Steve. “People who want a hotel want service and they will pay for it. Others don’t want service and want a lower price, but they still want a decent room. That’s who the Budgetel was for. We got a lot of comment cards saying, this place was much nicer than I expected. We wanted to give them more than the others (Motel 6 and Super 8) without a big price.”
The brand was franchised in 1986. In 1998, the name was changed to Baymont Inns and Suites. The company also started a small group of Woodfield Suites hotels.
Along the way, Greg Marcus, Steve’s son, had joined the company in 1992. He started with acquiring Applebee’s locations, then moved into theatre real estate. He joined the Woodfield Suites division to gain operational experience and for two years ran the Baymont division. He got involved with the name change and remembers well it was not all smooth sailing.
“The cost of changing all the signs was painful,” says Greg. “We had 100 company- owned Budgetels and 100 franchised. Every sign had to be changed. It was complicated. The local restrictions on signage were tough in a lot of areas. And then there were the billboards. Those were somewhat easier though.”
The company sold the Baymont properties and the name to the La Quinta Corporation in 2004. A few years before that, Greg sensed the time was right to sell off the lodging business. He recounts a discussion he and Steve had a few years earlier, not long after Ben passed away in 2000.
“It was September 12, 2001 and we were sitting in the coffee shop in the Pfister. We said, we have a lot (of money) in lodging and no one?s here. We have a lot of our (own) money in this company. Let’s think about that.”
Greg also recognized every asset they owned in the lodging division was over 20 years old, which he knew meant major renovations were on the horizon. Greg notes that Ben and Steve had always been disciplined about maintaining the assets and at 18-20 years of ownership, upgrading is expensive. He wasn?t sure it was a good idea to commit so heavily to aging assets.
“Real estate cycles run seven to ten years and we needed to start looking for a window to sell – we did not want to miss on that. There was a window of opportunity that opened around that time (2004), and I said it?s time to sell,” says Greg. “We did it, we hired Goldman Sachs and we sold… and then the window closed. The economy changed. We got out just in time.”
“Then we had a bunch of cash to deal with – $425 million from the sale. We declared and paid a special dividend, to our company’s shareholders and opened a family office,” Greg says. “We decided to go for full service hotels, built for the long term. We also maintained our traditionally low debt levels, in light of the Great Recession.”
Today, Marcus Corporation has 21 hotel and resort holdings across the United States, with new projects and upgrades on current properties in the works. Their latest project will be unveiled next year – the InterContinental Hotel is in the process of being renovated and transformed into an arts hotel. The property will undergo a name change as well.
Scene IV – Real Estate: Star Of The Marcus Show
According to Steve, Ben was a serial entrepreneur who loved to start companies.
“He’d have an idea and he’d go get one of those minute books at the stationery store and write it down there, “says Steve. “He’d tell my mother, I’ll be the president and you be the secretary. At one point, he had 80 of those notebooks in his office!”
Ben’s businesses were rolled into one – the Marcus Corporation – in 1972 and listed on the New York Stock Exchange, where shares are for sale under symbol MCS. The full-service hotels and movie theatres are the main assets.
Through the years, one thing has remained constant: the real estate, which had been and still is literally been the cornerstone of the business. The Marcus way is to look for value-add projects in good locations in strong markets, say Steve and Greg.
“We like well-tended mid-box centers where cap rates are attractive. We like to do projects where we bring something to the table – capital, experience, knowledge,” says Greg.
In the hotel division, the company has partnered with outside investors in several cities including Atlanta and Omaha.
While Greg says that the family mantra has always been “the only constant is change” another equally important mantra has been, “we own the real estate our businesses sit on.”
“Most people who do what we do lease their property. Our family philosophy is, there is value in owning your own real estate? we are real estate based,” explains Steve while Greg nods in agreement. “If I’m a tenant, every month I write a check and at the end of 20 years, all I have is a pocketful of receipts. If I’m a tenant, I paid that guy’s mortgage and now he has a building that’s free and clear – I want that position too.”
Steve and Greg are aligned on a number of points, one of which is not having to ask a landlord’s permission to make changes to a property is a major strategic advantage. In some cases, Greg says, they’ve made decisions and proceeded to implement the changes the next day, which has enabled them to stay ahead of their bigger competitors who have bigger budgets and enjoy economies of scale.
“The important thing is flexibility,” adds Greg. “You have competing interests (between a landlord and tenant) and you have to negotiate things through and that takes time. That would make us less competitive. Because we own the property, we have the ability to be strategic and that takes speed and flexibility.”
Greg says that while Marcus Corporation isn’t the largest movie theatre operator, it has still managed to install the largest number of recliner seats. He firmly believes being the first mover can be a critical advantage in the theater business.
“Our competitors don’t get the same percentage increases in their numbers that we do when we do something first,” says Greg.
“It’s about path dependency in behavioral economics – history matters,” he explains. “Where you start going to the movies is probably where you will keep going to the movies. It’s going to take a lot to get you to change where you go, because you got into a habit.
Scene V – Mr. Marcus Is Ready For His Close-Up
One unusual thing about going to a movie at a Marcus Theatre is seeing Greg. No, he isn’t taking tickets or selling popcorn. Every film is preceded with a personal welcome clip from Greg himself. It’s a pleasant surprise to sit back as the lights dim and see Greg’s friendly face and kind eyes fill the screen.
Sometimes Steve joins him. One month, the CEO of Marcus Theaters, Rolando Rodriguez, appeared. The messages change frequently to keep patrons engaged.
Greg says he had been appearing in public service announcements (PSAs) for the United Way when he was co-chair of the Milwaukee United Way campaign when someone at the United Way suggested he start doing regular messages to his customers. He wasn?t so sure at first, but by the third and fourth years he did the greetings, he was regularly getting recognized in public, which he says “really helps in the places we don’t live” outside of Milwaukee.
But sometimes he finds his “fame” slightly embarrassing.
“I was out at the movies one night with Linda, my wife, and as we left the theatre a family with kids was near us,” Greg relates. “One of the kids saw me and said, hey, that’s the guy on the screen. The parents told him no, that’s impossible, that can’t be him. Then Linda said, yes, it’s him! They couldn’t believe it. They wanted autographs and everything.”
Scene VI – Marcus Forever!
Steve and Greg agree there was no pressure on them to join the family business.
“Whatever we wanted to do was OK, but we had to get a good education,” says Steve. “That notion as passed down.”
And what if the generation currently coming up don’t all want to go to college?
“I said, a good education,” Steve points out. “That doesn’t equal going to college. My father (Ben) only went for two years and my mother didn’t go at all. What I mean is, you have to have a profession. As Jews in Poland in the old days, you had to hang your own shingle, no one was going to hire you. You were a lawyer or accountant or something like that.”
There are nine children that make up the Marcus family?s fourth generation. Three of them are currently in college and the rest are younger. However, a job in the family business isn’t a given, quite on purpose.
“We haven?t started planning for them to join the business yet,” says Greg. “They are free to choose what they want to do. Most importantly, they are going to work and contribute to society. They should do what they want to do. The opportunity here is open for them, but only if they want it.”
For Steve and Greg, it was a choice they each made later in their careers, and one they are happy with for a special reason.
“The best thing of all is the opportunity to work with my dad,” Greg says with another broad smile.
Steve smiles back and agrees, as they have both done throughout the conversation. The respect and love between them can?t be concealed.
The Marcus family is very clearly one of the rare 10%of families whose wealth and legacy will exceed three generations.