Pacific Business News
By A. Kam Napier
There are a couple of reasons why Peter Merriman is our Business Leadership Hawaii 2020 Career Achievement honoree. First, there is his decades-long work as a legend in the industry, as one of the founding members of the Hawaii Regional Cuisine movement in 1991, in which he not only established consistently excellent Neighbor Island restaurants, but played a key role in helping to grow the farms that could supply the entire industry. Second, is his willingness to take chances. We thought it noteworthy that Merriman, who might well have rested on these accomplishments, took the leap of becoming a partner in Handcrafted Restaurants in 2011.
At their peak, before the Covid-19 economy, the four restaurants of Meriman’s Hawaii and five restaurants of Handcrafted employed about 1,200 people. Handcrafted was honored in PBN’s 2015 Hawaii’s Best Workplaces. It’s a long way from his Hawaii debut in 1983 when the Pittsburgh-born Merriman accepted a job as the cook for the Mauna Lani Bay Hotel. Two years later, he was named executive chef of the resort’s new Gallery Restaurant. In 1988, he went out on his own, opening Merriman’s in Waimea on Hawaii Island.
The Mauna Lani is also where he learned some business advice that has stayed with him, from customers who have been successful with large businesses. One such informal mentor was Larry Dean, who had grown and sold an early Internet check- cashing business. By the time he sold it, Dean told him, the software was beyond him but he had people for that, it was more important that he “foster the culture.”
Merriman said his team can attest to the fact that, “to this day, I still walk around saying, ‘I’m gonna fostah the cultah!’” as Dean, a Southerner, used to say it. “That’s really fundamental to the way I approach business because I like to delegate a lot of responsibility and authority, making an environment where smart people can do well — in this way, I will do well.”
The other advice came from Robert Holder of the Atlanta-based Holder Corp., a builder and developer whose enterprises had grown enormously through that city’s boom. “Bob told me, ‘When you own a business, only do what only you can do’,” recalled Merriman. “I had to take myself out of the kitchen to be successful at the business part, so that advice has been really, really valuable. And I find it really useful down the chain, too, in that I can tell my managers the same thing — you have somebody else who can do that job, let them do that and you do the job they cannot do.”
Merriman said he still struggles with letting go, but he recently made his biggest delegation yet when he appointed Christina Schenk, his former controller, as CEO of Merriman’s Hawaii, the first CEO who wasn’t Merriman himself. “And she does a better job than me, which is very cool,” he said. “She pretty much runs everything on the Merriman’s side of the business, and I am really fostering the culture. On the Monkeypod side, Sarah Hill runs everything over there.”
Merriman’s partnership with Handcrafted is a 50-50 ownership deal founded with Bill Terry, whom Merriman had become friends with when Terry was with TS Restaurants, and it presented Merriman with an opportunity to see through an unrealized dream — owning a café, offering what he calls “accessible food.”
“When I opened in Waimea, I started out with a café but the only way to make it succeed was to push it upscale because we didn’t have the volume of customers,” Merriman said.
When PBN caught up with Merriman in late September for this article, the Covid economy was an unavoidable subject. He had used Paycheck Program Program money to keep people on as long as possible, but has had to do furloughs and some layoffs. When asked what the industry will need to do to survive, he went immediately to business fundamentals.
“We need to figure out where this market is going to settle, we’re talking about 80% swings in volume and no business can plan for that,” he said. “I think there’s going to have to be a total reset on the structure of how restaurant deals work between tenant, landlord and lender in the state of Hawaii, maybe the entire country. What has been in place to this day is no longer reasonable and that is, minimum rent, plus CAM plus percentage of revenue. That minimum rent turned out to be a killer because basically, that was using the tenant to guarantee the landlord against any downturns in the market like we’re having. The landlords of course say, ‘we owe our lenders, so we need that money’ and there’s some truth to that too. Banks, too, could help by offering small businesses longer terms on loans.”
“It’s a dead run, we’re all driving on debt, Alexander Hamilton would be happy,” he said. “For restaurants, we know the demand is not there now, we know it’s not going to be where it used to be, and our models were so incredibly tight — if 7% is the average profit then even a 10% loss can collapse the whole thing.”
We talked about the farming community as well, given the tight tie between his industry and theirs, and whether or not agriculture can be viable as one of the replacements for tourism, as is sometimes suggested when people talk about what else Hawaii could be doing. The challenge there, he said, is that the farms are quite dependent on the numbers of visitors we’re used to, supporting the number and kinds of restaurants that buy from farmers, ranchers and fishermen.
“I can pay more, and I do pay more, for grocery items than people who shop at grocery stores,” he said, “We’re the high-end outlet for farmers, which is especially good if they haven’t hit their volumes yet. If they can get a high price for the items they’re selling from us, it’s very useful. The farmers have done better than I expected up to this point, and some have been able to sell to the grocery stores but at a reduced rate. For the smaller farms, for those just starting out, they’re the ones who are really damaged.”
While money concerns are top of mind for the industry right now, it isn’t something Merriman generally allows to be the sole focus of his companies. Each restaurant is led by a general manager and a chef, in tandem, as opposed to restaurant companies that put only a general manager at the top.
“Chefs are very powerful in our organization,” he said, noting that he still designs about 75% of the dishes himself. “We don’t want to become bean counters, our origin story is from cooking, not from counting dollars and while we can maybe get good at that, at accounting, it doesn’t mean that’s who we are. We make a conscious effort in our company meetings to talk about food, even if it’s just down to the level of, ‘where did you eat that was really great?’ We believe the culture of a company is what it talks about, so if all we do is run around talking about dollars and cents, that’s who will be.
“I feel we are in the food business, but most importantly, we’re in the guest experience business, which the food supplies,” he said. “If we don’t remember that on a regular basis, our culture will change despite our best thoughts.”
And that is what “fostering the culture” looks like, in action.