Login  |  Register          Free Newsletter Subscription
Zibb
Subscribe to Restaurants & Institutions
Email
Print
Reprint
Learn RSS

Foreign-Based Chains' American Dreams

As home-grown chains secure their future strength through aggressive overseas expansion, a growing number of foreign-based restaurant companies are aiming to make a statement in the U.S.

By David Feder, Special to R&I -- Restaurants and Institutions, 9/1/2008

Japan’s Beard Papa
Japan’s Beard Papa opened its first U.S. location in 2004. Today, the company has 33 U.S. units and plans to make its Midwestern debut in Chicago within the year.
In a slowing economy, where the word “outsourcing” is spoken in the hushed whispers of a new ailment, the idea of “insourcing” finds itself overlooked. Yet companies overseas are seeing in the U.S. economy a promise that should give a little heart, if not some optimism.

Although local chain businesses still are growing steadily in this country, the expansion is at a slower pace than was seen in previous years. In its report of 2007 performances, R&I’s Top 400 Chains grew in aggregate 5.4%, down from the 6.8% growth charted the previous year. Yet in the same way that many domestic chains are casting nets well beyond the 50 states—looking especially to cash-rich countries in Asia and the Middle East for the type of high-octane growth that keeps Wall Street happy—more foreign-owned chains have been landing here. With them come new dining concepts and business models, not to mention food offerings that differ to varying degrees from what Americans are most accustomed to seeing on menus.

Imported chains aren’t an entirely new phenomenon, of course; Canadian Tim Hortons long has been an exemplary performer. The pace of foreign chains’ expansion into the United States is picking up, however. Japan, Belgium, Great Britain, Mexico and more are exploring appetites and business opportunities on American soil.

When Sushi Itto hit the States last fall, one could be forgiven for thinking that this fast-casual sushi-bar concept came straight from Asia. In fact, though, the largest sushi chain in the Western Hemisphere—with more than 100 restaurants—is based in Mexico City. The 20-year-old company opened its first four U.S. units this year: two in San Diego and one each in Seattle and in Rochester, Minn.

One of the keys to Sushi Itto’s success has been flexibility in both its menu and its restaurant format. On the chain’s design roster are small food-court style units, midsize sushi-bar/restaurant combinations and larger, full-service restaurant, bar and grill units. Sushi and sashimi dominate the menu offerings, although Southwestern accents abound. And in opening three of its first U.S. stores in areas that have large Asian and Latin populations, Sushi Itto ensures that its flavor combinations will be more familiar than unusual to many diners. How well the concept plays in Rochester will help the chain determine its growth strategy here.

Crossing Cultures

Another cross-ethnic import stirring interest is the Japanese restaurant group Muginoho International’s Beard Papa chain. Its bright-yellow color scheme with blue and white accents and a benevolent-looking bearded mascot provides no clues as to the concept’s menu: Beard Papa is all about cream puffs and coffee. Each day, a classic vanilla-custard filling is offered alongside flavored custard varieties such as banana, chocolate and strawberry.

London-based Wagamama
London-based Wagamama
The United States’ relatively high employment rate and disposable-income levels make the country an attractive target for foreign restaurant operators, including London-based Wagamama.
“When we opened our first store in the U.S., the nuances of opening a business—and particularly a retail one in New York—were challenging for us as a Japan-based company,” says Craig Takiguchi, president of Muginoho International U.S.A. “Such things as approvals on building permits, finding suppliers and basic logistics took longer than we expected. Ours is a fresh and natural product, so getting our approved ingredients to sync with suppliers was particularly challenging.”

Beard Papa’s expansion has been impressive, especially given the limited nature of the concept’s menu. After the introduction of Beard Papa in Japan, Muginoho opened the concept’s first store in the United States in 2004 in New York City. Four years later, it has 33 locations Stateside, with as many as 10 more due by the end of 2008. To date, the company has focused primarily on New York, California and Hawaii for its U.S. development, although the Midwest is soon to see its first unit as the cream puffs make their debut in the Chicago market. The company also franchises and operates more than 250 stores in 14 countries.

