um, offer pickup and takeout service starting in 2020? Uh, because of the COVID-19 pandemic and
in 2020.
the city shutdown orders, uh, but they allowed restaurants to do takeout.
And how did you determine where to locate the pickup window that is a subject of the application?
Uh, it is the location that is closest to, uh, both of our food preparation areas.
the kitchen and the sushi bar and uh it seemed like that was the best location for uh social
distancing health and safety of the community thank you i you know i have no further questions
for mr frank mr chairman i'd like to move on to my next witness if i may cross yeah unless i'm
I'm sorry. Sorry. It's OK. I did not mean to cut you off. No, I know. I just unmuted myself.
So it's OK. OK. Mr. Chairman, may I just briefly? You most certainly can. Go ahead.
Thank you, Mr. Frank. I have just a couple of questions for you. Actually, not many.
You are a principal at Royal Isakaya. Is that right? Yes. OK.
Okay. Do you have an option on your, your lease after this year is done?
I believe so.
Mr. Chairman, they have, they have a lease that was submitted.
I believe they have a, they're in the middle of a five-year term, I believe.
They were just about done that.
I believe it renewed. I believe it renewed a year ago. I could be wrong.
You could be wrong, Mike, and that's okay. And so can I,
But Mr. Frank, as a principal, would know, I would think, if he has an option this year, after this year, to exercise the option to renew.
Mr. Frank, do you know about your option to renew after the end of this year?
We would have to refer to the lease that's been submitted, I suppose.
I believe, Mr. Chairman, the lease does provide options, and it's in the lease.
The lease is a writing.
It speaks for itself, and it's in the record.
Mr. Frank, did you, have you exercised the option?
We've exercised every option at the time that the options were due to be exercised, yes.
Do we have, as part of the record today, an executed option sheet agreeing to?
Mr. Chairman, if the principal says that he's exercised the option, I think that that should suffice and should not go into that.
not go into tangents that have nothing to do with the application i'm going to allow the question
and i'm just asking if we're going to move on the lease is the lease is ending uh so i just want to
know if uh the principal has exercised his option to renew that's all i that's all i need to know
i think he answered that question he says he did but is there any evidence to that in the record
i think he answered the question mr chairman mr frank do you do you have the executed option
renewal do i have it with me right now no or or did you give it to your council
i would may i ask a quick question mr chairman i just want to know did you give it to your
counsel mr frank that's all so i have a simple question listen listen one minute like michael
ask the question if you think it helps yes are you are you also a principal of the owner of the
building yes is the owner has the owner allowed the they also acknowledge the exercise of the
option yes i don't think we need a written written has the option been exercised yes
is there evidence to that yes there is he's testified to it as both a representative of
the owner and the tenant mr chairman okay mr frank another question uh when you change your
operating hours from 60 plus per week to under 30 per week, did you anticipate or foresee a
reduction in revenue? Mr. Frank. Yeah. I'm sorry. Can you repeat the question? Not a problem. Yep.
Sure. When you decided to reduce your hours from 60 hours of service per week to less than 30 hours per week, did you anticipate a reduction? Did you foresee a reduction in your revenue?
That was certainly a possibility, yes.
Okay. I have nothing further.
Okay. I have nothing further.
Okay. Proceed to your next witness, please.
Certainly. Justin Holden.
Hi, could you state your name and spell for the court reporter?
Justin Holden, J-U-S-T-I-N-H-O-L-D-E-N.
You swear or affirm to tell the truth, the whole truth, and nothing but the truth?
Proceed.
Thank you, Mr. Chairman. And Justin, who's your present employer?
Royal Izakaya.
And what's your position there?
I'm the general manager.
And I think it's already been stated, but what were the days and hours of operation prior to the pandemic?
It was open every day from 5 p.m. until 2 a.m.
