Yahoo Finance Presents: David Chang
It. Welcomes, who finance presents I'm Andy Serwer and welcome to our guest, David Chang founder of Mamuka, Restaurant Group, host of show ugly delicious, and author of a new memoir eat appears David great to see you. Thank you for having. So of big question to start things off what do you think the state of the restaurant businesses in the United States given Kobe characterize things right now. Not Good. It's the covert has expose a lot of the underlying. Issues. All. Industries. Had and unthinking a lot of people have talked about but has been well known and documented. Announced been exposed, right the the fragile working environment, the six cost. All of these issues are now sort of front and center in. The conversation is what we do about it. The government is leads to intervene a little bit more not a little bit more a lot more. But I don't know what's going to happen in in. You know saying that it's a lot like that you thousand eight financial prices. Except that, it's not too big to fail too small. Ryan could be worth only you see all these small restaurants on you have the ability to tap. Initial backers presumably to know. But even still, no, we're we're we're we're a predicament ourselves. We still have restaurants. Costs haven't changed. You know it's this is an issue and. Even though we're not technically banks most cash flow that goes into restaurants goes dmitriy out only differences we're not charging interest and and. So, many other businesses are dependent on restaurants whether it's florist. Purveyors artisans. So this is going to have severe repercussions and I'm not sure exactly what's going to happen the issue really is this is an acceleration of ten to fifteen years and. You're going to have the middle squeezed out and you're going to have. Eventual. Recovery of high end in certain high end restaurants are doing well I think high end Sushi talion. Japanese like delivery like Sushi machi roles are doing well, but fast food like how are you if you're an independent restaurant how you supposed to compete against? Companies that have access to public markets. I I mean that's the thing is only applebee's going to survive and those are just the reality. Rhino. Foods and food has to get more expensive. Nobody likes to hear that. And Just me lies on. What we have to fix the model. You know we have too many workers that don't have health care. We have too many issues. About benefits and this is just We can't let this happen again, and one way we can do this is obviously charge warm because one of the issues that we've had is everything's got more expensive. It's what we can charge for food. And That's that's gotta change but the issue really is high fast food business. They're not gonNA charge more. And I say fast food. I think in incorporates a chain restaurants as well. They're gonNA probably drive their prices cheaper to drive out competition. So we're GONNA have a real issue here. Let alone the the lack of oversight for food delivery and logistics, which is giant business that should be government regulated and. This is this is a severe problem that is not being address. You mentioned the government should there be targeted bail out for restaurants the restaurant business specifically. Well. PP was people think that it was but it really was a temporary Gandhi and I know that they're you know we talked to a lot of elected officials. In terms of what needs to happen for restaurants I think that in the priority, it's not there yet. They need help local municipalities, pay hospitals in schools I. So I'm not sure where the money's GonNa come from, and secondly I don't know where their solidarity in our own business. A lot certainly, something needs to happen and I can see both sides of the argument on the restaurant end about what in how Inventions to be but. At this point I, we'll take any help. How do we design when to open restaurants and by how much I mean he saw the governor Cuomo just said the twenty five percent in. New York. It doesn't doesn't do anything in fact that just. Again If restaurants were limited to ninety person capacity, ninety percent of restaurants still because. I mean especially New York City. The model is built on one hundred percent occupants. Let's. Listen like let's look at the outliers on this equation, right? Because there's so many variables in minutia that are all really important. But let's just look at this one fact. If we don't answer this, then everything doesn't matter anyway. I would argue that at minimum twenty percent of top line revenue of a business whether you're small bar or high-end dining and everything in between in urban areas. Is derived from business corporate accounts. So you talk about private dining. Happier. Catering office catering in expense accounts that's at minimum twenty percent. I'd argue in New York that's probably a minimum thirty percent of top line revenue a healthy business, which is probably like less than five percent of businesses operate fifteen percent you know net like that is like a rarity. Where the hell is that difference GonNa Come? Because there's a vaccine as we can all see, cities aren't going to come back to pre pandemic levels especially, corporate environments, an office workers. So we just have to focus on that issue and realize wait this is a fundamental problem and how we're going to operate our restaurants and part of it as we need to start having pragmatic. Answers to real problems that we know are going to happen. They're not fun to think about that. The reason why we're here is if you just think about the lack of office workers or restaurants. How lived under? How are we going to fill that void? I don't have an answer and people talk about tax credits you there but that's again a temporary solution. So you know I, I don't like bring a Debbie Downer about this but I think that we need to come up with innovative solutions and I hope in coming up with impossible like an answer to these impossible problems. I mean, you've talked about the safe adjust reopening ran. Just, not GonNa Twenty, five percents nonsense. It's just nonsense we need to have protocol. When you have contacting, we need to have everything that Seoul Korea every other country. Has Except for America right now, for the most part right I talked to my friends in Europe talk to my friends. In Hong Kong China Korea Japan, they're not having these issues dining in is at a a a not normal per se but it's a lot better than what it is you. Get closer I mean, isn't the point though that would quote was trying to do is like, okay, it'll be criminal November I will be fifty percent of things work but you say we need tests Thought about them like how you're GonNa get there I get the. Most restaurants probably won't make two percent, right right and then you're gonNa have and again that's a temporary solution for the the beginning of winter coming. So all in a trolley car problem, right we have to figure out what is the the? Worst scenario and twenty five percent is just a random number. It's an arbitrary number, right? The end of the day you cannot operate a business particularly in New York City if it's not one hundred percent, it's. In right now. Employers and employees and guests don't feel comfortable doing. So so I don't have an answer. Right. Right. Let's talk