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L&L Hawaiian Barbecue is headed for 100 locations and New York, New York!

July, 2004

Eddie Flores Jr. believes that if he can make it there, he’ll make it anywhere.

Next month, hopefully in time for the Republican National Convention, the real estate agent cum fast-food mogul, will open an L&L Hawaiian Barbecue restaurant in New York, N.Y., a few blocks from Madison Square Garden. If all goes right, the restaurant will be the franchise’s 100th outlet, and the 50th on the Mainland in a little more than two years.

The move is a risky one. Flores and his partner, Kwock Yum “Johnson” Kam, cooked up L&L Drive-Inn’s simple franchising formula in Hawaii and perfected it on the West Coast: Find a city with a large Hawaii expatriate population; open a restaurant in a modestly priced strip mall, preferably next door to a 24-hour grocery store or drug store; work like hell. But Midtown Manhattan is a world away from the partners’ comfort zone – about 2,500 miles away – a high-rent district without an established Hawaii expatriate community nearby. The partners may be the kings of the hill, top of the Hawaii’s fast-food heap, but the Big Apple, with its universe of near-infinite dining choices, could squash the upstart franchise in a New York minute. Furthermore, L&L’s only other East Coast experiment, two restaurants in Manchester, Conn., closed after just six months.

“New York is unlike anything we’ve done before. The demographics are very different and it’s a very expensive location. But our model has been to go with our gut feeling. We look at the franchisee, the location and the opportunity and base our decision on that,” says the show-me-the-money Flores, who seems allergic to market research, strategic planning and long-term forecasting. “New York has a tremendous amount of people and a good mix of people. If you have 15 million residents sitting in one town, and you capture .01 percent of that, that’s all that you need.”

Is this man crazy? Opening a new location without a detailed study or even a focus group?

Yeah, crazy like a fox, according to Marty Plotnick, marketing analyst and president of Creative Resources. Plotnick, who was born and raised in Connecticut, “64 miles away from Times Square,” believes that L&L will not only survive in the big city, but it will likely be the toast of the town. According to Plotnick, Times Square, which is about six blocks away from L&L’s proposed restaurant, has become Manhattan’s new Lower East Side, a melting pot of cultures and cuisines. It’s the perfect haven for a restaurant serving largely Japanese-American food, cooked by Chinese immigrants and served up fast and in large quantities.

“This stuff is different, and New Yorkers are going to love it. I mean, how many times can you eat a burger or a taco?” asks Plotnick. “The world is on the run, everyone is in a hurry and this cuisine is built for speed. You’re talking about an area that has a tremendous amount of foot traffic till two or three in the morning. And the crowds are diverse, with residents and tourists from around the country and the world.”

Katsu-ing the Competition

If L&L’s New York adventure does happen to fail, it won’t tarnish the company’s stunning Mainland expansion that began in 2001 with the opening of an L&L in a shopping mall food court in West Covina, Calif. The response was overwhelming; Flores and Company took the katsu and ran with it. In 2002, Flores rebranded L&L Drive-Inn to L&L Hawaiian Barbecue to better reflect the restaurant’s Hawaiian roots and opened eight new restaurants. Last year, he nearly doubled that number and, in 2004, Flores hopes to have 50 new restaurants by December, at which time L&L’s Mainland outlets will outnumber its Hawaii locations.

As of early May, L&L had 87 restaurants throughout Hawaii, California, Nevada and Washington. By July, new franchisees will open locations in Arizona, Colorado and Utah. But Flores and Kam aren’t taking a breather after their 100th location in New York. In the fall, they hope to open an L&L in East Lansing, Mich., not far from the campus of Michigan State University. In addition, they’ve had inquiries from prospective franchisees in Georgia and Florida. Last May, Flores and Kam hosted a delegation of investors from Beijing.

In 2002, L&L Drive-Inn reported gross sales of $34.5 million, which placed it at No. 166 in Hawaii Business’ Top 250. In 2003, L&L reported sales of $42 million. Flores believes that in 2004, sales will exceed $50 million.

“Our East Lansing location will be a true test case for us, because there are no Hawaiians there,” says Flores. “Will it work? I really don’t know. But I do know that our food is addicting. Once people get a taste of it, they come back for more.”

If Midwesterners develop a taste for L&L’s Island-style cuisine, Flores predicts that within 10 years nearly every American city will have a plate-lunch restaurant. If not an L&L, then one of its many imitators.

Not the Chinese Way of Doing Business

L&L stands for Lee and Lee, a Korean-American dairy, which operated just outside of Kaimuki in the ’50s. The dairy opened a small store in Liliha, which sold its products in the city. In the ’60s, the store was sold and converted into a fast-food restaurant, selling hot dogs and burgers.

In 1976, Eddie Flores, a recent University of Hawaii at Manoa graduate and a successful Realtor, bought the L&L for his mother, who had been working as a cleaning lady at Patti’s Chinese Kitchen in Ala Moana Shopping Center. Mrs. Flores always wanted to run her own restaurant, even though she didn’t know how to cook. The first couple of years were tough, and she was tiring of the long hours, so Eddie called up his friend Johnson Kam to help out.

