 It's Tuesday. We're back. I'm Jay Fidel. This is ThinkTech. More specifically, this is Restaurants of Hawaii, and we have the Executive Director of Restaurants of Hawaii, Cheryl Matsuoka. Hi, Cheryl. Nice to see your smiling face. Hi, Jay. Thank you for having us on again. And we have the, what, former chair, but once you're a chair of the Hawaii Restaurant Association, you have that for life. And this is Tom Jones. He's heavily invested in restaurants. Hi, Tom. Good morning, Jay. How are you today? Good. So I like to say Ohio because I know that you speak Japanese, but first I want to ask Alexa a question. Alexa, how do you say restaurant in Japanese? Okay. Here's translated. Restaurant in Japanese is, you can say repeat, slow down, or just ask for another translation. What would you like to do? Alexa, stop. Enough. Tom, how do you say restaurant in Japanese? You don't know Shigataga Arimatsu, which means there's many, many ways, but Shokuten is one way. Okay. And your restaurant, and how do you say your restaurant in Japanese? Our newest restaurant is Kodomo, K-O-R-O-M-O, and it's a katsu and curry bistro out in Pearl Ridge. So here we are, talking about new restaurants in the time of COVID. And I wanted to turn to you, Cheryl, and ask you about this phenomenon. We are living in the time of COVID. No restaurant investor knows from day to week what's going to happen with the industry and with the government, and you could go crazy trying to figure out what's coming down the pike on rules about restaurants. At the same time, you sent me a list of like 20 brand new restaurants that have opened up even in the time of COVID. I do not understand. Cheryl, can you explain this phenomenon? Absolutely, Jay. Restaurant tours are entrepreneurs. And Jay, because of the love of the culinary art, restaurant tours will always be striving to create more culinary dishes to share with Hawaii and the world, right? Even during this relentless pandemic, and Jay, you know, as you know, just yesterday, a new strain has hit Hawaii. Even with all of the uncertainty, as you said, you know, I've been collecting a list and I get it, you know, there's a lot of restaurants that have closed their doors. But Jay, I want to focus on today, all the restaurants that have reopened, have opened their doors. And many restaurants who had shuttered down during our two shutdowns has also reopened. But today, it's all about, you know, it was a very difficult year. And even though the challenges that restaurant have with social distancing, they limited amount of people at a table, Jay, right now, we're only allowed to have five people in a party per table. So even though all those challenges, restaurant tours know the rules of the game, and they're still willing to open up their doors and welcome in you patrons. So I had a list and I shared with Jay because I wanted him to know the impact and how many restaurants open their doors. Jay, should I just mention a few? Yeah, would you? I'd like that. Sure. It was like Istanbul right over there in Ward, and there's Newt in Waili and Qaymuki, and there's Hayhoe House. I invited Thomas Ray to be here today, but he couldn't. He had another conflict. He is also a partner in Square Girls. There's also, I mean, there's so many restaurants that have decided to open their doors even during the pandemic. On my list, I have meal pastology over Makali Street, Papa Kurtz, which is over by the St. Louis Clubhouse on Eisenberg, and Kapahale, which is in Kahala, that have opened their doors. And I want to introduce Tom Jones, who has years. I mean, he has, I want to say decades, and I asked him if it was okay to say that, but he said, yes, absolutely. Tom Jones has five decades of experience as a restaurateur and currently a partner, and not only Kuromo, his most recent restaurant, but also in the Gyo Taku Japanese restaurant. And Tom Jones is a past chair many times of the Hawaii Restaurant Association. And if anybody can share with our viewers, you know, the challenges that restaurant tours go through, and why do they keep opening up their doors, knowing that there's going to be more challenges ahead? It's going to be Tom Jones. Yeah. Well, what an introduction, Tom. So the significant question here is why? We could ask you that question 10 times. Why? Why 50 years in restaurants? Why continue during COVID? Why new restaurants? Why do you spend the time with the Hawaii Restaurant Association? There's a million whys. Let's begin with, let's begin with, why did people open new restaurants in the time of COVID? Well, I think, you know, the economy certainly has changed, but people's appetites have not. And so the entire population of the state needs to eat, you know, three meals a day, pretty much. Where they eat them is really the trick or the answer to the question. And so there have been some restaurants that unfortunately, because of the financial situation, you know, restaurants operate on a very slim margin. And so depending on their financial situation, they were not able to survive, you know, the beginning of COVID. But there are still, you know, operations that can, that for, you know, they have low rent or they don't have any rent, they own their building, what have you, they're able to, to still provide food and meals for folks. And I think the big change for us, you know, as an industry has been the major shift from dine in meals to take out meals. And so typically your restaurants that are able to make the adjustment shifted from probably our restaurants were doing probably about 85% dine in and about 15% takeout. And now we're, our takeout sales have increased by 400%. And our dining room sales are down by 70%. And so we're still, you know, these, these are kind of national averages, actually. So what, you