“From the consumer-acceptance standpoint, we couldn’t be more thrilled,” says Takiguchi of the U.S. units. “We continue to find new ways to deliver our products in such innovative retail outlets as baseball stadiums, combined 2-in-1 concepts with coffee brands, lifestyle centers and destinations. The franchise program, too, has been creative.”

This does not mean that planting a flag on U.S. shores has been a snap. Staffing, for example, required an adjusted approach for the chain. “Labor is very different in the U.S.,” says Takiguchi. “Because our product is fresh, the store is where we do most of the preparation. The Japanese labor market is very efficient, and we had to make significant changes in operations to adapt to the U.S. market. In some areas, we establish a backup commissary to support franchisees who may have labor issues.” The signature cream puffs are filled only when orders are placed, allowing the shell to remain crisp and light.

Notes Takiguchi, “The U.S. market is rife with local franchises as well as [multiple] permit and food laws.” Such things, he adds, make it a challenge to predict growth. “Competition has been fierce, but it also helps us to learn, maintain our edge and focus on innovation. We continue to refine our models and believe the U.S. could be one of the largest markets in the world for us.”

British Invasion

If Mexican sushi and Japanese cream puffs can find an American audience, why shouldn’t a Japanese-style noodle house with a British accent be able to do the same? London-based Wagamama, after spending 16 years opening more than 90 units in the United Kingdom, Continental Europe, the Pacific Rim and the Middle East, hit Boston last year with its signature ultra-hip, open-kitchen and communal-dining format. Two units now operate in the Boston area.

A strong chain with an avid following and its own cookbook, Wagamama is high on its prospects for the United States, says Ed McGraw, vice president of development for Wagamama USA.

“The U.S. is an outstanding market, from a disposable-income and employment perspective,” McGraw says. “East Coast metropolitan areas, in particular, have a great combination of density and employment centers, producing high-volume restaurant markets both urban and suburban. We believe there are hundreds of opportunities across the country.”

The first U.S. unit, in Boston’s Faneuil Hall, opened in April 2007, and one in nearby Cambridge opened several months later. Despite a slowing U.S. economy, McGraw says Wagamama USA’s numbers are on target. “On sales, we have been at our pro forma [expectations], and we’re also pleased at the acceptance here in the States of our cuisine.”

As did Beard Papa, the Wagamama team faced a few hurdles as it settled into the American market. “We’ve had a number of challenges, such as hiring and training when you have no other unit around to help out,” McGraw says. Preopening costs were high as well. “Fortunately, we did foresee many of the challenges, and we had action plans on how to deal with them. But we did get tied up in some federal paperwork as we tried to get a large number of trained workers over from the U.K. in preparation for the first two openings. Forms, notaries, documentation—in triplicate or worse—ate up a lot more time and effort than we anticipated. We kept pressing, with the help of good counsel, and got it done. But it was frustrating.”

Think Global, Act Local

Not all is fast food or fast casual in the chain invasion. Rouge Tomate is a Brussels-based concept about to make its U.S. debut in New York City. An upscale full-service eatery with a nutrition-through-natural-foods focus, Rouge Tomate is slated to open here in October. The New York restaurant is large—16,000 square feet—and is situated in an area that will allow it to draw shoppers and businesspeople as well as tourists.

Toronto’s 22-year-old frozen-yogurt and smoothies retail chain Yogen Früz has accelerated its run for the border; the company recently announced its intent to open 10 stores in Atlanta. As an established brand with more than 1,100 units worldwide, Yogen Früz appears to be responding to all the excitement surrounding the Los Angeles-based Pinkberry frozen-yogurt chain.

Also coming down from Toronto is Freshii, a concept geared toward health-minded diners. “Nutrition to go” is the tagline for the chain’s eight Canadian units, all in Toronto. For its foray into the United States, the company has selected Chicago as its debut market; one unit in the Windy City is open and another is under construction. Freshii’s menu centers on customized salads, wraps, rice bowls and soups.

From slightly farther beyond U.S. borders comes South Korea’s barbecue-chicken-delivery giant Genesis Corp., which made a bicoastal move into the United States with openings of one store in New York City and two in Southern California. The company, which is fast approaching $1 billion in annual revenue, has the ambitious plan to open as many as 200 additional units in the United States within a year. The move would nearly double Genesis’ 250-store global operation.

