Chris Kajioka’s new restaurant in Kaimuki looks ready to roll. The bar is stocked, the glasses clean and a dining room ready for guests. But what was supposed to be a grand opening with a series of sold-out dinners from one of Hawaii’s most acclaimed chefs isn’t happening.
Like many other restaurants in Hawaii and around the world, Kajioka’s restaurant, Miro Kaimuki, is closed. When it can open is anyone’s guess. An island-wide shutdown order already was extended once, until the end of May, and government officials aren’t making any promises.
“What’s really horrible is we just don’t know,” Kajioka says. “We don’t know anything.”
Restaurants are hardly the only businesses to be suffering from government stay-at-home orders designed to contain the virus. But few industries have been hit harder.
The University of Hawaii Economic Research Organization recently reported that Hawaii eating and drinking establishments shed just under 36,000 jobs between January and April. That compares to about 23,200 for hotels.
Only the retail industry has suffered more, with a loss of about 44,800 positions.
But the job losses are only part of the story.
The bar and restaurant industry is Hawaii’s largest private employer, with some 85,000 jobs, according to the most recent available data. And by some accounts, the industry was projected to be one of the state’s fastest growing employers over the next decade.
Instead, it’s fallen off a cliff, taking with it some of Hawaii’s most financially vulnerable people.
UHERO economist Peter Fuleky saw this early on, in a March 24 blog post. With median annual incomes of only about $30,000,” he wrote, “food service employees likely have limited savings and are not prepared to handle a system-wide shock to the visitor and local dining markets.”
And the hardship is likely to outlast the federal assistance that’s helping some people barely make it.
“Many job losses in Hawaii’s food service industry,” Fuleky wrote, “could last months to a couple of years.”
To be sure, some places might bounce back more easily than others. Consider Beet Box Cafe, a funky quick-service place that serves items like acai bowls, veggie burgers and Thai veggie burritos at two locations, in Haleiwa and Kailua.
The cafe’s owner Marlys Mentz closed shop in Haleiwa March 30 following a steady, 80% decline in business. She plans to reopen on Friday serving takeout only.
Beet Box was one of 11,500 Hawaii businesses that shared some $2.05 billion in loan money from the U.S. Small Business Administration. If used to cover payroll, the Paycheck Protection Program money doesn’t have to be paid back.
But doing that isn’t as easy as it seems, Mentz said.
For one thing, time isn’t on her side. The money must be spent by the end of June for the loan to be forgiven.
Also, there’s the issue of not needing that much staff yet: Mentz said she needs just a handful of workers to do takeout, far less than what Beet Box employed at its peak which the loan was based on.
Even if she wanted to hire her full staff back and pay them to not work, Mentz said, most of the staff in Haleiwa have left the island and gone back to the mainland.
So even though she’ll have to pay back the loan, with 1% interest, Mentz said she might use the loan to pay her rents, which is a big expense. She got a big chunk of loan money, she says, enough to cover her lease payments at both places for two months.
The problem, she said, is that her loan payments will be $7,000 per month to repay if the loan isn’t forgiven.
“Luckily, we’re not a business that’s in debt, so I’m thankful for that,” she said. “We still have a few dollars in the bank to help reopen ourselves, even without the PPP loan.”
It’s also convenient that Beet Box isn’t a full-service restaurant. When the City and County of Honolulu allows businesses to open again, she figures she’ll be able to space her tables apart fairly easily, cutting her seating from 38 to about 30. And that won’t mean a big hit to revenue.
The bigger concern is getting landlords to adjust rents for a tourist town with no tourists – at least for a while.
It was natural that rents and other costs in Haleiwa went up as visitor numbers soared and the town became a must-see, Instagrammable destination for many of the 10 million tourists who came to the state each year.
“It’s going to be interesting to see how we all fare with the same rates and the same prices that we’re paying, and half the customers,” she said. “That’s my biggest concern. I’m hoping landlords will work with us on that.”
Down the road at Cholo’s Homestyle Mexican Restaurant, the owner, Nancy Salemi, is even more optimistic. She’s keeping her head above water, she says, even though the North Shore Marketplace where she’s located is mostly closed and she didn’t get a PPP loan in the first round.
”We’ve been kind of limping along,” she says. “It’s more kind of like we’re serving the community by being open, to make a presence in the marketplace in Haleiwa.”
Most of Salemi’s customers are residents, she says. And that’s meant a steady take-out business, for food and margaritas sold in quart and half-gallon jars. It’s enough to support a payroll of 10, down from a peak of 50 before the crisis.
When the island does open for business, Salemi wants to go slowly, opening for residents first, then visitors.
“If we open up with a bang, what will happen? We could all get sick again,” she says.
Long-term, Salemi said, she hopes tourism will come back smaller but better.
“I’ve been screaming at the town meeting for the last two years about this overtourism,” she says. “Now is our time to tone down the North Shore because it’s way out of control.”
But won’t that mean less money for businesses desperate to bounce back?
