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Kona Grill tries to stem an ‘erosion of core values’

The Asian-fusion chain’s newly reappointed CEO and founder hopes his turnaround plan will reverse plummeting sales.
kona-grill

An “erosion of core values” saddled Kona Grill with some of the worst same-store sales in the restaurant industry, but the struggling Asian-fusion chain, which is at risk of being delisted from the stock market due to poor performance, has a plan to battle its way back from the brink.

That’s the message delivered Jan. 14  by Marcus Jundt, newly reappointed CEO and co-founder of the 44-unit Scottsdale, Ariz-based chain, which has had three CEO changes in the past six months.

In his two months since returning to the top post at Kona Grill, Jundt has fired the marketing department, eliminated all expansion plans, returned the chain’s founders, retooled the menu and brought back happy hour.

“We’re going back to the future,” Jundt said at the 2019 ICR Conference in Orlando.

Kona Grill’s recent missteps, according to Jundt, which have led it to see a whopping same-store sales nosedive of 14.1% in the third quarter of 2018, include:

  • Eliminating a popular happy hour. (“That killed our same-store sales this year.”)
  • Overaggressive expansion. (“We took locations that weren’t ideal.”)
  • Unfocused, bloated menu. (“When I came back, we didn’t even have a hamburger on the menu. We’re going back to the basics.”)
  • Loss of the chain’s founders. (“Bringing these people back brings back the culture of Kona Grill.”
  • Doing away with the margarita. (“We have 112 pages of negative Yelp reviews. The No. 1 problem was, ‘Why did you take the margarita off?’”)

“We took a lot of pride in what we created and we were really sad about what happened,” Jundt said. “We really believe in the brand and we really believe in the company.”

He added, however, that the “circumstances aren’t ideal for coming back” and that “there’s a potential bloodbath and a shakeout and a recession in the restaurant business,” driven largely by skyrocketing labor costs.

In his ideal future for Kona Grill, Jundt said he hopes the company will mix the Instagram-perfect cocktails of Sugar Factory with the welcoming decor of True Food Kitchen and the playful, millennial-grabbing vibe of Punch Bowl Social.

Jundt said he fired the marketing department on his second day back at Kona Grill.

“I have never believed in spending a lot of money on marketing,” he said. “The best marketing in the world is your customer being happy.”

He has also eliminated all spending related to expanding the brand, he said.

Alcohol sales are a major part of Jundt’s turnaround plan, which includes expanding happy hour from 2 to 7 p.m. every day, and all-day Sunday, and offering a $1 margarita.

“You can already see the needle moving with customer foot traffic,” he said.

Kona Grill has closed one unit in Las Vegas and one in Miami in recent months and two others are being evaluated for closure, Jundt said.

Jundt and several others founded Kona Grill in 1998, with a plan to serve then-novel sushi along with American grill favorites. Between 2012 and 2015, the upscale-casual chain’s stock price more than quadrupled.

 

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