What’s the Real Reason Most Restaurants Fail?
In the restaurant industry, success can be elusive. Here, stories from spots that didn’t make it, and the lessons learned.
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ONE BAD DECISION
Closing for renovation led to Seed’s ultimate demise.
photo: courtesy of bluewater mission
Sometimes it just takes one bad decision to break a restaurant, especially in the critical first two years.
Seed Restaurant opened in February 2014 in a small building in one of the municipal lots in Kaimukī, with truly noble intentions: It would be a way for Bluewater Mission to provide rehabilitative employment for people coming through the nondenominational church’s transitional homes for victims of human trafficking, homelessness and abuse. The goal was two-fold: provide them valuable workplace experience while raising money to further support the church’s outreach programs.
“We didn’t start out with much knowledge [of running a restaurant] but were willing to try,” says Jorden Seng, the church pastor.
The church did everything right: It hired consultants and restaurant professionals to provide guidance, developed a solid business plan complete with contingencies, had chefs review its food and menus, and provided training for its employees from various industry veterans.
“We were as thorough as we could be, under the circumstances,” Seng says.
From the moment it opened, the restaurant basked in positive press about its mission, and online reviews raved about the baked katsu chicken, veggie stir-fry and seared ‘ahi wrap. It wasn’t hard for the community to support a restaurant concept like this. The restaurant was turning 90 covers during dinner at its peak, with lines out the door.
“We had to alter our operations in the first months in order to accommodate unwieldy lines at the door for dinner and weekend breakfast,” Seng says.
Not surprisingly, he adds, the restaurant had challenges with the consistency of its employees, many of whom were living on the street, just out of prison or transitioning off drugs.
After about a year, the church decided to launch a crowd-sourced fundraising campaign to help with renovations. In three months, it raised about $170,000 to buy new equipment, paint and revamp the restaurant. The plan was to close the restaurant temporarily during renovations.
But unless you were on Seed’s email list or following the restaurant on Facebook, which wasn’t updated all that often then, you wouldn’t have known why it had closed during that time—or even that it had reopened three months later.
“We did our best to get people back in here. That was our inherent challenge,” says Ryland Young, who works at the church and served as assistant general manager of the restaurant. “We didn’t do a good job retaining the customers we had and getting them back to the restaurant.
—Ryland Young, of Seed Restaurant
By March 2016, the restaurant wasn’t generating enough revenue to keep up with expenses, and the church decided to close it.
“They made a classic, classic mistake,” Curran says. “They closed and nobody knew when it had reopened. They never advertised that they were reopened. Up until that point, they were doing something quite remarkable. They really put a lot of effort into the restaurant.”
But the church doesn’t consider the restaurant a total failure. It did make good on its mission to help others.
“In the end, a large number of our employees were able to gather their lives together through Seed and graduated from our restaurant to other full-time jobs,” Seng says. “We saw individuals go from living or working on the street to living and working with dignity and freedom. So, that’s not bad! But we learned that a tremendous number of things have to go right, with the right timing, for a restaurant to succeed in Honolulu. And it’s tough for any employer to be generous and just when the business environment is so hard.”
Restaurant closures can happen quickly—so quickly that sometimes chefs and partners aren’t aware of what’s going on.
Back in January, Kawehi Haug found out from her neighbor that the restaurant she co-owned, Bethel Street Tap Room, in Chinatown, was closing.
She was blindsided.
“We were forced to close our doors … because we are apparently tangled up in a legal lease battle between the primary leaseholder of the space and the landlord,” she posted on the restaurant’s website. “And, as subletters, we have no recourse. We are as shocked by the closure as anyone else.”
Everything—the liquor, the wine glasses, Haug’s laptop—is still locked up in the restaurant.
“Honestly, we’re super bummed out and really angry,” Haug said just after her restaurant was shut down. “We literally invested our life savings, time and energy into making our bar-bakery concept work, and it was working! We were turning a profit in our 11th month of business, which is phenomenal for a food business of that size. It feels like a huge loss.”
Bethel Street Tap Room—which garnered a very loyal following for its house-made pickles, hefty hoagies, Nitro coffee and very relaxed atmosphere—opened in 2014, with Haug’s popular cupcake business, Let Them Eat Cupcakes, occupying a corner.
When the bar closed, Haug put on her apron and got back to work, reopening her bakery in its former space, which was primarily used for production, and expanding the menu to include éclairs, marshmallows and gluten-free baked goods. In April, Haug brought back the Nitro coffee and started working on new bench seating inside the small space, so customers could sit and relax. The closure of Bethel Street Tap Room was a huge setback, but Haug is moving forward, one buttercream-topped cupcake at a time.
“We’re still always hustling and working to grow our bakery business and hopefully expand to bigger and better projects,” she says.
Last December, another high-profile closure hit social media and shocked foodies and everyone who said, “Oh, man, eating there was on my list!”
After just three months, Hale Ōhuna, a craft cocktail and noodle bar run by chef Lee Anne Wong of Koko Head Café, closed its doors on Wai‘alae Avenue. There was no advance notice, just a sign on the door and a post on Instagram that read, “It is with the greatest regret that we close our doors permanently at Hale Ōhuna today.”
“The primary reason for closing was financial,” says part-owner Kevin Hanney, who also owns 12th Ave Grill, a block away. After Hale Ōhuna’s closing, he remodeled its awkward, narrow space and in April opened Avenue’s Bar + Eatery, a neighborhood gastropub helmed by a new chef. “[Hale Ōhuna] was an ambitious project with delicious and beautiful food and a great bar program, but it just did not catch on as hoped.”
Compare the two. Hale Ōhuna boasted a sophisticated menu, much of it locally sourced, with carefully crafted cocktails, elaborately plated dishes and luxurious bowls of noodles with ingredients you don’t often see on restaurant menus, such as pa‘i‘ai, ‘ulu poi and wakame. Wong’s noodle dishes were bold and flavorful—and cost upward of $18, which challenged the cheap-noodle culture in Hawai‘i. Avenue’s, on the other hand, has broad appeal, with feel-good menu items that include ‘ahi melts and buttermilk-battered Jidori chicken with a bacon-and-corn gravy, a solid bar and accessible prices.
“I think what people want is a very casual, very affordable place, a neighborhood watering-hole-type of place,” Hanney says. “Selling noodles is like trying to sell ice to Eskimos. People don’t want to pay $16 to $20 for a bowl of noodles, even if it’s full of local ingredients.”
—Kevin Hanney, restaurateur
He pointed to the narrow space as one reason Hale Ōhuna, with its pricier dishes, may have not worked.
“The biggest challenge is this narrow space,” he says, pointing to the downstairs dining area of the awkward, bi-level space. “If you have people sitting here, you’d have to squeeze to get past. So it has to be a very casual concept. People have to be having fun, so they’re not bothered by getting bumped. You can’t be serving $50 food here. If this space was four feet wider, it would be a whole different story.”
Bethel Street Tap Room and Hale Ōhuna closed for different reasons: the former because of lease disputes, the latter because of low sales (it opened in September, one of the slowest times of the year for restaurants). But they both had great concepts executed by passionate restaurant veterans. Sadly, sometimes that isn’t enough.
“There’s such a combination of things that go into running a restaurant that people don’t understand,” Curran says. “You might understand that it’s a lot of work, but you don’t understand the costing and pricing. Or you might be really great with numbers, but like Jill, you get pregnant. It happens. There’s so much to consider, and that’s what makes it so challenging. Running a restaurant is multifaceted. It’s not like opening up a shoe store because you’re passionate about shoes.”