Raw deal

Supermarket sushi nourishes Philip Maung’s American dream.
By Lisa Davis

 

Spicy salmon, tuna-avocado and California rolls compete for space in a display case with less-common fare such as pollo picante, made of grilled chicken, bell peppers and jalapenos rolled in rice and seaweed and topped with eel sauce and sesame seeds. As passengers scurry to afternoon flights at Charlotte/Douglas International Airport, a few stop to grab a bite and check their cellphones. Leaning against the counter is a man who is neither hungry nor in a hurry.

Wearing a suit jacket, jeans and sneakers, Philip Maung chats with the chefs, who are dressed in black. “Every time I go into a sushi bar, I enjoy meeting all the people, the customers,” he says. “I love to talk.” He’s not a gadfly, and unlike the cuisine, he’s not Japanese. Maung is from Burma and of Chinese extraction. He has kept close tabs on this place since it opened nearly two years ago. Sales, he knows, are growing fast.

He owns this sushi bar, plus another one that recently opened on the international concourse, his first forays into airport restaurants. Then there are his 400 or so sushi kiosks, most in high-end supermarkets across the country. About 400 employees and independent contractors work for Hissho Sushi, which had sales of $43.6 million last year, up 26% from 2010 and nearly 61% from 2009. Driven by a dream, he is always probing, looking for ways to grow, to expand. Hissho is Japanese for “certain victory,” his brash prediction for a business he started 14 years ago in his Charlotte living room with $100,000 borrowed from family, friends and credit cards.

“He’s very charismatic, very approachable, and he’s very intelligent,” says Mark Allison, dean of culinary education at Johnson & Wales University in Charlotte. There’s another key to his success: “He hit at just the right time on a great idea.” For the last two years, Hissho Sushi has been on Inc. magazine’s list of the 5,000 fastest-growing American private companies, ranking among the top 100 in the highly competitive food-and-beverage sector, and was No. 18 last year on the inaugural North Carolina Mid-Market Fast 40, compiled by Cherry, Bekaert & Holland LLP, a Richmond, Va.-based accounting and consulting firm. In 2009, Maung was Ernst & Young’s Entrepreneur of the Year for the Southeast. In the nation’s gloomy economy, such success has not gone unnoticed.

Last summer, Charlotte Mayor Anthony Foxx and his Republican challenger, Scott Stone, both visited the company’s Queen City headquarters. Then the White House started calling, and Maung, 45, flew to Washington, where he sat in the same row as Michelle Obama during the president’s high-profile jobs speech to a joint session of Congress in September. Also in this section of invited guests were “the American Express chairman, the GE chairman. They all sat in back. AOL owner Steve Case sat in back,” he says. “Nobody knows who I am.”

He can’t help but laugh. Growing up on the other side of the world, Maung Phone Lwin would lie in bed, exhausted from scraping fat and plucking hair off pig skins, staring at the moon through holes in the roof of his house. Now he has basked in bright lights, below the Capitol’s iconic dome, two seats away from the first lady of the United States.

The airport setting makes sense, considering that sushi was one of the original fast foods. “A lot of people think sushi is going to be all raw fish, which, in fact, it is not,” Allison says. “It’s just anything rolled in rice that’s been fermented.” Its origins go back thousands of years to when Southeast Asian farmers stored fish in slowly fermenting rice to keep it from spoiling. Later, a faster way to get the same flavor was devised — dousing it with sugar, salt and rice vinegar. In the 1800s, Japanese street merchants sold sushi rice topped with fish as a quick eat.

It came to America after World War II, when sushi bars opened in Los Angeles’ Little Tokyo section. There, in the late ’60s or early ’70s, a Japanese chef invented the California roll, filled with crab, cucumber and avocado and wrapped with rice rather than seaweed on the outside. That helped establish sushi’s popularity, but only in the last two decades has it gone mainstream, propelled by diners seeking alternative, healthier ways to eat. Suddenly, sushi didn’t seem so strange, and sushi bars began popping up everywhere. In 2005, there were about 9,000 Japanese restaurants in the U.S., according to a Japanese government estimate, up more than twofold in a decade. Not all were sushi bars, but it was clear that sushi was on the rise.