know, my restaurants are experiencing is similar to what you're seeing on the mainland as well, and around, around town. So we have to have more takeout and we had to adjust with, you know, online ordering and pick up these software and things like that. But we're making the adjustment. And so those that have been nimble and able to, you know, handle the financial crunch are successful still. So if I'm a restaurant entrepreneur and I see all this happening, and I see it happening on the mainland, and I see the numbers you're talking about, you know, it seems to me that I would, I would open a restaurant like one of those pizza places with a counter. That's it. Just a counter, you walk in the door, you, you know, take your food out and you leave and I don't spend the rent on a, you know, in a dining space. So are people doing that? Or are they hedging their bets with a sort of buy, buy focal kind of thing where you can do both in the anticipation that soon enough we'll get back to dining. Yeah, I think if you look at the list of restaurants that that Cheryl mentioned, they're generally relatively small restaurants and they are able to handle the takeout business. And I do, I do think though that there's an awful lot of pent up demand. And if you look back to the previous century when we had the pandemic and then immediately after the pandemic, you remember the roaring twenties? Well, I heard this morning on a, on a national conference, dealing with restaurant economy that they're anticipating a second roaring twenties in this century. So, you know, look out 2022, I think, you know, people are really dying to get back into the, to the restaurants and, and, you know, commune and share stories and all of that. So the restaurants that are able to adjust and stay in the game to later this year or into the next year, I think stand a chance of being very, very successful. Yeah, that's a good point. I wonder if, you know, for the benefit of our viewers and listeners, if you could just tell us what day that would be. Let me, I get my crystal ball right over here. Let me just double check. We don't know. There's always, there are always pickups and you know, when this first happened back in March, we were thinking, okay, we'll have a vaccine by September, we'll be back to normal by Christmas time. And certainly that didn't happen. And we can see, you know, how long it's really taking to roll this out nationally. So it's going to be a while and we have to anticipate some hiccups. And there's no question that, that people adjusted to take out or working from home. All these adjustments that we've been made that making on the last year, we're not going to rush right back to the way things were before. So some of these habits that we've developed are going to, are going to stay with us. And I think one of the things that's interesting about, you know, the size of the restaurant that you mentioned is prior to the pandemic, there was this new phenomenon called ghost restaurants. I don't know if you're familiar with this, but these are restaurants that open up that don't have a dining room. And all they do is exclusively, you know, takeout food, either, you know, pick up takeout food or, you know, delivery takeout food. And so there's, you know, they're called a ghost because you really can't see the restaurant. But the food shows up. And so that trend has really grown, you know, a lot in the last nine months. I don't know why, but I hear you talk, I think about, I think about one of those movies where there's a fellow in prison, okay. And then somebody comes to visit him in prison. And then they talk through a telephone with a, with a glass barrier between the prisoner and the prisoner. Okay. And I'm thinking that, you know, maybe in here somewhere is this, it's this telephone in a restaurant in the middle of the table, the glass barrier, and a little telephone on either side. It could conduct a conversation. And the problem is it wouldn't be worth spending the money on that because soon enough we will, we will be emancipated. I knock wood. But make me an entrepreneur, make me a fellow who is always like restaurants. I've gone to restaurants. I have my own concept in mind. I'm very empathetic to, you know, the guys who haven't been able to keep going in the time of COVID. And I want to, I want to come back with them. I want to start a restaurant too. I have a concept in my mind, both in terms of space and food and, you know, the whole, whole new creative idea for my restaurant. How do I handle that now? Should I do that now? Should I do it later? Should I save my money? What's your advice to somebody? I know this would be a competitor, of course. But what's your advice to somebody who wants to get into it as soon as it's appropriate? One of the biggest challenges that the restaurant tours are having right now is rent. And that's one of the main reasons why restaurants are forced to close. And so when, you know, I think that's going to be one of the biggest changes in, in the restaurant, you know, economy world is what are rents going to be in the coming years? Because with the number of restaurants that have had to close and the amount of dining business going down, I think that there's going to be a lot of opportunity to negotiate on lower rents for newer leases, not necessarily your current lease because some landlords are very forgiving and some are not. But certainly anybody who's going to be getting into the business, you know, in the near future can probably look to lower rents, which is one of the biggest costs and one of the biggest hurdles to opening a restaurant. So that's, I think, one thing. We are, we are also seeing some challenges right now in the area of supplies. So because COVID's affecting certain industries