Working Magic off the basketball court

LOS ANGELES - He may not be the star of the Los Angeles Lakers anymore, but take a trip back to the hallowed hardwood with Magic Johnson, and the glory days come rushing back.

“Just like when I walked out here, it took me back from when I was coming down on the fast break and doing my thing,” said Johnson on a recent visit to the Lakers' home court at the Staples Center in Los Angeles. “I don't want to go back or be in the NBA or be in basketball. But it's nice to reflect.” 

Standing with Johnson courtside, it’s obvious that 12 years and 30 pounds haven’t erased his signature moves, including his famous “no look” pass.

“That never goes away,” he said. “I can come down here now, and I know I'll always know how to run a team.”

For the past decade he’s run a new team — Magic Johnson Enterprises — an empire estimated to be worth more than $700 million. He’s built his business by opening upscale stores in a place corporate America had all but ignored: the inner city.

Today, he has 116 Starbucks, 31 Burger Kings, a dozen 24 Hour Fitness Gyms, and a T.G.I. Fridays. He says other companies considered similar moves but were afraid to move into the neighborhoods Johnson has invested in.

Video   The Magic touch May 5 - CNBC talks to Magic Johnson about his second career launching a string of successful inner-city businesses in neighborhoods that other companies had shunned. CNBC

“No question about it; they were all scared,” he said. “Scared they were going to lose money. They didn’t know how to do business in these communities so they just said, ‘We don’t need the headache.’ And they went elsewhere.” 

But Johnson saw an opportunity and in 1995 scored a deal with Sony, opening movie theaters in South Central Los Angeles and Harlem. Johnson says the business community initially looked at him “as a joke” — wondering what a basketball player knew about running a business.

It turned out he knew plenty. He convinced Starbucks CEO Howard Schultz to do something he’d never done before or since — take on a partner.

“Howard Schultz took a chance,” said Johnson. “Not only with his company but with his brand. And he put it in my hand and said, ‘Look, I’m trusting you with this brand and I hope you know what you’re doing.’ ”

Johnson said his goal was to give minority consumers options that they never had before.

“If they don’t want to pay four bucks for a cup of coffee at Starbucks that’s okay,” he said. “But as long as they know it’s sitting there.”

Johnson’s impact was evident on a recent trip to LA’s Ladera Heights, where he opened his first Starbucks and T.G.I. Fridays 10 years ago. Before he arrived, the only restaurants in the neighborhood served fast food or soul food.  Now, the Ladera Shopping Center is booming as other retailers have followed Magic’s lead.

In this community, he’s every bit the star he was on the court — approachable and gracious to a fault, whether the cameras were rolling or not.

“I’m a part of the fabric of the community,” he said. “And they know that I invested in them. I didn’t talk about it, I was a man about it.”

His latest venture has the business world buzzing; Canyon Johnson Funds has raised $2 billion to finance real estate projects in cities across the country. 

“Now they’re saying, ‘OK, let’s get together now,’ ” he said with a laugh. “I had to bang down doors. I had to really show them that I was a serious business man.  Then, the track record had to come.”

As a mogul, Magic Johnson may be bigger now than he was in the NBA, which is why some of today’s star athletes, like Alex Rodriguez, have turned to him for advice.

“He is probably one of the top three greatest basketball players to ever lace them up and to say that perhaps he’s had a better business career,” said Rodriguez. “It is quite remarkable.”

With a $275 million contract, A-Rod is the highest paid player in baseball, yet he’s already talking to Magic about life after the big leagues.

“He’s done so much, and he’s just really been a university of knowledge and example for all of us that are playing today,” said Rodriguez. “He has great common sense. If you talk to him about business, he doesn’t over complicate it. He likes looking outside the building, looking at a business and within four or five minutes — kind of like Warren Buffet — Does it make sense, or it doesn’t make sense?” 

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