Kam, who immigrated from Macao in 1971, worked in the housekeeping department at Kaiser Hospital. On his days off he drove his truck to Pearl City and Makaha and sold manapua that he bought from a factory in Chinatown. For $11,000 ($10,000 of which Flores helped finance), Kam bought half of L&L Drive-Inn and worked the night shift, usually logging in 14 or 15 hours a day.

A year later, Mrs. Flores lost interest in the restaurant business, and Kam purchased her half of the drive-inn. In 1978, he helped one of his cooks open an L&L in Puck’s Alley, near the University of Hawaii. Shortly thereafter, he helped another employee open a downtown location. Then there was a fourth, fifth and sixth. Kam would help them secure financing and in return retain an interest in the business, which he would eventually sell to his former-employee-now-partner.

“We didn’t do any plan. People work for me for two or three years, so I try and help them,” says the soft-spoken Kam. “I keep 30 percent. I was doing fine.”

In the summer of 1988, the Flores and Kam families took a Maui vacation together. While strolling on the beach, the friends and former partners talked shop. Says Flores: “I told him, ‘Johnson, are you crazy? You shouldn’t be giving away your name like this. That’s not the Chinese way of doing business!'”

The next year, the partners formed L&L Franchise Inc. In their first year in business, they collected about $1,000 in franchising fees.

Everyone Cuts Chicken

Mainland expansion has provided the partners with an opportunity to put the genie back into the bottle, so to speak. Hawaii is saturated with L&Ls, run by a patchwork of independent owners, who have no obligation to take directives from the front office. Not that Flores wants to give many orders. The quintessential small businessman, who despises bureaucracy and red tape, Flores has built a loose, decentralized organization: New franchisees are charged an upfront fee of $35,000 and then 3 percent of sales (the national average for franchising is between 8 percent and 10 percent). Franchisees are also charged an extra 1 percent for advertising and marketing efforts. Flores and Kam, who help finance the operation, will usually retain about 20 percent to 30 percent of the business. Full ownership is sold back to the franchisee on a case-by-case basis.

L&L Franchise Inc. reviews and approves all new location leases as well as architectural plans and interior designs. Franchisees must adhere to a slimmed-down menu that focuses on barbecue and katsu. (The partners have found Mainlanders haven’t developed a taste for other local-style items, such as beef stew and lemon chicken.) L&L employees on the Mainland are required to wear uniforms consisting of aloha shirts or polo shirts, and managers are encouraged to cultivate an Island feel, displaying Hawaii photos, surfboards and distributing the state’s daily papers.

In addition, franchisees are required to purchase certain brand-name ingredients and products such as Best Food mayonnaise, McCormick spices and Keoki’s Lau Lau. However, the operators aren’t required to purchase these or any of their provisions from a particular supplier. The owners also have the freedom to add to their menus to fit the tastes of their particular communities. Flores claims that every L&L tastes slightly different, a fact that he considers as a strength, not a weakness.

The most important element in L&L’s branding effort is also the most crucial ingredient of any successful restaurant: the cooking. All new L&L franchise owners must undergo a grueling two-week training course with the company’s executive chef, Raymond Cheng. The cooking boot camp is followed by a two-month stint at one of the company’s West Coast operations. While L&L’s cuisine is easily imitated, Flores and Kam want to make certain that it can’t be duplicated.

“Everyone must learn how to cut chicken, everyone,” says Flores, who has yet to learn how to cut chicken. “It all comes down to the food. What makes us different from all the imitators and every other restaurant out there is that we are from Hawaii, and we know what good Hawaii cooking tastes like.”

The formula seems to be working. According to Flores, L&L’s Mainland restaurants average gross annual sales of $500,000 to $600,000, about 20 percent more than its Hawaii locations.

Cultivating this exploding network of restaurants are Kam and his daughter Eva, the director of West Coast operations. Eva, who started her L&L career at age 8, scooping ice cream, has done long tours of duty on the Neighbor Islands and in Los Angeles, the Bay Area and Washington. Johnson travels three weeks out of every month.

“We are working toward making our restaurants consistent. We would like them to look more alike,” says Eva. “However, part of our appeal is that we have the feel of a mom-and-pop restaurant that you’ve just discovered, something that’s not perfect and manufactured. We’re not like Starbucks and that’s OK. Sometimes not being perfect is good.”

New York, New York

For someone who is about to make his debut in the Big Apple, Flores sure doesn’t seem very nervous. The $60,000 security deposit for his Manhattan location took him a little by surprise. Otherwise, Flores’ approach is the same as his other 99 restaurants: He’s following his gut instinct.

“In New York, we’re going to have to adjust to the market,” says Flores. “I’m thinking we might introduce a corned beef or pastrami musubi. It’s like a sandwich. You can pick it up and eat it on the run.”

“If Eddie does that, I have one piece of advice,” says Plotnick. “Put that thing on brown rice, and it will sell like hotcakes.”

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