on the mainland, we're not able to get, like rice vinegar last week, we were struggling to get rice vinegar. And I called all the providers and they didn't have what we were looking for. And, and so there were just going to be issues like that for a while. But I think that, you know, in six to nine months, it's probably going to be not such a bad time to, to try to get into the restaurant business. Yeah. Oh, yeah. Well, what about what's your advice to landlords? Because they're critical in all this, as you said. And it seems to me that the landlords now have restaurants in the past, you know, they're not making the same kind of money because the restaurants aren't able to pay them. So if I, if I make myself a, you know, a fly in the room of a negotiation between a restaurant landlord and a restaurant entrepreneur, how does that negotiation go? What is what right now today, if I'm planning to do this as a restaurant entrepreneur, what do I say to the landlord? And what kind of arrangement could the landlord make with me to, you know, be comfortable that he has a tenant or will have a tenant? And what kind of arrangement would the restaurant entrepreneur like to have to have the comfort that when he's ready, he can go in and start without having to look around for space? Yeah, I think, I think the big challenge is going to be the unpredictable level of sales. And so so many of the, the, the lease rents are based on a base rent plus a percentage of sales. And so typically in the, in the, you know, the negotiation, the lease negotiation arena there, there's always a little give and take. So what we will probably see as a reduction in the base rent, but possibly an increase in the percentage of sales so that the landlord is able to recoup some of that, you know, what they may be giving up at the beginning on the lower base rent. So I think we'll probably see more of that, which is, I think is a good sign because I think that's always the big challenge for restaurants is when sales drop down, you know, our rent, which would normally be eight, nine, maybe 10% of our sales quickly became 15, 20, 30, 40, 50, 60%. And there was no way that that restaurants could be able to pay that percentage of, of, you know, their income in rent. So I think that's probably going to be the biggest challenge is, you know, adjustments in base rent, but increases in percentage rent possibly. Yeah, yeah. So that would allow somebody to get into a contract now without having to write a big check. It would allow the landlord to know that he's going to have a real live restaurant owner in that space when, you know, and making money in that space. Right. And I think, I think, you know, I think that most rest, most landlords and the landlords that I've been working with are generally by and large understanding I work with four, four landlords on our properties. And most of them are really willing to work with us because they know that if we fail, it's going to be a long time before they can, you know, you know, fill that space again. And not only would they lose the income that they would be getting from us, but typically in Hawaii, we have what we call triple net rest, you know, leases where the restaurant, you know, pays the real property taxes. And you know, so in addition to losing their income, the landlord would also be then having to pay money, you know, on a some annual basis to pay their RPT. And that's not going to help anybody out either. So I think landlords by and large would be very wise to work with their tenants and help them through this so that there's a constant flow of, you know, income and then work with them to make up the differences later on or give them a break along the way. There's also some federal, there's also federal and city and county opportunities too to get grants to help cover rent as well. So they should explore all those opportunities. They should. And the worst result is when the restaurant closes, because when the restaurant closes under the stress of COVID, you're leaving behind all of that plumbing, right? All the drainage systems, you're leaving behind, you know, a deteriorating asset. I mean, I don't know. I'm sure you've seen what happens if you abandon a restaurant and then come back in, you know, like a month later, it's a wreck. That space is a wreck and it deteriorates. Yeah. So and the landlord, the landlord does, you know, really it's not in his interest to have that month go by and he's going to have to completely demolish the space and rebuild it later or try to keep somebody in there who will maintain it. It's like a ship. It's like a ship. You, if you leave a ship at the dock and do nothing with it, it costs you a fortune to maintain it because these are organic enterprises. And if you don't, if you turn your back on it, it's really bad for everyone. I also wanted to ask you about something you said about, you know, how there was this pent up demand. I find that a very interesting phenomenon. And I'd like to just confirm a couple of things about that. I believe that in Hawaii, people eat out more than in other other locations, except maybe overseas, maybe in, you know, in Asia, they eat out a lot too and maybe in Europe. But as opposed to the mainland, we eat out a lot. And I sure agree that people, if they had the chance, they wouldn't eat out. And so I guess what I'm asking is, can you break that down? What kinds of restaurants would have the most significant benefit if we let them all come back in, let all that pent up demand happen in Hawaii? Are they going to be looking for Japanese restaurants? Are they going to be looking for fast food? Are they going to be looking for high-end expensive restaurants? Where is that demand going to go? Well, I think it's going to go across all those