Coming to America: just like their U.S. counterparts, Asia-based chains seek new revenue streams in foreign markets

Nation's Restaurant News, Feb 14, 2005 by Sarah E. Lockyer

As multinational foodservice companies like McDonald's Corp. and Yum! Brands Inc. increasingly focus on growth in Asia, Asia-based restaurant companies similarly are looking to the United States in search of unit expansion and revenue growth.

The huge U.S. population, its growing interest in Asian cuisines and concepts--and the relative infancy of the Asian-chain segment--make the United States a perfect market for overseas penetration, according to executives at restaurant companies based in Asia. The U.S. restaurant environment is hardly the mature market that veteran restaurant operators would have people believe, they say.

"[The United States] is a strong economy and very diverse," says Oliver Cortes, California-based vice president of planning for Yoshinoya West Inc., a subsidiary of Tokyo-based Yoshinoya D&C Co. Ltd., which has more than 900 quick-service outlets in Japan and some 88 U.S. outposts. "With those criteria it is an ideal market for Yoshinoya ... people here are also very adventurous and, with the rise in obesity, there are more and more demands on quality."

Consumers can find the "quality and freshness" they are looking for in Asian cuisines and at restaurants operating in the sector, he continued.

Indeed, operators at Asia-based restaurant companies say it is the perceived healthfulness of their cuisines that is helping them make headway in the United States. Data from Technomic Inc., a foodservice market research firm in Chicago, outline the growth of the sector clearly, showing sales at Asian-style quick-service and fast-casual chains having grown 22 percent from 2002 to 2003. Sales at full-service Asian chains rose 17 percent during the same period. While those sales figures represent mostly Americanized, U.S.-based chains, Asia-based brands also are reaping the rewards of increased consumer interest in cuisines from across the Pacific, operators indicate.

"Lately there have been a lot of Asian fusion concepts coming out, and that is helping the segment," Cortes says. "As [Asian food] becomes more popular to more people, it helps the whole segment. [Asian concepts] are growing, gaining popularity and getting stronger."

Yoshinoya D&C operates 1,008 beef-and-rice-bowl restaurants throughout its multinational system. Net sales in 2003 were $1.32 billion but are expected to drop about 18 percent when 2004 results are finalized, according to the company's Web site. The tough year for Yoshinoya can be attributed to Japan's import ban on U.S. beef, which was triggered by the first U.S. case of mad cow disease in December 2003. Yoshinoya stopped selling its signature dish of seasoned beef over rice in its home market of Japan, and sales fell dramatically. Japan agreed last October to lift the ban, but negotiations with the U.S. Department of Agriculture have slowed since then, and no date had been set as of presstime for Japan to resume buying American beef.

But Yoshinoya's U.S. market has been growing steadily, the company says. The Torrance, Calif.-based subsidiary, Yoshinoya West, operates about 86 units in California, and another subsidiary, New York-based Yoshinoya East, operates two units in New York. The chain first expanded from its Tokyo headquarters to the United States in 1979, when it opened a restaurant in Los Angeles.

In 2003 Yoshinoya's U.S. sales were $67.3 million and are expected to exceed that when fiscal 2004 results are finalized, Cortes says. Same-store sales in the United States also are "increasing very much," he added. During the next five years to 10 years Yoshinoya expects to open "a couple hundred" units in the United States, Cortes adds, mainly in its California and New York markets.

"General franchising is under consideration," he says. "It could be one of the avenues we would take."

Other chains with Asian roots making headway in the United States include Jollibee, a 478-unit Philippine burger powerhouse with nine locations in California. While corporate officials could not be reached for comment, the chain's parent company, Jollibee Foods Corp., plans to open an additional five units this year in the United States, according to an article in the Manila Bulletin. All are corporate units, as franchising has not yet begun in the United States, according to the company's Web site. The first U.S. Jollibee unit opened in 1998 in Daly City, Calif., a city near San Francisco that is heavily populated with Filipinos.

Jollibee Food Corp. is the largest fast-food operator in the Philippines. Its 1,008 restaurants include 276 Chowking Chinese restaurants, 226 Greenwich pizza units and 28 Delifrance bakery-cafes, along with its 478-unit Jollibee hamburger chain. It has been reported that Jollibee commands a 65-percent share in the Philippine hamburger quick-service segment, with McDonald's a distant second.

Jollibee operates 120 restaurants outside of the Philippines, including 23 Jollibees, eight Chowkings and 89 locations of Yonghe King, a Chinese chain acquired last March. The Manila-based corporation's systemwide sales were $455.5 million for the nine months ended last Sept. 30, a 23-percent increase from the same period in 2003.