executive impact

Wendy's Japan

29 Comments
By Chris Betros

Two years after exiting the Japanese market, American fast-food restaurant Wendy’s returned to Japan on Dec 27 with the first store opening in Omotesando.

It is the result of a joint venture agreement between Wendy’s/Arby’s International Inc and Higa Industries Co Ltd, a successful food importer and distributor based in Tokyo.

Higa Industries is led by American entrepreneur Ernest Higa, who owned and operated 180 Domino’s Pizza stores in Japan before selling the business in February 2010. A pioneer of the Japanese home delivery market, Higa’s stores became known for gourmet pizza products and the use of the Internet and wireless technology to promote menu items and enhance the customer ordering experience.

This is the first joint venture for Wendy’s/Arby’s International. In December 2009, Wendy’s did not renew its franchise agreement with its former franchisee for Japan, resulting in the closure of 71 restaurants.

Higa said that since that time, there has been a huge Wendy’s following in Japan that developed on social media, urging Wendy’s to return to the Japanese market.

Wendy’s will introduce four types of “Japan Premium” products only available in Japan, including the Foie Gras Rossini with original foie gras terrine, along with an upgraded line of long-awaited classic products, including Dave’s Hot-n-Juicy hamburgers (with square patties), premium chicken sandwiches, “Garden Sensations” entrée salads, chili and Frosty.

Regular burgers will cost from 380 yen to 780 yen, while the four premium burgers will range in price from 780 yen to 1,280 yen for the Foie Gras Rossini. Salads cost from 480 yen to 630 yen, and baked potatoes 360 and 380 yen.

Wendy’s Japan plans a national rollout in the coming years, with the goal of achieving Wendy’s estimated market potential of 700 restaurants throughout Japan.

Japan Today visits Higa at his offices in Toranomon to hear more.

Why did you decide to relaunch Wendy’s in Japan?

I thought about how and why many of the major restaurant chains which came to Japan over the years did not succeed. Only a few did – McDonald’s and KFC, for example. I believe that if a chain has several thousand stores in the United States and their sales are several billion dollars in sales, the business model must be good but perhaps the missing element was their failure to adapt to the Japanese market.

Given my experience with Domino’s, I thought Wendy’s would be a great opportunity. I was already in that mindset, trying to figure out which chain to do and when, and then the opportunity to do Wendy’s came up. At the time, I had just sold Domino’s and felt I had some experience and knowledge to perhaps do it right with Wendy’s.

How were negotiations with the head office in the U.S.?

We came to an agreement to do a joint venture in early March. We hadn’t put our money into the joint venture yet, when the triple disaster in Tohoku happened. They were wondering what was going on and I also wondered if we should go ahead with the investment. There was a period of uncertainty about the future; however we both decided to go ahead and closed the deal in April.

The key factor was that we both felt Japan is still a critical market, especially if you look at the restaurant industry. The economy is now the third largest in the world, but the restaurant market is the 2nd largest, at about $240 billion. For Wendy’s, it’s their first investment outside the United States. They have cited three strategic markets – China, Brazil and Japan. So we are both committed to making this work.

What has been the biggest challenge in relaunching Wendy’s?

Getting the first store up and running because so much is involved, whether it is the supply chain side, the site selection, construction and making sure we are on the same page as Wendy’s America.

When I did Domino’s, I thought it was very critical to adapt it for the Japanese market. I did a lot of brand repositioning and product adaptation and added Internet ordering. How you adapt and what you adapt for the local market are crucial. There is no manual for that.

With Domino’s, I was a licensee but in this case, I decided to do a joint venture. I own 51%. The rational behind that was that I wanted to be sure that I was in a position to adapt Wendy’s for the local market. I wouldn’t have taken it on, otherwise. If we do the same thing as before, we’ll end up with the same result.

So what can we expect on the menu?

In terms of product, we have two strategies. One is to maintain the original American menu but upgrade it. The other is to add products just for the Japanese market. On the original menu, the upgrade has to do with what they are doing in the U.S. with the Gold burger. They are using a new technology to produce the hamburger. The bun also has a different formula, different taste profile and will be toasted, so that requires a different process in the store. You need the equipment to do that.

We will introduce four types of “Japan Premium” products only available in Japan, including the “Foie Gras Rossini” with original foie gras terrine, along with an upgraded line of long-awaited classic products, including Dave’s Hot-n-Juicy hamburgers, premium chicken sandwiches, “Garden Sensations” entrée salads, baked potatoes, chili and Frosty.

For quality, service and variety, you have to really raise the bar here in Japan…and that’s one area we hope to distinguish ourselves.