“Even though it would mean less business to me,” she says, “I’d rather have quality business and have people say, ‘It’s really cool to go there because they really care about their island and they’re making it really nice.’”
What does worry Salemi is that business reopens in the summer and into the fall, only to face another, bigger outbreak and longer shutdowns during the winter flu season.
“That will crush a lot of people … maybe us included,” she says.
Beyond financial issues, there’s another challenge facing bars, cafes and high-end restaurants.
It’s the question of what a bar known for loud music and convivial crowds will be like if strangers can’t mingle, what a dance club will be like without dancing, what fine dining will look like when staff are wearing masks and gloves.
“The price that people are willing to pay is partly for the experience you get,” says Meli James, president of the Hawaii Venture Capital Association and co-founder of ManaUp, a business incubator for Hawaii startups. Taken to an extreme, measures to make people feel safe diminish that, she says.
“Who wants to sit at a dining table with a shower curtain around it?” says James, who also studied the hospitality industry at Cornell University’s School of Hotel Administration. “It’s not the same.”
“Imagine going to the best sushi restaurant, and he’s serving you with gloves and a mask,” he said. “Is that going to feel the same?”
The situation has some prominent restaurateurs asking existential questions.
It’s not just a business issue that some say they can’t pay enough to compete with unemployment insurance when the federal government offers another $600 a week in unemployment. It’s also a social justice issue.
“The concerns before coronavirus are still universal: The restaurant as we know it is no longer viable on its own,” Gabrielle Hamilton, owner of Manhattan’s Prune Restaurant, wrote in a meditation on closing the restaurant she’s owned for 20 years.
So much goes to paying rent that it’s impossible to pay line cooks a decent wage and keep prices down, she writes.
“Who wants to sit at a dining table with a shower curtain around it? It’s not the same.” — Meli James, co-founder of a business incubator for startups
“You can’t buy a $3 can of cheap beer at a dive bar in the East Village if the ‘dive bar’ is actually paying $18,000 a month in rent, $30,000 a month in payroll,” she wrote. “It would have to cost $10.”
How high-end restaurants will survive the COVID-19 crisis could depend on solutions and relief being provided throughout the financial pecking order: not just to restaurants through the PPP loans, but to landlords, lenders, insurance companies and the like.
“The government should give a greater bailout package to real estate owners so that there can be relief for the restaurant owner,” David Chang, owner of Manhattan’s famed Momofuku Noodle Bar, said in a recent interview. “It has to move up the chain.”
Meanwhile, a group of celebrity chefs has launched a movement to pressure insurers to pay business interruption insurance claims. In Hawaii, hotelier Jonathan McManus, owner of Maui’s Hotel Wailea, has joined the fray.
The restaurateur group — which calls itself the Business Interruption Group, or BIG — includes well-known chefs like Thomas Keller, of Napa’s French Laundry and New York’s Per Se, and Wolfgang Puck. They’ve teamed with the owner of the law firm that led national tobacco litigation that resulted in a $286 billion settlement. One idea is using federal money to provide a financial cushion to insurers that pay claims.
The movement is getting traction. So far, legislators in six states — New Jersey, New York, Massachusetts, Ohio, Pennsylvania and Louisiana — have proposed bills clarifying that business interruption coverage extends to losses attributable to COVID-19 and related government orders that have forced businesses to close, The New Jersey Law Journal has reported.
The White House also is siding with the restaurants. Following a conference call between the BIG restaurateurs and President Trump, the president told reporters that he had directed staff to “use any and all authority available to give restaurants, bars, clubs incentives to stay open,” the Wall Street Journal reported. And Trump has named Keller, Puck and other members of the restaurant group to a new advisory task force on reopening the economy, the paper said.
Whether all this results in relief for Hawaii restaurants like Kajioka’s Miro remains to be seen.
Kajioka is clearly one of Hawaii’s culinary stars. He’s worked at top restaurants like Per Se. And he’s been nominated for prestigious James Beard awards multiple times, on his own and with Anthony Rush, his partner in Senia.
But a stellar resume means little in the context of COVID-19 and government mandates. Miro Kaimuki’s timing to open in April could hardly have been worse. While Senia obtained a PPP loan, Miro didn’t qualify because it wasn’t open by Feb. 16, Kajioka said.
What saved Kajioka is he had hired only a team of managers; the staff was waiting to come on board. If Kajioka had hired everyone sooner, he would have had a whole team to pay and no federal assistance.
“If I had had a full staff and we were opening in April, I wouldn’t have gotten anything,” he says. “We would have been totally screwed.”
How restaurants will operate in the age of social distancing is unclear. One challenge for restaurateurs is that profit margins are already so thin that cutting back on the number of available seats could force them to operate in the red.
“Opening with smaller capacity doesn’t make sense,” Kajioka said.
At the same time, he wonders what kind of appetite there will be for dining in a full-service restaurant. The model of fast casual restaurants – where customers order at the counter and a server delivers the food to the table with no other interaction – could make sense for some places, Kajioka said. But it’s just not the same.
“It’s not why we do what we do,” he said.
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