Innovation Can Save Some Restaurants, But Many Face Financial Peril

Apr 6, 2020

Restaurants employ 13% of Hawaii workers. Many of those businesses face an existential threat from the coronavirus pandemic, but some are already finding success in the new reality.

Two weeks after Honolulu Mayor Kirk Caldwell ordered the closure of non-essential businesses, many restaurants and bars are facing a dire financial outlook.

On the corner of 8th and Waialae Avenue in Kaimuki, you’ll regularly see a dozen or so people lined up on a sidewalk.

They’re outside Breadshop,  a local bakery that sells whole loaves of freshly baked bread and pastries direct to customers. Owner Chris Sy, who started the business three years ago, says the line used to be a daily occurrence. On weekends, it would be out the door and down the street.

Normally, that is an enviable position for any business to be in. But when the novel coronal virus began sweeping across the world, Sy anticipated those lines would pose a public health risk, and therefore a risk to his business.

“Honestly, my first thought was to close,” the baker said. 

Sy said the loss of revenue from shuttering his bakery would in all likelihood have meant permanent closure. So when he saw a former boss of his, a chef in Chicago, transition his restaurant to takeout only with an online ordering system, Sy decided to try it.

The results are promising. Sy says business is now 10% to 20% from normal, but still steady. He described the ordering process, designed to minimize interaction between customers and with customers and staff.

“What we do is you order online, you pay online, you make a reservation for a date and a time, you come in at your reservation, your order is ready. The whole transaction takes ideally less than 30 seconds,” Sy said.

The mayor’s declaration allows for restaurants to offer takeout, a thin lifeline to the many owners and workers who make their livelihoods by serving people meals.  

Breadshop is using a platform called Tock. Customers select a day to pick up their order, and based on that date, they can see what bread options are available. They then choose a 15-minute window to retrieve the order, ideally preventing multiple customers from arriving together.

Sy says business has dropped by around 10% to 20%, but his customers have largely transitioned to the new system without issue.

But a few blocks up the street, traditional restaurants are having the exact opposite experience.

Natalie Tew runs a family-owned Thai food restaurant on Waialae Avenue called To Thai For. She says business is down as much as 90% since mid-March.

Like all restaurants in Honolulu, To Thai For switched to a takeout only model. As an added incentive to bring in customers, the Tew family has also started selling fresh fruits and vegetables at cost from their local supplier.

Natalie Tew says business rebounded a little toward the end of March, but still far below former levels. The night before rent was due, the family did not have enough cash on hand to make the full payment and their landlord would not cut them a break.

They plan to stay open anyway.

“I will just pay whatever I have,” Tew said. “If we close, there would be zero or even minus [revenue] because we still have to pay the rent. But if we keep open, at least we have something coming in. It’s better than nothing.”

As an added incentive to bring in customers, the Tew family is now offering fresh produce for sale at wholesale prices at their restaurant To Thai For. They are not generating enough revenue to make rent, but plan to stay open for now.
Credit Ryan Finnerty

That is hardly a unique story among restauranteurs.  The local culinary industry has seen a huge drop in traffic according to University of Hawaii economist Peter Fuleky.

Using data from the reservation website OpenTable, Fuleky said that traffic to restaurants in the third week of March was down by 100% compared to the same time last year.

His brief notes that food restaurant employees make up 13% of Hawaii’s 660,000 person labor force. March saw more than 150,000 individual claims for unemployment insurance filed in Hawaii.

Weekly data on unemployment claims from the federal Department of Labor shows that in states around the country, workers in hospitality and food service, two pillars of Hawaii’s economy, have been some of the hardest hit.

Fuleky says the takeout-only model will offer a lifeline to some food-oriented businesses. Establishments that were already focused on take away meals, rather than dining in, will have an easier time in weathering the downturn.

As an example, he cites Diamond Head Grill, a popular bakery and plate lunch purveyor on Monsarrat Avenue that has always focused on takeout.

But Fuleky also notes that the all take-away model will not provide equal benefit all restaurant workers.

“If you are working in the kitchen, you might be able to continue to cook the meals if people keep ordering.” he says.

But serving staff? “They are not needed in this setting, so their jobs are at greater risk,” Fuleky says.

He expects low wages and Hawaii’s high cost of living mean many of them likely aren’t prepared for this recession.

In an industry with a median annual income of $30,000, Fuleky says that it’s likely food service workers living in a high-cost market like Hawaii are not financially prepared for a recession and prolonged unemployment.