spectrums. The restaurants that will be the busiest are the restaurants whose customers can afford to eat out. And so what we see a lot of times, like, you know, we went through 9-11. And so that was a very challenging time for us. And what we experienced during that time, my restaurants, the Gyotaku restaurants are kind of in the middle of the market. So we found a lot of our customers that would dine with us, you know, once a month, but, you know, eat at higher-end restaurants frequently would trade down into our area of the market. And so we picked up a lot of high-end restaurants. And then during, you know, really good times, people, you know, from the bottom side will, you know, kind of shift up and eat out a little bit if things are going well for them. So I think the big area that's the big question mark is going to be tourism because we have so many restaurants during the tourism sector, and they're going to be probably the slowest to recover, generally speaking, because it's going to, you know, their customers are quite large tourists. So I think that's going to be the area of the market that lags the most. And unfortunately, you know, the employees and the people that work in those restaurants don't have regular steady income, and they eat out also. So where they would normally eat will be affected by their inability to dine out on a regular basis as well. So we'll see how that plays out. But the sooner we can get our hotel and restaurant workers vaccinated and the airline folks vaccinated, and we can get the tourism industry moving along, that'll be a really, really big help to, you know, bring, you know, return to normalcy, if you will, to the entire, you know, restaurant industry. But I think shortly you'll see that the local restaurants that cater to the local customers will probably rebound the fastest. Yeah, I have an image in my mind of a restaurant with those five seat tables, okay. And then somebody enthusiastic about coming back to restaurant living. And he calls five or four of his local friends, his local friends. And he says, Have you been overseas? What's your temperature? And you have any symptoms at all? And have you been vaccinated? Have you been vaccinated more than, say, a month ago? And if you pass my little test, you can come and join me at my five seat table, because then I won't have any issues at all. That's an exaggeration, of course. But it seems to me that that level of comfort would really allow people to come back, local people, people who know each other, come back and have a social and restaurant experience in the intermediate term before we are able to deal with a tourism and all that. Don't you agree? So you want to be ready for that? Correct. Right now restaurants are already, you know, moving to outdoor dining. So you'll go around town and you'll see tents outside of restaurants. I think Murphy's has some outdoor dining now. I saw another restaurant that had a big tent, you know, next to their restaurant the other day. And also too, another thing that's moving along through the industry is this ionization air filtering that they're putting into the, and black lights that they're putting into the, you know, the air conditioning systems to kill all the viruses in there. And by doing so, we're creating a better environment for our customers and our employees to work and dine in. And so I think, you know, very shortly, you're going to see more and more restaurants advertising those steps that they're taking to create a safer environment. And if they do that, they'll probably be able to have larger parties and the customers will trust them and consumer confidence will increase and bring, you know, the business back faster as well. Yeah. But it's more than consumer confidence, although that, to me, that's central is right now a lot of people have no money. They haven't had jobs, you know, and they could be a substantial part of the restaurant, the restaurant population, you know, the restaurant goers, our state. So when we get back, you know, if they have jobs, they'll have some disposable income to spend in restaurants. If they don't, if the economy is still suffering, they may not have so much money to spend. The other element I want to raise with you is, so this is like, you know, years ago when I was a kid, they had a bus strike in New York. So was it a subway strike? Anyway, let's say a subway strike. They had a subway strike and everybody decided they were going to take the bus. They had no choice when they started taking the bus. After the strike was over, the subway said, okay, come back, now take the subway again. And people in general said, no, no, we like the bus. We're going to continue taking the bus, you know, change our approach on it. So the same thing, like, you know, I go down to Safeway. I buy my, you know, my gruel, right? I bring my gruel home. I eat there. I get basic nutrition at home. And it works for me and it works for my family. And, you know, I don't spend a lot of money on it. Now you tell me the restaurants are open. Maybe for a while I still like my gruel. You know, I've saved a ton of money eating gruel at home. So the question is, how do you deal with that? You've still got to attract them back to the romance and the social engagement of the restaurant because they may have found another way that they believe works for them and unlimited means that's appealing to them. So you need to take affirmative steps, don't you, to bring them back? Oh, absolutely. You'll see a lot of advertising and a lot of deals and discounts and coupons. And I think you're very right. You know, a lot of people said that the millennials really didn't know how to cook and they, you know, they're out dining all the time and eating out and so forth. And now they're