Supermarket sushi, Maung figured, would be the next big thing. What could be more convenient than to pick up some tuna rolls along with the bread and milk? Sushi had made inroads in supermarkets out West, but Maung had a plan in 1998 when he founded Hissho: He would beat the trend East, before competition became intense. “Our program is a turnkey project for the retail grocer,” he explains. The supermarket provides a display case, freezer, cooler and storage area, and Hissho supplies everything else, from the chefs who prepare sushi on-site to the bar-code labels on the trays. Customers see a case filled with trays, often with a chef behind it, rolling sushi on his mat.

The supermarket takes its cut off the top. “Anything that goes through their cash register, they get a portion. We take care of the shrink, and they don’t have to worry about the training, hiring, firing, managing. It’s a big plus for them.” Maung targets upscale retailers, and his customer base includes small chains such as Martin’s in Virginia, part of Carlisle, Pa.-based Ahold USA, and Lunds and Byerly’s in Minnesota, part of Edina, Minn.-based Lunds Food Holdings Inc. He has also picked up business from such big chains as Winston-Salem-based Lowe’s Food Stores Inc., a subsidiary of Hickory-based Alex Lee Inc., and Cincinnati-based Kroger and from nongrocery customers such as Carolinas Medical Center in Charlotte and Wake Forest University in Winston-Salem. Hissho’s footprint spans 28 states coast-to-coast.

The company supplies those far-flung kiosks from its headquarters in an industrial section of southwest Charlotte. The former home of a vending-machine supplier has been renovated into sushi central. Behind the modern office is warehouse space that stores everything needed to start and run a sushi bar: boxes of miso soup and bags of rice, shelves filled with knives, measuring cups, signs, menus, mats for rolling sushi. Two walk-in freezers hold boxes of fish shipped from around the world. Supplies are packed onto refrigerated trucks that deliver to each location every few weeks. Though his workforce is a diverse lot, most are Burmese.

In the professional kitchen with six big rice cookers, chefs prepare sushi for local customers. Next to it is a kitchen with a different purpose: to train chefs. About three to 10 new hires usually cycle through the program each month. Seasoned chefs can complete training in two weeks. For the inexperienced, it can last seven to 11 weeks. First comes book work. The training kitchen opens up into a wide space with bright red couches, desks and a projector. Students learn the logistics of running a sushi bar — how to stock it, handle the accounting and promote sales. Then they turn to food safety, particularly crucial in the risky business of serving raw fish. Chefs study to become certified by ServSafe, a National Restaurant Association training program, and must meet specific standards that vary by state. The company follows a detailed hazard analysis and critical control point — HACCP — plan and regularly inspects its operations.

Then students are ready for the kitchen. Under the tutelage of a seasoned chef, they learn to slice fish with the curved blade of a sushi knife and pack tight maki rolls. The training room has its own full sushi bar, and on many Fridays employees pull up stools and play customer. They taste students’ concoctions and ask questions a trainer has slipped them — things the chefs might hear from their supermarket customers such as “What else can you use this sauce with?” and “Can you customize rolls?” The interaction is important, corporate trainer Lu Ann Vang says. “We have a lot of Asian chefs, and sometimes in Asian culture they are quite shy, not speaking until spoken to. We try to break them out of that shell, give them more confidence to let them know they are not just sushi chefs — they are salespeople, as well.”

As the business has grown, so has Hissho’s headquarters. A year after starting the company, Maung moved it from his living room to a 5,000-square-foot plant, then, three years later, to a 16,000-square-foot space. Its current home, bought in 2005, is 46,000 square feet on 12 acres. Maung wanted plenty of room to expand, which it will need to do soon. He plans to add another freezer and more office space by early next year.


A small country southwest of China whose narrow tail extends down the coast of the Andaman Sea along the border of Thailand, Burma, blessed with fertile land and abundant natural resources, was once known as the rice basket of Southeast Asia. That and its highly educated population prompted Maung’s Chinese grandparents to leave their impoverished homeland to seek their fortunes there. But Burma’s promise didn’t pan out. The end of British occupation in 1948 unleashed a civil war and eventually a military takeover. Years of fighting and failed economic policies impoverished the country, which its leaders renamed Myanmar in 1989. Like many, Maung still calls it Burma.