about. Your book, a little bit shift gears EDP. So. You talked about some misconceptions about you and restaurants get into that a little bit for David. Could you elaborate on that? Well. that. People. Think that you know it's just maybe one just nice. Happy Narrative easy. So easy. Now. my dad immigrated this country nineteen, sixty, three, eight worked in restaurants for. Thirty plus years of his life. To make sure I would never work in restaurants in the reason being. It's incredibly difficult. It's so hard. And even if you go to a fancy high end restaurant, wherever seems flawless. It's it's not an easy way to to make a living. It seems glamorous, but it's it's. It's. It's a very difficult business that ultimately is a labor of love and you know. It's a calling as I say. It's not for anybody you wrote openly in the book about struggles that you had with mental health was that hard for you to to put down on paper? I think originally, it was incredibly difficult. Especially, when I first started a see how get help like two, thousand, three, two, thousand, four, I never thought in my wallet was imagination I had ever been so open about talking about it but I think as I've dealt with my own issues, my own mental illnesses become something that I've been able to share with other friends who've had their own issues and I think at the end of the day. As I've gotten older I think. At least I could do is like not be afraid and to be a little bit more open about it and maybe that would. Help people because the up your stigma attached to mental illness? Right. You also write about the male dominated world and sexism has that changed I remember reading kitchen confidential and you know Anthony was disturbed very matter of fact about it was. A long time ago now, things have changed and obviously they're the metoo moment has come to your to your world very much. So but any progress there or not? I think though entire industry is. Trying to ask themselves the questions of why right and in there is movement and. I've certainly been part of the boys club. Certainly, it's not just about to I. Think we're at a point about equality representation and opportunity and I think. Treating people the way you would want to treat it in. The industry particularly certain Kinda dining is based on the military. And a lot of that toxic behaviors I came from that and and I've been a bully and verbally abuse people in something that I've worked really hard on, but it's also. It's not the entire culture, but it's certainly been the part that has been celebrated and. It's long overdue that. People are saying this doesn't work anymore. In fact, it's never really worked and I don't know exactly what's going to happen but I think it's a good place where people are asking. Let's not let's not to. Continue this. Let's try to come up with a new solution a new way doing. Right. Talk politics a little bit Stephen Ross is an investor in your restaurants. He's back trump in a fund raiser you. Maybe suggested that wasn't such a great idea. I'm curious. How active can you get in politics without alienating customers potentially If I had the alienate customers to believe what I think is right then Soviet and. That whole issue of what happened is not something that I'm I ever thought it to deal with but You know I respectfully disagree strongly with with. anyone that Supports Donald Trump and. We're doing everything we can sort of. Do our do our part and. I think you can't in this day and age Nazi politics and It's not something you're supposed to talk about at the dinner, table but. In the world of food. so much of what you eat is literally. You know stems from. So it's it's something you should talk about whether it's immigration. Or the environment, this is all really important stuff and I just. I strongly disagree that you shouldn't talk all. I should ask you the top maybe but where do you restaurants stand right now? David. Interest opening carry out. Take out. All we've pivoted a lot of our restaurants to carry out and take away. Four we did that we spent I would say almost three months in probably. How many minimum three thousand dollars two, thousand hours. A developing standard operating procedure for safety protocol and protective equipment. once we implemented that we open sourced it so it could be a resource because we do have resources available us that other people don't. Because we're all in this together and we need solidarity one restaurant. Doesn't have answers doesn't help like we need everybody to operate on the same page. And you know we we you know two years ago. Our CEO Margaret Mary Scowl presented to the board an option to. Change revenue from the four walls of a restaurant being one hundred percent of our revenue just fifty. And that was our goal in five years so we've had a plan to. To to to. Enter into the consumer product goods business who did that with pines? And we we've been launching it. So we've had a lab for ten plus years were finally now in a position to start to sell it directly to the consumer. I, we had a plan that we were going to unveil for five year plan, and because of the pandemic we patch, it do that in six months so. We're doing anything and everything obviously to try to make ends meet but we are focusing efforts on. A lot of the products that we've developed and sounded we have Momofuku Chile crunch. We are savers salt soy sauce in a variety of metric products. So we've been sitting on a treasure trove of of RND and I'm incredibly thankful that we have that because this is this is something we strongly believe in a it's a very. Important part of our business in for. A couple of quick last questions you were in finance so for our audience. In Finance. Why don't you get out? Because, I was terrible at it. I mean, I worked for painewebber at a private wealth asset management. This is before was UBS. For a couple of years. And not surprise I was one of the few people that didn't get offered a job. Amber. My terrible I just didn't do Ellen's Bul. I was a religion nature and. Everyone I knew as either going into dot com like the ninety nine bubble burst or banking that was really it in my world. And not a surprise, I get a job really either place. So I entered the financial business. However, I could just was terrible added and I didn't have the aptitude work ethic and I realized even if I was really good at it, still wind up being average. Songs, like I can't do this. This is just I don't have a heart for it. Well food is out. There are glad you watched out David so. No loss at all and then finally what are you cooking during coroner? My God I could so much. First of all I cook for my son's been running around. So that's why I've been looking at this I know. I Cook for him a lot and it's a challenge is to get him to eat whatever I make for him these eighteen months. He's now at the point of a liking one thing one day another I don't like that. But I'm I'm making everything you name it for hot dogs to roast chicken too cramped, and at the Japanese food am a private chef to my family and I'm happy I'm doing that I I. It's one positive quarantine is being able to spend time with my son and my famine wisdom. I never would have been able to before so I'm thankful for. In their lucky ones. David Jang author of the new book. Eat a peach. Thank you so much joining us.