L&L CEO recommends decentralization

[Story and photo by Mike Foley: Published originally in the BYU-Hawaii online “Newsroom,” February 18, 2003]

Eddie FloresThe CEO of Hawaii’s largest plate lunch restaurant chain says decentralization and giving management part-ownership are keys to L&L Drive Inn’s success.

Eddie Flores [pictured at right], a Chinese-Filipino who immigrated with his parents to Hawaii in 1963, told BYU-Hawaii School of Business students in the Feb. 18 Entrepreneurship Lecture Series that L&L Drive Inn has 1,000 employees, and annual revenues of $34 million from 48 branches in Hawaii and 13 more on the mainland, where the rapidly growing chain is known as L&L Hawaiian Barbecue.

A witty speaker, Flores recounted how after working at Bank of Hawaii Laie Branch, he started a commercial real estate business. “I found a location on Liliha Street [in Honolulu] and bought it for $22,000 as a gift for my mother. I was only 25 years old.”

He recalled the whole family worked very hard at the restaurant, which was already named L&L. “The only reason we made money in the early days is because I didn’t pay my wife and children. That’s often how it is for an entrepreneur. You don’t work eight hours a day, you work 14.”

Flores explained that after a while his mother didn’t want to work at night, so he formed a partnership with Johnson Kam from Hong Kong. By 1980, he sold everything to Mr. Kam. “A friend asked to use the L&L name, and asked Mr. Kam to teach him. Another friend did the same. In ’89 I told him, you shouldn’t give away the name for free. He agreed, and said, ‘why don’t you come back and work with me?’”

The rest is local entrepreneurial history. Flores started as president, and Kam became chairman, even though generally Flores does not recommend partnerships: “Any time you have a partnership, nine times out of 10 you’ll have a conflict. Fortunately, Mr. Kam and I work together as a tremendous team. If you go into a partnership, make sure you understand your partner very well.”

“That was 1991, when the Gulf War started. That was the beginning of the recession in Hawaii. But despite that,” Flores continued, “we grew L&L from three restaurants to 48.” He added that against advice from others, the partnership also expanded to the mainland. “By this summer, we’ll have 25 restaurants on the mainland, and 60 by next summer. Don’t listen to advice, if you feel you have a good idea.”

Flores attributes part of their success to filling the local plate lunch niche market. “It’s important to have a niche market. Ours is selling plate lunches.” He used the success of the Laie L&L as an example, whereas a number of national brand restaurants have gone out of business here, including A&W, Burger King, and most recently Kentucky Fried Chicken. “Yet we’ve survived. The niche market is very important, but we also have at least 50 imitators.”

“The main reason we’re successful, however, is our system of complete decentralization. We only have three people working in the main office. In fact, sometimes we don’t even answer the phone,” Flores said, admitting he hadn’t been in the Laie store for over two years.

“Our system is very simple: I find a location. We sign a lease, we borrow the money, and we set up a separate corporation.” Flores said he and Kam also “reward the local managers by giving them about 25% of the business. When you’re an owner, you treat the business differently. When I was younger, having my own business meant I couldn’t sleep, because I was anxious to go to work. Being a mom-and-pop operation, your chances of success are even higher.”

“The national brands failed because of their layers of management. Our managers are owners. They run the stores, and we survive,” Flores said, adding he uses the same system on the mainland. “We hired people from here. When you eat in Ohio, it will be exactly the same as here, because we have the same workers. We tell these people, fly over there and we’ll give you 20-30 percent ownership. Eventually, we’ll turn the business over to them.”

“People are dying to work for us,” he continued. “But our managers have to make money. If I look at the profit-and-loss statement, and they’re not making money, we’ll bring in a new team.”

Flores explained that on the mainland their closest competitor is Panda Express, “because Asian food has become the fastest growing segment in the market. When you talk about Asian food, however, you’re usually talking about Chinese. At L&L we’re talking Asian-American food. Where else would you find Chinese food with macaroni salad?”

“I’m completely shocked with the potential on the mainland. Here it’s difficult to find a good location, but on the mainland there are thousands and thousands of locations, and I’m really excited.”

For example, Flores said L&L will soon open its first East Coast branch in Connecticut. “I came from a poor immigrant family, and it’s been a really good ride.”

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