 

Orient Express

Japan’s quick-service restaurant culture is notable for having mastered serving the perfect lunchtime meal: affordable, freshly prepared food served quickly. In Japan, these are called “one coin” shops because guests need no more than one coin (500 yen, about $5) to eat there. Some of these companies such as Beard Papa have made inroads in the U.S. market. So what other concepts excite us?

  • Andersen. (r.) Danish design meets pastries at Hiroshima-based Andersen Bakery in Japan and San Francisco. Some locations are designed by U.S.-based architect Richard Bloch.
  • Curry House Coco Ichibanya. Headquartered in Aichi, Japan, the 1,000-plus unit chain specializes in customized bowls of Japanese-style curried rice. Its parent company, Ichibanya, has Curry House locations in Hawaii. It also operates Pasta de Coco, a pasta concept in Japan.
  • Tenya. Guests order from a menu at the table at this fast-casual chain known for serving tempura prawns donburi-style (on rice). The 200-employee, Tokyo-based company also has stores in China.
  • Yoshinoya. With more than 80 units in southern California, this Tokyo-based company is well-positioned for U.S. expansion. A quick-service chain specializing in beef-and-rice bowls, Yoshinoya opened its first U.S. store in 1979. In 2003, it established a U.S. holding company. This year, it plans to expand to northern California, Arizona and Nevada.

Made in the Philippines

When R&I wrote in February 2002 about foreign-based chains entering the U.S. market, two of the chains were based in the Philippines. Six years hence, the aspirations of one of the Filipino chains appear to have exceeded the concept’s ability to carry out its plans, while the other chain continues to clip along with slow, steady growth.

Jollibee, the so-called Filipino McDonald’s and the largest Asian chain, had eight domestic units and expansion plans that called for 20 units by the end of 2002. Today, there are only seven Jollibees in the U.S., including one that opened in Las Vegas last year. Spaghetti with chopped ham, cheese and tomato sauce, a best-seller in the Philippines, is a signature dish on American menus. More-familiar American fare such as burgers, fried chicken and hot dogs also are offered.

Another Philippines-based chain, Goldilocks, has grown from 12 units in 2002 to 19 (17 in California, two in Nevada) in 2008. The bakery-cafe chain caters to a largely Filipino clientele, although a base of American customers helps fuel growth. Cafe items such as chicken curry and lumpia, a type of egg roll, are broadly familiar and appealing. Less so, perhaps, is dinuguan, a pork-and-entrails stew simmered in pork blood.

Email
Print
Reprint
Learn RSS

Talkback

We would love your feedback!

Post a comment

» VIEW ALL TALKBACK THREADS

Related Content

Related Content

 

By This Author

Sponsored Links

 
Advertisement
SPONSORED LINKS

More Content

  • Blogs
  • Videos

Blogs

  • Chris Muller
    Starters

    October 21, 2008
    The 10 Steps to Save Casual Dining
    As if times weren’t bleak enough, last week USAToday ran an article on the problems facing the Casual Theme Restaurant segment. It was......
    More
  • Michael Oshman
    The Green Line

    October 7, 2008
    Ready to Go Green?
    When I founded the Green Restaurant Association 18 years ago, the word green was still just a color and its best-known advocate was Kermit the Frog......
    More
  • View All BlogsRSS

Videos

Paul Prudhomme-The View from New Orleans
Legendary chef Paul Prudhomme takes a nostalgic look back at Crescent City dining before Hurricane Katrina. This proud ambassador for New Orleans also predicts the future of the city’s restaurants and how they will help rebuild the city’s stature and culture Watch It Now

View All Videos VIEW ALL VIDEOS
Advertisements





R&I NEWSLETTERS

Click on a title below to learn more.

Newsfeed (Daily)
eBurger eBurger (Monthly)
Recipes & Ideas (Twice Monthly)
R&I eMarketplace (Monthly)
R&I Beverage Briefing (Monthly)
Regional Cuisines (Monthly)
Noncom Niche (Monthly)
About R&I   |   Advertising Info   |   Site Map   |   Contact R&I   |   Industry Links   |   FREE Subscription   |   RSS
© 2008 Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
Use of this Web site is subject to its Terms of Use | Privacy Policy
Please visit these other Reed Business sites