Life was rough for his parents, who married when they were about 18, before they could finish their educations. “My father had a business, but he was never successful. He was always struggling.” The fourth of six children, Maung worked after school for his father making crispy pork rinds. Everything was done by hand. He and his siblings would go to a butcher shop every day to pick out skins. They scraped off the fat and plucked bristly hairs, one by one. The work, dirty and difficult, sometimes lasted until midnight. But he did get a tiny taste of a different way of life. His father was an Elvis Presley fan and avid consumer of Western culture who took his son to see Hollywood movies such as Kramer vs. Kramer and The Godfather. That’s when Maung began dreaming of a way out. “I was very determined that I wanted to become someone. I didn’t want to carry this poverty into another generation.”

He excelled at his studies and read American bestsellers at night to sharpen his English, along with self-help tomes such as Dale Carnegie’s How to Win Friends and Influence People. He was among 500 chosen to attend an elite medical school, but after only a few months, government authorities kicked him out because his parents were ethnic Chinese. “Even though my parents were from Burma, and I was born in Burma, they never considered us full citizens. They treated us like foreigners.” He started work toward a chemistry degree at a university, then got a scholarship to study in Taiwan. Here, finally, was his chance to get away. But Maung, who spoke little Chinese, struggled and soon dropped out. Determined not to return to Burma, he scraped together enough money from family and friends for a plane ticket to Los Angeles, arriving in 1989 at the age of 22.

His papers and passport listed him as Maung — as all young Burmese males are addressed — Phone Lwin. Since U.S. government forms listed last names first, he became Phone Lwin Maung. He had no bankroll and no prospects, but he quickly fulfilled one of his dreams: He went to McDonald’s. “I had always wanted to eat there.” The only person he knew was a Burmese UCLA student — a med school classmate — who let Maung bunk in his dorm room. When roommates kicked him out, he spent a week sleeping in his friend’s car. He found a room to rent and a job loading boxes at a clothing factory. Six months later, he paid $1,000 for his first car, a 1980 Toyota Corolla. Reading business books, he became intrigued with Donald Trump and his real-estate exploits. Surrounded by L.A.’s beautiful houses, he decided he would like to live in one, so he studied for a real-estate license while working long shifts at gas stations. But once in the business, he didn’t find the success he was looking for. It was 1991, the economy was in recession, and his heart just wasn’t in it.

That’s when he started thinking about the food business, something he knew a little about. He didn’t grow up eating sushi, but he had taken to it in America and saw its popularity growing. He calculated that, if he focused a sushi business on supermarkets rather than restaurants, he wouldn’t need as much capital and could expand quickly. But the first step would have to be learning to run a sushi bar.

In Japan, apprentice chefs can spend years just cooking rice and chopping vegetables. Maung needed a faster track. He approached Rancho Dominguez, Calif.-based Advanced Fresh Concepts Corp., a big player in sushi kiosks, and asked to open some on the East Coast. “Let me work behind the counter. I can learn everything in a week,” he said. It was hard, but it beat plucking hairs out of pork skins. “I’m more focused on the customer relationship. It’s about selling the service.” Soon he was opening kiosks for AFC in supermarkets in Orlando, Fla. — 10, he says, in a matter of months.

By then, he had developed a network of friends. They made plans to start their own company in Charlotte. Its status as a banking center would make it easier, Maung hoped, to get financing. Soon, though, they started disagreeing about money, and the partnership broke up. “I was back at square one.” He had no financing — banks weren’t willing to lend money to someone with no track record — and no manpower. He went back to AFC, offered to open kiosks in Charlotte and won the business of Matthews-based Harris Teeter Inc., which remains an AFC customer.

Two years later in 1998, using money he had saved and borrowed, he started Hissho with the help of his new wife, Kristina Tong, also from Burma, whom he had met at a Burmese festival in New York. Maung is sole owner of Lwin Family Co., which does business as Hissho Sushi. In the beginning, he worked out of his living room with a slow dial-up Internet connection. “Lots of sleepless nights,” he recalls, “thinking, ‘When will the money run out?’” He had reason to worry. He finally got an appointment with a potential customer in Indianapolis. It was his first presentation, and he needed business cards. To economize, he printed out the cheapest ones he could find. “I went to the meeting, and the guy looked at me like, ‘Are you sure you have a business?’” He didn’t get the account.


