Struggling Kona Grill Is Losing Customers & Seeing Major Sales Declines
More than five years after Kona Grill declared bankruptcy due to declining customer traffic and sales, the steak and seafood chain still hasn't overcome its financial woes.
ONE Group Hospitality—which bought Kona Grill out of bankruptcy in 2019—released its latest earnings results on May 7. The results showed that Kona struggled during the first few months of 2024 as guest traffic dropped by 14% and same-store sales decreased by 9.7%.
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Profits at Kona's restaurants also have some room for improvement. When ONE Group purchased it in 2019, the chain had 24 locations, though its restaurant count now stands at 27. During a May 8 earnings call, ONE Group CEO Manny Hilario explained that about a quarter of the 24 restaurants it originally acquired had "underperforming" profit margins at the end of 2023.
That trend continued in the first quarter of 2024 as some Kona restaurants saw "significantly healthier margins" than others, Hilario added.
Despite the iffy quarter, ONE Group has a clear plan in place that it hopes will give Kona the boost it needs. Hilario said they'll promote value offerings like Happy Hour menus and Kona's $39 steak meal deal in a bid to entice more budget-conscious diners.
Additionally, Hilario noted they're working to improve profits at Kona and its sister chain STK Steakhouse by better managing the mix of menu items available and maximizing productivity through "smart scheduling practices," among other initiatives. These types of efforts can result in a better customer experience and potentially inspire guests to keep coming back.
ONE Group is also intent on significantly expanding Kona's footprint. The company plans to open a couple of new Kona locations this year and believes the chain has the potential to reach a whopping 200 restaurants ultimately.
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"We are clearly in the early innings of a robust growth strategy," Hilario said.
Kona Grill is far from the only restaurant chain that has been losing customers and struggling with declining sales in 2024. Outback Steakhouse's customer traffic and domestic same-store sales dropped by 4.2% and 1.2% in the first quarter, respectively. The steakhouse chain's parent company blamed the declines on a pullback in spending from lower-income customers, but it hopes to reverse the trend by investing more in marketing and potentially launching more value-friendly items.
First Watch and Starbucks also saw fewer customer visits during the first few months of 2024.
