Trends for the Japanese Restaurant Industry in America and Future Issues

During the first half of the year, the trend for all Japanese Restaurants in America for the year 2006 was comparatively good, but the effect of the steep rise on gasoline and the decline in real estate values during the second half of 2006, resulted in a slight slowdown. Also, even though the number of newly opened restaurants were concentrated in the first half of the year, it appears that the growth rate of such restaurants reached double digits for the year. For the past three years, Korean owners have been pulling along the growth of newly opened Japanese restaurants. 2006 was also a year in which small sales of Japanese sake were favorable.

The Current Sate of Affairs
Among the 9,000 Japanese restaurants in all of America (2005 Japanese Food Trade News), about 10% of the owners are said to be white (non-Asian). Twenty years ago (in the early eighties), the perception of such owners was that their business was ‘half hobby’ (persons involved with Hollywood who liked sushi) and they were not very serious, but the investment environment is greatly changed now, and sushi is thought of as a serious investment activity. Characteristic of today’s environment is: American operators with prior experience in nightclubs, bars, and fast food businesses; Japanese food in American big chain restaurants; and American supermarkets beginning to focus on Japanese food.


1) What Americans expect from full-service restaurants
Above all else, what first-time American guests want from a full-service restaurant are: a good ambience, attentive service and a sense of cleanliness. For us Japanese the same is true when we eat foods from other countries. Most of all, we don’t know the food itself (taste and menu) of that country very well, so we will also decide in the same way. There is a tendency to think that in the case of Japanese diners, even if the restaurant’s decor, ambience, and service are more or less bad, the restaurant can still make it on its food, but it is a big mistake to think Americans will think in the same way. If the food is average, but the service makes one feel good, that is important. In conclusion, there’s nothing better than delicious food; nevertheless, a restaurant should still consider ambience, service, and cleanliness to be very important.


2) Thinking about return on investment
The strategy for opening a business is fundamentally different in Japan and America. As a basic principle, Japanese believe businesses should be maintained by – relatively speaking - one’s own capital. However, in America opening a business with capital from other investors (a separation between capital and management) is the norm. The business strategy is fundamentally different in America than in Japan. Here in the last 20 years, ideas such as ROE (return on equity) and cash flow are finally becoming mainstream in the finance industry, in big trading companies and in manufacturing companies, but in the restaurant industry, where there are many individually owned business, these ideas are rare. One recent feature of the industry is for Americans operating Japanese restaurants to use individual capital as a base, draw up a precise business model, and then seek investors to join the enterprise. They research not only Japanese food, but also research Japanese culture, and create a restaurant that reflects the service, food and ambience that Americans like (Something which may seem like a nuisance in the perception of Japanese chefs; may, in fact, lead to a relatively good growth in business). Also, as Japanese employees increase, I believe there are some younger Japanese employees who get used to the American management style and have no sense that it is somehow strange. So, just how is the Japanese-style self-financed individual business different from management by investors in America, who are conscious of a return on their investment? Regarding a business that is self-financed with some of the money borrowed, it’s good to consider the income of you and your employees as well as the business expenses and the payment of the loan. However, in the case of a mix of investors, it’s necessary to consider distribution of profits, shares, and capital gains; and, a shareholders meeting (a disclosure of information) must also be held. Accordingly, it is necessary to work hard to improve the virtues of the restaurant for the management and shareholders - the so-called maximization of profit, property value, and goodwill value. Also with investors, a difference in scale appears and the number of seats increases and what is developed is not just a single unit restaurant with less than 80 seats, but the cases are many in which investors open a large restaurant. In those cases, it is common for the management to create an organizational structure and financial plan based on the assumption of opening several restaurants. I’d like to stress the point that in America many restaurants other than Japanese restaurants are small businesses, but nowadays, there are many businesses where operators of Japanese restaurants are investors participating in the planning and who have a relatively large amount of funds. In particular, restaurants such as the Japanese-style pub, Taneko, which opened its first branch last year in Arizona (it is part of the P.F. Chang’s group with over 130 restaurants), are typical of these kinds of businesses.


3) The future
Owners of Japanese restaurants, as well as wholesale businessmen who have operated businesses in America for a long time, have stayed in business by observing genuine traditions, and by being both sober and healthy. However, in managing numbers, service, and the management of American employees, there are many weak areas and in the present state of things, there are many restaurants that do not succeed at developing their restaurant or in expanding their business. We should learn from American business management methods where investors are present. This means managing according to the numbers while maintaining the present traditions of the food culture. Managing and evaluating according to the numbers appears to treating people coldly, but in a country like America where there are many different cultures and ethnicities, it can be said that managing by the numbers is common sense. It also makes good sense to research customer care, providing service, and creating ambience. In particular I would like readers to focus on the finer points of those systems and customs that are unfamiliar in Japan. These include issues involving tipping, sexual harassment, racial discrimination, language barriers, differences in taste preferences, and so forth.

Recently, in chain restaurants from Japan (including publicly traded companies), new Japanese-style management methods are being introduced. The reason for this is that there are presently 700,000 eating and drinking establishments in existence in Japan, and with the aging of the population and an overall decrease in the population, competition has intensified and the market has become saturated. But because America - at 20 times the size of Japan - has only 900,000 eating and drinking establishments, there is still room for growth. To succeed in America, the key points for those veteran entrepreneurs who survived the competition in Japan will include: learning the actual on-site methods of waiting on American customers, cost accounting precision, and management of American employees.

For seminars on Japanese sake or shochu, contact Yuji Matsumoto at 310-936-4649 or ymatsumoto001@gmail.com.