Disappointment faded, and business started trickling in. Maung picked up Dean & Deluca, Reid’s Fine Foods and Cosmos Cafe in Charlotte. In South Carolina, he put kiosks in Piggly Wiggly supermarkets. Then came his big break. “My son saw one of his sushi shops,” says Norman Mayne, CEO of Dorothy Lane Market, a grocery chain based in Dayton, Ohio. The Maynes liked what they saw. “We know better tuna when we see it, and we know better products when we see them,” says Mayne, who dropped his sushi supplier and brought in Hissho.

Mayne was sold by more than Maung’s sushi. “He treats his customers like we treat our customers. If we’ve ever had an issue, we make a phone call, and someone is there the next day from the corporate office.” Getting Dorothy Lane’s business wasn’t a major revenue boost — the chain has only three stores — but its chief executive was well-connected in the industry and introduced Maung to other grocers. The company made another leap in 2002 when it got the Lund Food Holdings business. The Minnesota-based company operates a chain of two high-end stores, Lunds and Byerly’s, in and around the Twin Cities. Hissho is in 21 stores there. “That was a major breakthrough,” Maung says.

The company’s first 10 years was a frenzy of growth. “We hired people left and right.” But when Maung finally had time to step back, he realized something wasn’t right. “A lot of the people we hired did not even share our values. Because of that, the company started seeing division.” What Hissho needed, he thought, was “one voice and one culture.” Inspired by Good to Great, Jim Collins’ book about exceptional companies, he urged his managers to submit ideas for what the core values should be. That list was hewed to 11, which are displayed on the office walls. Some are expected: “Great Hissho service, high speed and high touch,” for example, and “Create synergy.” Others less so: “Simple, hip and chic,” “Generate fun.” Potential hires are evaluated on how their values align with the company’s.

Maung devotes a lot of attention to corporate culture. Employees work together on charity projects. They get together after hours for poker games, movie nights and supper clubs. He has set up a small library with business books he loves, some in Burmese and Chinese. “Making the culture right is very important, taking care of employees, making this a second home,” he says. “If we do the culture right, the rest comes naturally.”


On the second floor of a red-brick building in Charlotte’s Plaza-Midwood neighborhood is a small restaurant and bar called Soul Gastrolounge. Behind the counter are bearded cooks and bartenders and Joe Thu, a slender, dark-haired sushi chef wearing a dotted bandana. He slices thin strips of white tuna from a plastic-wrapped block on the counter and drapes them over the roll he’s pressed into place with his mat, then drops on dollops of wasabi mayonnaise and Sriracha hot sauce.

Thu, 32, had worked in his family’s tea shop in Burma and studied chemistry in college before emigrating to Charlotte in 2001. A friend introduced him to Maung, who put him to work. “He needed labor, and I needed a job.” He sharpened his skills in Charlotte, Minnesota and places between, working for Hissho on and off through the years. “If Philip needs me, I always help him.” Through Hissho, Thu learned to manage a sushi bar, handle food safely and make good sushi. He strives to create a unique plate. “People want new things. They want me to surprise them. I try to do that as much as I can.” He’s not sure where he’ll end up, maybe in a restaurant of his own one day. “I’m always thinking about what’s next.”

So is Maung. “Chefs are a very rare commodity these days,” he says, and Hissho’s growth depends on finding, training and retaining good ones. One way to do that, he has found, is to sign on independent chefs. Hissho has close to 200 chef partners, as it calls them, in addition to its 200 employees. Rather than wages, the independent chefs earn a percentage of sales. That way, Maung says, “they make more money and are easier for us to recruit.” However, that relationship will soon undergo another transformation. Maung wants to set up a franchise system he hopes to have in place within a couple of years. “The current structure is only good for a limited amount of growth. In order to properly grow nationwide or expand to other countries, we have to franchise.”

There are challenges on other fronts, including increasing competition from players entering the market. They try to undercut Hissho by offering retailers higher commissions, but he is determined to compete on quality and customer service. “We need to keep changing our game and let our competitors keep guessing what we do.” There’s no guessing, though, about his priorities.

A U.S. citizen for eight years, Maung travels often to visit his two sons, ages 8 and 10, who are in school in Singapore. He has set up an office there, so with the 12-hour time difference he can work all night. “We want them to understand how the rest of the world functions. We want them to see how poor people live, how they struggle.” He wants the boys to learn Chinese. But in a year or two he’ll bring them back to the U.S., the country where he had always dreamed he would succeed. “This is a country that gives you lots of freedom, that encourages people to do well. If you work hard, if you have focus and determination, a guy like me can do it.”