Room for more U.S. brands in Japan
The Tsutenkaku Tower in Shinsekai district of Osaka, Japan. The tower and area were modeled after New York and Paris.
The best way to enter into an agreement in Japan is to think small and be patient.
“American franchisors always seek the largest development agreements,” says Roy Fujita of I Fujita International, a consultant who works with both Japanese brands coming to the U.S. and U.S. brands going to Japan. His advice: “Don’t push too much in the beginning. Let it (your concept) prove itself.”
Too often, franchisors think a brand’s success in the U.S. automatically translates to success in Japan, he says, adding, that’s not always the case. The Japanese “adore” U.S. brands, which they have experienced through travel to the U.S., especially Honolulu, Hawaii; and by watching Hollywood movies, Fujita says. But a brand still needs to hit the public’s sweet spot.
Japan’s $195-billion franchise market is the second largest in the world, which is one of the reasons the market is attractive, even though the deals are slow to close.
Deals in Japan will be with corporations, rather than individual investors. There are three types of investors in Japan, Fujita says: 1. Existing franchisors seeking additional brands to market to their existing franchisees; 2. mega-franchisees of domestic brands who now want to try out American brands and will secure the rights to be the franchisor for Japan; and 3. entrepreneurs in nonfranchised businesses who want to get into franchising, but are tired of domestic brands.
Two products currently hitting that sweet spot are popcorn and pancakes, Fujita reports. Japanese also have a fondness for sweets, so cupcakes, frozen desserts and chocolate concepts are popular. And yet, healthy brands are gaining traction, such as fitness concepts, like Curves and Anytime Fitness, which has added close to 90 units in Japan over the past four years. “Salad chains will be very promising,” Fujita says. The demand for smoothies, however, is still weak, but Fujita believes it’s just a matter of time until they too are expanding there. Senior care is also on the rise, as 22 percent of the population is over 60, according to franchisemeets.com, a website for the Dai Corporation, a business service.
Carl’s Jr. signed an agreement to build around 150 units in the next 10 years. Fujita worked with Carl’s Jr. management on the deal, as well as U.S. consultant William Edwards of EGS. The concept will stay true to the U.S. version with the only exception being the size of the portions, which will be smaller than what’s offered in the U.S.
“Instead of making changes in the beginning, we keep it as authentic as possible,” Fujita says. “The consumer doesn’t want made-in-Japan brands.”