And when Royal Izakaya operated seven days a week until 2 a.m., where did customers waiting for a table wait?
um much like they do now they would wait right outside or uh kind of standing or sitting at the
bar inside so prior to the pandemic was it typical to have patrons waiting outside until 1 a.m for a
table seven days a week yeah we served food until 1 a.m so whether they're waiting for a table or
waiting for friends to join um i would say that's very common and when the pandemic hit what happened
to the business? Initially, there was a period where it was completely closed, but a few months
after that, we pivoted to a takeout only model. And what changes did you make to stay in business
as a result of the pandemic? Primarily for a long time, it was the offering of takeout. And then
when we were permitted to, we did have a small sidewalk cafe and eventually some limited capacity
indoor dining. Are you able to operate a sidewalk cafe? Not anymore, no. And are you able to operate
a streetery? No. And how many days and hours per week do you operate presently? We still open at
5 p.m. Tuesday through Saturday. We're closed Sundays and Mondays. And then we are only open
till 10 or 11 p.m. And why are you limited the days and hours you operate? Primarily because
during the pandemic, the labor market in our industry has completely changed. There's less
people, there's a smaller pool of applicants. So I think that's true across some various industries,
but I think it's definitely more acute in the restaurant industry.
And another reason is that those that do still work in the business,
especially the quality of employees that we're trying to get,
they want a greater quality of life.
And that would include things like less late night hours and a more set schedule.
So we're adjusting to the needs of employees in limiting those hours.
And do you provide pickup and takeout service?
And do you pick up customers pre-order?
Yes, generally ordering online.
And based upon your experience in the business and knowledge of the business, what is the percentage of revenue from takeout?
About 19%.
Has takeout service made it possible to remain in business despite the reduction in days and hours of operation?
Yeah, absolutely. It's another channel of revenue that is kind of filling in the gaps of those less hours.
And what changes did you make inside Royal Azakaya when you were permitted to offer takeout service only in the early part of the pandemic to make it viable to provide takeout service?
um there's some changes to the interior where there's um an area that
was formerly seating that we adapted to make like a takeout preparation area
and also we did invest in a different point of sale system that lets people do online ordering
and pick up you know time to pick up um that we did not have prior to the pandemic
And is this area, do you see where I'm pointing?
Is that the area you're talking about?
I want to go down to the next exhibit, which shows it in greater detail.
And this is the area?
Correct.
And again, explain the things that you did here.
And this is the window in question.
Yeah, that's right.
And so in being able to, like David mentioned, this is right next to.
And being able to, like David mentioned, this is right next to both areas, which food is prepared in, the sushi bar and the kitchen.
And we added things like refrigeration and shelving so that we could, you know, have a counter space to put the orders together and also the appropriate storage for them.
and does the front of the building have a proper area for storage
food storage if people pick it up there it does not
and that shows the front of the building correct yeah and could you modify the front of the
restaurant to handle takeout uh we could not the that the nature of that room um for one is quite
narrow and we already you know obviously the front door is not going to move um so there's
there's not space available um in that room to make those changes so what are these physical
constraints that exist in the building that make it virtually impossible to do takeout through the
front door uh it's a overall very small narrow space um and as i mentioned there's not an ability
to add the type of things that we have in the back of the restaurant such as like you know
any refrigeration or area to store orders that are in process or being completed
yeah so basically just the space and the layout do not allow you know any anything like that in
the front of the building and how are the pickup orders completed if i wanted to do a pickup order
what would i do um by far the most common method is that people utilize is to order them online
and are they prepaid yes and are orders time for efficient pickup yes
and if the pickup window were permitted would there be any ordering at the window would i be
able to walk up to the window and make an order uh no we currently like i said the vast majority
of those orders that come in are online. It's about 95%. And then a small percentage of
people will call and place an order for a scheduled pickup. I would say less than 1%
of our orders are placed in person. And in those cases, we would just direct them inside
to order with like a, you know, a server or a bartender who is more able to handle their
questions and and put an order together for them and please explain the operational constraints
of attempting to have takeout through the front door um the biggest constraint is that it's a
huge bottleneck um so you know with these limited hours you know often especially on weekends
there's there's an influx of people um for those prime dinner times as opposed to having a more
kind of spread out service um so there's there's already an influx of guests looking to dine in at
certain times and to add um people coming in through the front door attempting to you know
pick up their orders is is really increasing to that congestion um additionally it's a
the front of the restaurant is the furthest point from the kitchen so if somebody does come in
through the front door to pick up an order, as we've been doing it now. We have to go greet that
person, find out what their order is, walk back, and then bring it back up front. That whole time
they're standing there increasing the congestion. So it's operationally very inefficient,
and it does lead to that congestion that I mentioned that can tend to kind of spill out
onto the sidewalk. As was noted by QVNA in their letter, um, if you were to have takeout,
which is permitted up to 50% of gross revenues through the front door, where would these patrons
wait? Um, as, as we're getting the order, they would, um, either be directed back outside or
just kind of wait inside and, you know, like I said, contribute to that bottleneck that we have
up front and um does utilizing the uh pickup takeout window permit royal izakaya to operate
both the indoor seating and provide takeout despite the challenges presented by the physical
layout of the building yes definitely the more most efficient way of doing um what we need to do
and i'm going to turn to uh exhibit six which is a letter from your accountant
um did you review this letter yes and his letter accurate yes
is the letter based upon financial records of royal izakaya
Is the letter based upon financial records of Royal Izakaya?