forced to stay home. And so I'm hearing about all these millennials that are actually learning how to cook for the first time and they're actually really enjoying it and getting into it. And so I think you'll see that also too, the rise of the milk kit of business on television, where you can, you know, get the food delivered to your house. It's all ready to go, but you cook it yourself. And so I think you're going to see more of that and restaurants are actually dipping into that market as well. So you'll see, you know, milk kit, you know, restaurants offering, you know, dine in take out or a meal kit and you can cook food on your own. But I think by and large, especially in Hawaii, one of the reasons why people out here so much is because of the economy forces so many people to have to have two jobs. And so they really don't have the leisure time, you know, to, you know, do fancy cooking or enjoy cooking on their own, or even just, you know, put a meal together. They're grabbing a bite between, you know, one job and the other job, or they got to figure out how to feed their whole family. And so dining out is a pretty, and actually it's quite economical. When you take a look at the cost of food in the grocery store, and by the time you have leftovers and all that, you know, you can eat at a moderately priced restaurant for a pretty good value. So I'm confident that they'll be back in droves that, you know, that social, that social experience will prevail and they'll want to be with their friends and family again. I also want to refer to one other thing you mentioned about the roaring 20s, you know, we had the pandemic of 1918 and 19, I don't know, you went to 1920. And then after that, people wanted to come back and have those social experiences. And it was remarkable that it happened to be the same time as, you know, we outlawed alcohol, which was a huge mistake. But the thing about it is I see that pent up demand as including a special interest in alcohol, that's euphemistic. And so some restaurants, you know, are well more on alcohol and some less. I mean, for example, if I went to your restaurants, I'd be, I'd be looking for cold sake. I mean, badly, I would be looking for that sake right now. In fact, I could, I can actually taste it right now. So the question is, don't you think there will be a significant interest or re-interest in serving alcohol with meals when we get back to our roaring 20s again? Oh, no question about it. And it's really unfortunate that, you know, so many of the bars and, and the restaurants that have, you know, higher levels of alcohol and service are not doing well right now. I think they're probably one of the most hardest hit areas of the market. And part of it's due to the fact that once people start drinking, you know, they lose their inhibitions a little bit. So it's a little harder to comply with your social distancing regulations. But I'm more confident that the bars will be successful or more successful after this is over than the restaurants, because there are a lot of people that just want to get out there and have fun and drink and, you know, party, if you will. And so the bars are going to make a big, big, you know, come back when this is all over. You know, it strikes me that in your restaurants, you'd be the kind of personality, especially with your Japanese language skills, who walks around and says, hi. You know, the host, so to speak, of the restaurants. You do that because I can envision you doing that. I do like to walk through the restaurant and touch base with my guests. Quite a few of them I know personally. They're friends or they've become friends over the years. But yeah, I do like to walk through the restaurant and I, you know, watch what's going on at the tables and I'll make eye contact with customers sometimes and go over and have a little chat with them. And of course, if there's some, I think the, you know, the older, you know, Yisei Nisei Japanese women love to, you know, talk a little Japanese, so I'll surprise them and we'll have a little, you know, Japanese conversation. It's always fun. Yeah. Reminds me of a restaurant I went to in Strasbourg years ago where the owner of the restaurant stood at the door and he shook the hand of every, and he was clearly the owner. He shook the hand of everybody who came in and then he shook the hand of everybody who came out. And I remember that from, I don't know, 30 years ago, I remember that. So he had an effect on me. Okay, it's time for you, Cheryl. We have to try to make sense out of all this. We have to, you know, I mean, I think I understand why Tom has been chair of the Hawaii Restaurant Association in the past and so many times it all, it's all coming clear. But can you make sense out of this whole trend? Can you summarize our discussion today? Yes. Even with the obstacles that this whole pandemic brought on us so suddenly, because this was such an unexpected event, restaurateurs will always find a way to continue pursuing their passion. And their passion is food. It's serving people. Restaurant tours enjoy seeing the pleasure of people enjoying their meals. So restaurant tours are entrepreneurs. And even during a pandemic, restaurant tours are continuing to open up their dining rooms. So please, everyone, come back and enjoy our dining rooms. And we can't wait to enjoy a meal with you again. We are the Hawaii Restaurant Association. We are the voice of Hawaii's restaurants and food service industry. And if you have any questions, please reach out to us on our website. Thank you, Cheryl. Cheryl Matsuoka, Tom Jones, thank you so much for joining us today. It really does clarify things. And for me, I'm going to go have a little glass of cold sake right now. Thank you so much. See you in the restaurant.