Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues.

Sunday, July 14, 2002

Bad Brew for business | It could have been us



Bad Brew for business

By Stephany L. Sofos

I said goodbye to a old friend the other day.

Coffee Works closed its doors after 25 years at Ward Warehouse. As a quintessential connoisseur of caffeine who enjoys all the pleasures of this elixir of life, Coffee Works was one of my main hangouts.

The ambiance of the shop had stayed much the same over its existence; a mixture of anti-establishment San Francisco Bohemian and rustic gourmet yuppie chic. A bit funky, but always warm and friendly.

Jay Tyson, its owner for the past 18 years, called it quits primarily because he was just tired of the struggle.

I met Jay some 21 years ago when we both had slimmer waists and no gray hair. We became the best of friends and he remained one of my long-term clients. Over the years we often spoke about the economics of running a small business in Hawaii and its opportunities and difficulties. Over the years I learned much from his day-to-day experiences. When Coffee Works first started out, like many other moms and pops, there was success that cumulated with the Japanese boom of the late '80s and their discovery of gourmet coffee.

However for Coffee Works, as well as other locally owned businesses, the tide turned downward. Starting with the Persian Gulf War in 1991, the beginning of value retailing in 1994, the increased competition of international and national companies, our state's 11-year protracted recession, and finally the impact of Sept. 11, the daily struggle to compete became burdensome and exhausting.

Coffee Works' situation is an example of why it has become more difficult for small businesses to survive in Hawaii. While residents and visitors often say they crave unique "local" favors and experiences, the reality is most desire familiar qualities and controlled atmospheres. Everyone, given the opportunity, wants the simplicity of sameness.

As a small business, the bottom line becomes difficult to achieve because of the lack of ability to compete on the scale of economies with the larger companies. They cannot advertise as much, discount on any satisfying level, or offer greater experiences. Combine this with yearly increases in the costs of goods and services -- not to mention increases in labor costs, rents, maintenance costs and advertising -- and the burden becomes crippling.

With the vacating of local merchants, the Hawaii retail atmosphere is quickly losing its uniqueness. We are becoming more in line with the rest of the United States with our international and national retailers. It will only be a matter of time before we forget who we are and what makes our islands so unique and desired by the rest of the world.

People often ask me how we save small business. The answer is simple and yet, very complex. The short answer is our state and county governments could step in and subsidize areas where businesses can go and operate on lower rents and costs much like the City of Seattle does at Pike Street Marketplace. However, while this would help a few it is not enough to assist the majority and would create more government, something all in business agree we do not want.

The more complex answer is we need to restructure our tax system, beginning with our gross excise tax. The current situation is a pyramiding one where everyone contributes to the tariff: wholesalers, suppliers, retailers and consumers. When all is said and done, this tax is approximately 16 percent for all goods and services rendered in Hawaii and is stifling to small business. It is a vicious tax, because as sales grow, your taxes go up exponentially.

If profits cannot be obtained and break-even is the norm, then after time the increases in costs put businesses behind and failure becomes the ultimate out come.

The gross excise tax was created in 1937 to establish "the right to conduct business in Hawaii." While taxes are extracted to assist and help all of us with government services, they should never be so burdensome that they cripple local business and suppress individuals.

Like other small business people, Jay still has the unequivocal spirit in him that drives many of us against all odds. He has closed at Ward Warehouse but is moving forward and has opened a new, smaller store on Lanai. He managed to buy a small building there years ago and he is now able to control his costs, which hopefully gives him the ability to grow his enterprise. He, unlike many small business owners here, is getting a second chance at his dream. I am cautiously optimistic for him.

So, aloha my old friend Coffee Works and good luck in your new life.

Stephany L. Sofos is president of SL Sofos and Co. Ltd. and a licensed real estate broker and appraiser. She can be reached at



It could have happened
to any of us, so it pays
to be prepared

By Judith Sterling and Michelle Tucker

Millions of americans watched in horror on Sept, 11, 2001, as terrorist-controlled jumbo jets struck at our buildings and our hearts. The attacks killed thousands of Americans. Now, we are left cleaning up the mess.

Valiant firefighters, police and construction workers have worked tirelessly to remove the debris at Ground Zero, where the Twin Towers of the World Trade Center once stood tall. Less visibly, countless people have helped those who were left behind to bring order to the financial and legal chaos caused by the attacks.

The victims of the attacks were firefighters, maintenance personnel, secretaries, bookkeepers and financial traders. Many of the victims were in the prime of life, and many of them died without wills or other planning. Their loved ones are left with disorganization and court struggles.

>> BIll had been living with Liz and her daughter for several years, but they had not yet married. While Bill and Liz had been sharing finances, he never made a will or planned in any way.

So now Liz is facing the personal tragedy of losing Bill without any security from his assets. His property, life insurance and all other benefits will go to his heirs, as state law directs. Liz will have nothing but memories.

>> Craig faces a similar struggle after the death of his life partner, Rick. The state did not recognize their relationship, so Rick's assets will go to his brother, who never approved of Rick and Craig's relationship and had not spoken to Rick in years.

>> Sue and John were married and had two children. While Sue's assets will go to John and the children as heirs, the portion of the assets going to the children may be subject to court supervision because the children are minors. John will have to ask a judge for approval before using those funds.

Certainly Bill, Rick and Sue did not expect to be victims of a national tragedy. They expected they would have time to take care of things later. We all do. But, each year, countless Americans die unexpectedly. According to the National Center for Injury and Prevention Control, about 98,000 Americans died in 1998 from unintentional injury. Automobile accidents accounted for more than 42,000 deaths in 1998. In fact, among Americans 18 to 49 years of age, sudden unintentional injury was the leading cause of death in 1998. Death and disability are not reserved for those of advanced age.

Effective planning can guarantee that things happen the way you want. It can direct where your assets go and ensure there are enough assets to go to the people you choose. Planning can direct how those assets will be used, for example, for your children's education. Planning can direct who will raise your children. The basics of estate planning include a will, a revocable living trust, a general durable power of attorney and a health care durable power of attorney. These documents express your wishes as to how events should transpire in the event of your death or disability.

Effective planning makes it easier for loved ones left behind. While the loss of a loved one is never easy, effective planning can ease the traumatic effects of sudden death on those left behind. Personal tragedy can strike unexpectedly. A qualified estate planning attorney will help make sure things happen the way you decide. Your loved ones can be spared the needless additional grief of disorganization and court struggles that now face the families of the victims of Sept. 11.

Judith Sterling and Michelle Tucker are partners in Sterling & Tucker, a Honolulu law firm. They are certified public accountants as well as attorneys. Reach them at 531-5391.

To participate in the Think Inc. discussion, e-mail your comments to; fax them to 529-4750; or mail them to Think Inc., Honolulu Star-Bulletin, 7 Waterfront Plaza, Suite 210, 500 Ala Moana, Honolulu, Hawaii 96813. Anonymous submissions will be discarded.

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