Yes, it is.
And it explains what your profit margin.
So what is your profit margin roughly?
Obviously, it's a low variable month to month, but anywhere from 8% to 15%.
And that's including your takeout?
Including takeout revenue, yes.
Right. And did you appear, did you prepare this expense comparison showing your 2019 expenses compared to your 2022 expenses?
And what does it show?
Well, we've talked about the hours of operation, but as far as the expenses, excuse me, it's showing, you know, in short,
a really significant increase in the dollar amounts on a couple of key categories.
For payroll, as I mentioned earlier, the demand for the wages that are commanded by people,
both hourly and salary, are much higher.
And also, in order to retain quality people, we found it could be a best practice to offer
additional, you know, benefits that both health benefits, 401k, paid time off, things of that
nature that weren't in place or particularly commonplace pre-COVID. In terms of the food
purchase increases, that's driven by a really exorbitant increase in the cost of seafood,
especially the premium seafood that we use, as well as just inflationary costs across the board
and all types of ingredients. And is this report you prepared, is this based upon the financial
records of Royal Ezekiah? Yes, it is. And it's based upon your review of those records? Yes,
it is. And is the need for the takeout window caused by the changes in the restaurant industry,
including people who will not eat in a restaurant, coupled with the inability of Royal Ezekiah to
provide outdoor seating, either sidewalk seating or streetery and the physical conditions of the
building? Yes. And do you still have patrons who refuse to eat in a restaurant because of health
and safety concerns? We do. There's a lot of those patrons, especially our neighbors, as it's
reflected in dozens of those emails that were received. A lot of people really prefer that
option because of their own health situation or those of a close, you know, relative.
And on top of that, you know, not only do they prefer to have takeout, but they greatly
prefer the takeout window, which does not require going inside at all.
And does the ability to offer pickup and takeout meals permit you to serve patrons who will
not eat in a restaurant?
Is the ability to serve these patrons important to the viability of Royal Izzakaya?
Yes, definitely.
Are the circumstances particular to 780 South 2nd Street and not to other restaurants in the area?
yeah our particular um building size and layout i would say is unique as well as
the fact that um after our temporary sidewalk cafe permit is expiring at the end of this year
uh of the industry affected just about just about every restaurant um and or you know uh food and
beverage uh facility in the city oh yeah every in some way different different ways to different
types of restaurants probably but yes okay so the market challenges that you're experiencing
are pretty much uh industry-wise right the rise in costs and all this other stuff is that right
yeah inflationary you know costs and payroll increases are industry-wide sure
when you adjusted and changed your operating hours from 60 plus hours a week to under 30
hours a week did you anticipate or foresee a reduction in revenue
um to be honest i i feel like we were kind of just operating it was really like you know fly
by night kind of situation when when the covid restrictions were changing every day so yeah i
think it's definitely a known possibility that that revenue would decrease but um the decisions