By Evelyn Kim
Twenty years ago when Jo McGarry moved from Scotland to Hawaii, she launched Gusto Magazine. It was a natural progression from her previous project of running a lovely soup and sandwich bar in Edinburgh. The magazine opened doors for her to meet the top chefs in Hawaii and gain a firm grip on the restaurant industry here. While empowering restaurants editorially through Gusto magazine, she observed a huge gap in specialty help for restauranteurs.
Also equipped with a commercial real estate license as a broker for CBRE, Jo naturally progressed into forming her own restaurant advisory company called Mojo (mojomcgarry.com). Her company helps clients with everything from initial concept planning, how to find a restaurant space, and everything else required to open a restaurant.
Food-A-Go-Go sits down with Jo for an open discussion about industry insights and current issues.
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What is your client base?
We work with everyone from mom-and-pop restaurants to start-ups, and big national brands. Here we have recently worked it Pig and the Lady, Pint and Jigger, Pie-ology and about 40 different clients.
How do you help them out?
I run a free clinic every Wednesday morning at Chefzone from 7-9 AM where I answer questions about opening a restaurant and also give them advice.
Can you breakdown the types of people who approach you for help?
Yes, there are 3 categories.
In the first category, people have no idea what they really want but they have a vague idea and desire. I spend about one hour with them to evaluate the possibility of them being able to succeed. If I think it’s not possible for them to do it, I tell them right away that they may risk losing a lot of money and most people appreciate the honesty.
The second category includes people who have a good idea and a strong menu. They understand the demographics to target. We help them get their business plan ready and match them with landlords, and get their financial documents organized.
In the third category, a person will walk up to me and say “I want to open a restaurant, here’s my menu” and you can just tell right away that they are going to be successful.
What are key factors in assessing a good fit when developing relationships with clients?
There are a lot of complex levels when approaching this industry. The most important part is making sure our values are aligned. Also, the ability to recognize in the early stages who we can actually help. We have to evaluate if clients will actually listen and act on the advice of our team.
Being a real estate expert on top of your hospitality background I’m interested in your forecasts for the future. How do you think things will change for re-openings? I think ideas about prime real estate locations will change as dining habits become restricted. What are your thoughts on ghost kitchens and consolidated production areas in a commercial kitchen format?
In terms of the future, we have a lot to learn from this unprecedented time. The industry in Hawaii was incredibly fragile. We depended on 10 million tourists, so we started on shaky ground. The restaurant industry was already approaching unsustainable levels.
There has to be rebalancing as debt settles and economy reopens, we will have to figure out who can actually re-open and on what terms?
We will see many different models coming out of this, my hope is that we are able to help people become more efficient and sustainable. I think ghost kitchens, digital restaurants, and commercial kitchens will become much bigger players.
I think the dynamic will change 180 degrees especially in an area like Waikiki, if companies like Cheesecake Factory declare that they cannot afford to pay rent, then from a landlord’s perspective, who can afford to pay rent in this retail environment?
Yes, there are so many factors with complex layers. Diners’ expectations are going to change and there needs to be a huge focus on re-energizing confidence in everyone in the market.
If a person like me were to renovate an empty warehouse space and turn it into a commercial kitchen, what avenues would I have to go through and what does that look like financially?
It’s very tricky especially in Hawaii because we are used to having minimal inventory, less than 2%, and a ton of demand. Consequently the prices for warehouses are very overpriced. So I think what would be more lucrative would be to turn existing restaurant spaces into commercial kitchen spaces. Instead of letting 7,000 square feet sit empty, we can convert it into a commercial kitchen space with additional build out.
Can you explain profit sharing models for restaurants? What are qualities of a good partnership? When is it advantageous to make these kinds of deals and what category of restaurants are they best suited for?
All good leases should be some form of a profit sharing model. In a good model, you should have a relationship with a landlord who is giving you the opportunity to do the best you can and in return you are giving them a percentage.
There are a lot of landlords who are averse to the model because they feel completely unknowledgeable about the industry and don’t have confidence to be involved. For example, property managers and asset managers are not necessarily restaurant experts.
Restaurants of all sizes can benefit from profit sharing, even if you are a mom-and-pop Pho shop. If you have a good relationship with a landlord and a percentage model, it would be possible to open multiple locations, no matter how small.
If you go for a profit sharing model, then the obvious perk would be a lower base rent, am I right?
The landlord can also decide to give you a lot of input up front about building the restaurant with the understanding that they are putting you in a good position to succeed. This benefits both parties. Asking for help while you build the restaurant you can leverage the strength of your brand.
If the landlord helps you build a beautiful restaurant environment, it will help attract customers to not only the restaurant, but the building or shopping mall.
It’s important to focus on how to make it a win-win situation between the restaurant and the landlord.
What percentage of restaurants in Hawaii engage in this profit sharing model?
I think most landlords are open to this model. They can offer favorable terms and high profitability index up front. The ones who are not, you probably shouldn’t work with them because they don’t understand the restaurant model. I would say about 80% of restaurants need the help in the beginning, either in the form of tenant improvement money or lowered rent.
In the immediate future, we’re going to see a lot of interesting creative solutions and I think shared optimized kitchen spaces will be the most obvious first step to recovery. Once we have a vaccine, then I believe a re-imagined dining environments can emerge with better emergency planning.
From your 20 years here, what have you observed in terms of the evolution of food and dining culture here?
I think we’ve taken Hawaiian regional cuisine, which has become very important 25 years ago, and taken it to new horizons at a rapid pace. Today, you can see multi-generational and multi-ethnic culture reflected in the cuisine, and the people are proud of their food.
You can find restaurants from all around the globe and a myriad of small restaurants representing their own style of cooking. Someone like Andrew Le from Pig and the Lady, has taken Vietnamese cuisine from his childhood and brought them into the 21st century. Even with a classical background, the flavor of his mother’s stocks and broths still come through and even amplified by the local agriculture here.
One of the most positive things to come out of this pandemic is the focus on local produce. Hawaiian cuisine embraces the people who live here.
Who do you think will occupy the lucrative spots on the Waikiki strip moving forward? Will it be fast food chains or will people still have the a big enough appetite for risk to invest money into converting existing kitchen spaces for further buildouts for takeaway models?
I think we have to think about the tourists who are coming back to Hawaii. If we can bring tourists who are willing to pay more because they appreciate the beauty of the island, then there will be ample room for fine dining and beautiful restaurants that represent Hawaii.
The mistake that happened was Waikiki became a place for budget vacations. It became a place where people bought cheap flights and came in groups, and once they got here, they didn’t have a lot of money to spend on food. It could potentially become a strip of curbside pick-ups and deliveries.
How could we possibly curate better tourists and change their expectations?
We have to go back to promoting Hawaii in a different way where people value what is here. Hawaii is a stunning place to visit and respect and it has been trampled over like Venice or Paris. If we have the right kind of tourists who appreciate where they are, then they will appreciate the food, too.
I agree, although the pandemic is not a positive thing, I noticed at least in the Waikiki area that it hasn’t been this clean and serene looking back at the 20 years I have been visiting here. Right now Hawaii is being given the rest and relaxation it needed nature-wise.
Nature is giving us an opportunity and we must learn from this and if we can’t, then that’s on us. We need to respect farmers by paying the price the produce is worth, same for the fisherman and everyone else in the industry. It will change everything if we do, and that’s a very big goal I hope others can adopt.
It starts with an intent to do the best that you can.