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
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| 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. |
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 CulturesAnother 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.
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| 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. |
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 InvasionIf 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 LocalNot 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.
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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.

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