Where Kona Grill’s Massive Changes Will Take the Brand
Kona Grill is shaking everything up, from a menu revamp in June that introduced more than 25 menu items to the announcement August 9 of a new man on top: Jim Kuhn, former COO, is now the president and CEO. On the cusp of this announcement, Kuhn talked to FSR about the revamp and what it means for the future of the 46-unit chain, founded in 1998.
“We were stuck in a sea of sameness and weren’t leading with ideas. It was time to make a change,” Kuhn says of the new menu.
And this comes as Kona Grill aims to boost profitability amid lagging same-store sales. The company’s comps declined 12.1 percent in the second quarter. On top of the prior-year period’s 5.3 percent decline, Kona Grill is looking at same-store sales drops of more than 17 percent on a two-year stack. Revenues fell 9.8 percent to $42.3 million and the company posted a net loss of $1 million in the quarter. However, compared to the prior-year quarter, thanks to cost savings initiatives implemented earlier in the year, Kona Grill “significantly improved” the brand’s profitability, Kuhn noted in an earnings call. For the first half of fiscal 2018, it more than doubled last year’s numbers by generating $4.5 million in adjusted EBITDA (compared to $2.2 million in the first six months of 2017 and $4.8 million for all of 2017).
The menu change is core to the turnaround, Kuhn says. The brand took a look at every single item—“even items that stayed on the menu, have all been updated and enhanced,” he says—with goal of becoming more global.
“It’s always been who we are, but now we’re making it more prominent,” Kuhn says of the global approach. “We are a brand that has everything from burgers to sushi to yellowfin tuna flown in from Hawaii to jambalaya from New Orleans.”
Items telling that global story include the Umami Mushroom flatbread and a Hamachi Nachi starter, which includes red pears, house made taro chips, and yellowfin tuna.
Kona Grill’s team landed on dishes that would be craveable and approachable with their own spin. Take the Grilled Salmon & Herb Salad, for example. The team ups the flavor using five fresh herbs that makes this menu staple distinguishable. And, although Kuhn describes the Crispy Korean Chicken Sandwich as “like a kimchi sandwich,” it doesn’t include kimchi because that can be more of an acquired taste, he said. “It’s got such a wonderful flavor. With this dish, we did something that kind of went out on the edge, yet, that’s going to become very craveable as people try it.”
And then there’s the Kona Steakhouse Roll that features a soy- and sake-marinated prime filet mignon inside a sushi roll that also includes yamagobo, a Japanese pickled burdock root.
“That attention to detail in each of the recipes makes each of these items so unique and desirable,” Kuhn says.
The beverage menu, too, has received a reboot. The team’s goal here was to create a menu with contemporary flavors, combining unique recipes and presentations. The Herbalist, for instance, has five fresh herbs, gin, and St-Germain, shaken over ice. While, The Rum Drink is a top seller and patio-favorite meant for easy drinking.
And then there are the five sake cocktails, the Tokyo Mule, Grapefruit Sake-Tini, Sake Sangria, Yuzu-Rita and Zen Collins. “Most bars and restaurants don’t carry sake, so it’s exciting that we were able to integrate that unique element into several of our cocktails and have the ability to utilize that as an unexpected ingredient,” Kuhn says. Sparkling sake is also a special new add.
“We hope that diners find something that they love, crave, and want again,” Kuhn says. “We also hope they see something on the menu that they want to come back and try. One of the best compliments I’ve received from guests is that it’s hard for them to choose what they want to eat because there are so many things on the menu that sound good. If we can get guests to come back again and again and try new things, that’s a big win.”
Something incentivising guests to come back again is Kona’s happy hour, which has always been a strong aspect of its business. About 30 dishes are on offer starting at $7. Ten specialty drinks are available, as well as reduced priced beer and wine. The brand has also recently introduced its first ever rewards program, called Konavore Rewards.
While the goal is to have customers come into the restaurant, get waited on, and enjoy the atmosphere—preferably with a drink in hand—the team at Kona realizes there is a demand more and more for off-premises dining. The brand offers online ordering, works with many delivery services, and has chosen take-out packaging that helps maintain the integrity of its food through transportation. But this section of the business is more of a future goal. “Down the line, off-premises dining will be more of a focus for us,” Kuhn says.
Overall, Kuhn is hopeful for the future. The brand has a new website with a mobile-first approach and better capability to receive, manage, and respond to guest feedback. Expect more international franchising as well as domestic, he said. And the team is working to develop a smaller prototype—5,000 square feet versus the current 8,000 square foot model—as something they will implement moving forward to hone in on the in-restaurant dining experience.