Joe Carouba pivoted from a donut empire to gentlemen’s clubs as a founder of BSC Management, but never wavered from investing in his San Francisco community.
(Note: This story appears in the March 2023 issue of ED Magazine)
In 1997, with nine donut shops and a large national wholesale business, Joe Carouba was a successful San Francisco entrepreneur and the Bay Area’s biggest donut producer. At the same time, Joe’s father, Habib, his brother, James, and their business partner, Sam Conti, were navigating a rocky period in San Francisco’s adult entertainment business. Recognizing Joe’s business skills, they requested his help.
What started as a six-month agreement has turned into a fulfilling career for Joe as the founder and managing member of BSC Management, one of the leading adult nightclub groups in the world. ED Legal Correspondent Larry Kaplan sat down with Joe to learn why he decided to forsake a successful baking business and veer towards adult entertainment, as well as how the industry and his clubs have changed since then.
ED: Just over 25 years ago, you signed a six-month commitment with BSC Management. Why did you decide to stay and make a career in this business?
CAROUBA: I was having lots of fun and felt more connected to this industry than to baking. It was such a healthy business, with far better margins than mine in the wholesale bakery business. So it felt like a good fit, like I was home. I was trained to manage through the financials and watch my numbers closely, and with my background managing multi-unit stores with much smaller margins, I could manage these properties well. The goal was to take what we had and grow it.
ED: How many competitors were there back then?
CAROUBA: About half a dozen. The Mitchell Brothers, Walter Pastore and a couple of guys with individual clubs.
ED: How does today’s San Francisco club market compare to 10-20 years ago?
CAROUBA: Operating these clubs back then was easier. It was mostly juice clubs, the margins were better than today and the rules and regulations were different.
ED: When you decided to stick with adult businesses, did you sell off the donut shops and wholesale business?
CAROUBA: No, I maintained all three for around five years. It was insane. I worked the adult clubs and stores while running the 50,000-foot manufacturing plant in Hayward. We were selling all over the country and also operating our store chain. Ultimately around 1991-92, I let go of the bakery and the retail stores.
ED: Are they still around?
CAROUBA: Yeah, the factory was purchased by these guys who were doing a roll-up in the bakery industry. They executed my business plan, acquired a competitor and combined us into one facility. The retail stores have grown considerably. Today, Happy Donuts stores are all over the Bay Area.
ED: Do you think adult businesses require a particular type of person to succeed?
CAROUBA: Yes. You cannot be risk-averse in our industry. You need to be able to go to bed at night and just not worry too much. Otherwise, you can’t last.
ED: How have your business challenges changed since you started?
CAROUBA: Today, you spend half your time running a business and the other half just covering your behind, making sure you comply with new laws, that your policies are being implemented and protocols are adhered to. You have to create a safe umbrella under which the businesses can operate. That wasn’t as important 26 years ago.
Back then, it was just such a lucrative industry that if you had the risk tolerance and didn’t mind fighting some zoning or other legal issues, you could do pretty well. It was such a simple business, and the clubs with the most entertainers won. But, unfortunately, that’s not true anymore. Today you have to be a much more sophisticated operator to survive.
ED: With eight San Francisco clubs, what sets each of them apart?
CAROUBA: Over the years, we’ve had numerous San Francisco clubs in a small geographic area. You cannot simply build the same business model and multiply it. We’ve done a pretty good job of owning the top of the market, the bottom of the market and the middle of the market. To do this, we’ve had to market to multiple guests and design clubs where one is value-driven and another where customers feel they’re in a high-end club with the best service and entertainers. We’ve had to be pretty good at marketing those clubs and creating separation between them through each club’s pricing, marketing, look and design. And all of our clubs have exceptional teams. I admire the people running each of them.
“We’ve done a pretty good job of owning the top of the market, the bottom of the market and the middle of the market. To do this, we’ve had to market to multiple guests and design clubs where one is value-driven and another where customers feel they’re in a high-end club with the best service and entertainers.” – Joe Carouba
ED: You’ve long been politically active locally in San Francisco and with the state legislature, as well as philanthropic in your community. Why is that involvement important to you?
CAROUBA: I think it’s crucial, especially in our industry, to manage outside your club’s walls. If you have a business in a community and are making a living out of that community, you have a responsibility to give back and do the best you can with what you’ve got to be part of that community — especially guys like me, who’ve been pretty lucky in their lives. And because of people’s attitudes towards our industry, we need to be active so people can see we’re just like them and we deserve a seat at the table, just like any other business.
ED: You were one of the founding members of the Top of Broadway Community Benefit District; you’ve donated time, energy and considerable funds to revitalize the Broadway corridor of North Beach, where you have several clubs. Recently, your Club Condor on Broadway, the birthplace of topless dancing, became the first adult nightclub inducted into the San Francisco Small Business Commission’s Legacy Business Program, which includes economic and marketing assistance from the city and tremendous credibility. This induction must have been very gratifying after all your Broadway corridor efforts?
CAROUBA: Yes, it was. Again, with our industry, when you can get a win, you take it. San Francisco is a sex-positive city. They showed that when we were inducted into the Legacy Program. I’m very proud of that. I hope those who worked at and had the Condor before me are proud of it. And I hope those that will own and operate it when I’m gone will be proud of it.
ED: The COVID shutdown, and its subsequent restrictions on what were then your 10 San Francisco bars, was devastating. You still had rent, expenses and hundreds of employees, including entertainers. How did you cope with this?
CAROUBA: A great question. If I started thinking about the future and our inability to fulfill our commitment to care for our people until COVID was over, it would be just too much, so I worked on it a day at a time.
ED: I remember you telling me some years ago that you were turning 50 and ready to slow down and enjoy life more. Have you been successful at slowing down since then? Have you been able to delegate more?
CAROUBA: I’m a failure at retirement. We have a solid team in place, and so far, this has remained challenging and lots of fun for me. So as long as I don’t get too stressed out, I’ll keep doing it.
ED: How is BSC different from other club groups?
CAROUBA: Most people know how the business works, it’s just their level of execution [lacking]. I think BSC is good at execution.
ED: In 2015, you joined a select few people that have been inducted into the ED Hall of Fame. How did that feel?
CAROUBA: It was really sweet. I was very proud of it. Numerous people probably deserved it more than me, but I appreciated the recognition. I love this industry and that we do a lot of good work. We’re an essential cog in society. I think the more sex-positive businesses there are out there, the more it shows the health of society.
ED: This year marks the EXPO’s 30th anniversary. About how many EXPOs have you attended, and what were your takeaways?
CAROUBA: I’ve probably attended 25-plus EXPOs. I’ve only missed a year or two. We’re a pretty niche industry, and it’s always nice to see old friends who, after all these years, I sometimes only see at the EXPO. It’s also nice to get caught up on what’s happening with the industry in different corners of the country and the world.
ED: How would you like to be remembered?
CAROUBA: As a loving father, a loyal and trusted friend and partner. And as somebody who looked out for the people he worked with and the community he worked in.
Larry Kaplan has for 22 years been the Legal Correspondent for ED Publications. In addition, Mr. Kaplan is a business broker in the sale and purchase of adult nightclubs and adult retail stores and the Executive Director of the ACE of Michigan adult nightclub state trade association. Contact Larry Kaplan: at 313-815-3311 or email larry@kaplanclubsales.com.