How have you been marketing the opening of the first store?

The positive aspect of the relaunch is that Wendy’s was previously here for 30 years. Within the Japanese population, there is high brand awareness, even though they only had 71 stores. The other thing is that in our market research, the brand has a good reputation in terms of product quality and taste.

When Wendy’s pulled out, there was a big outpouring of all these customers who went to the stores. It was actually on TV. Wendy’s America, in their wisdom, said they would be coming back. So that built up anticipation. As a result of that, there are about 30,000 people on social media, whether it is Twitter or Mixi waiting for Wendy’s to reopen. That means we already have a customer base, brand awareness and a good reputation even before we open our first store.

What are your expansion plans?

When I did Domino’s, my strategy was to own and operate them all directly. That way, you have full control but your expansion speed is a little slower. This time, I want to do things faster. So I will open some directly controlled stores, and when I feel ready, I will franchise stores out as well, which will speed up the process.

First we have to make sure our strategies are correct for the launch. Critical mass is important in this business. It’s important to get to about 100 stores within 5 years. McDonald’s has 3,400 stores or so, but we don’t aspire to open that many. However, I believe achieving Wendy’s U.S.’s goal of 100 stores is possible.

Is it hard finding good locations?

Yes. You need high-visibility, high-traffic locations but they are not always available, such as two former Wendy’s locations at Azabujuban and the one opposite Kiddyland in Harajuku. We are already looking at many different locations, talking with real estate companies and land owners.

Is the hamburger market in Japan saturated?

To some extent. Interestingly, the fastest growing segment in the restaurant business in the U.S. is gourmet hamburgers. There is a strong trend toward better hamburgers and I think that is also happening in Japan.

In Japan, if you look at demographics, McDonald’s has a lock on the kids’ market but as you get older, you want a better burger. That’s how we are looking at it. When you are 10, what you eat and where you eat is one thing, but when you are 30, you want a different atmosphere. That is one trend.

What about prices?

Despite the 10 years of recession followed by 10 years of deflation, I believe that rather than just competing on price, the best strategy is to compete on “value for your money.” It might not be the cheapest burger but if you up the quality, then the value perception is there.

Where are you getting all your staff from and where did you train them?

I have some staff who were with me at Domino’s and some staff who used to be at Wendy’s. We built a test kitchen and training center here in Japan, and we also trained our people for about 8 weeks in Guam and Singapore.

What is a typical day for you?

I try to get here about 8:30 a.m. I’ll have teleconferences with the U.S. and internal meetings. Some days, I go out to look at locations because it’s a big investment. I also have a lot of evening business dinners or receptions, but I try to avoid working on weekends.

Are you optimistic about Japan’s economy?

Yes, I am. During the crisis, it was widely reported how resilient the Japanese people were. I think that says a lot for the people. The economy will come back because of that spirit. I was here during the bubble economy and it was a great market. We were growing 200% prior. I believe that will come back and we are still the world’s 3rd largest economy. We have rule of law, we are politically stable, although I do wonder about the political leadership sometimes, but there is still wealth in Japan.

My hope is that the best and brightest will develop new businesses and become entrepreneurs. It’s what happened in the U.S. in the 1960s. Great human capital became the great entrepreneurs and they revitalized the economy. Japan has great human capital who don’t have a home in government and big companies due to the bad economic environment they will be forced to be innovative and help revitalize the economy.

To finish off, I better ask you how often you eat hamburgers.

Maybe a couple of times a week. I like hamburgers … and not just because of the job.

© Japan Today

©2022 GPlusMedia Inc.


29 Comments
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Wendy's return is good news, there is a serious lack of a decent burger chain here and Burger king does not make the grade.

Look forward to dinning at Wendy's again and a store around machida / Sagami ono would certainly be a hit !

0 ( +2 / -2 )

Ernest Higa has some good ideas. Hope he succeeds. Overall, an interesting and informing interview ... Good luck, Wendy's .....

2 ( +3 / -1 )

Bring in some Nando's, Chicke Licken, Longhorn, Steers, Wurstbude, Nordsee, etc.

Don't have to all US-centric fast-foods.

0 ( +2 / -2 )

Even the best burger consists of mainly white bread, red meat, fatty sauces, and very little vegetable. I do enjoy a good burger, once or twice a year, but let's not act like a burger can ever be gourmet food. Even if you put the best Kobe beef on it, it won't.

-6 ( +3 / -9 )

What I was trying to say is, you're in the country with the best and healthiest food in the world, and are asking for more fast food chains to come here. Now I start to understand why some foreigners in Japan feel ashamed for their peers.

-6 ( +2 / -8 )

HansNFranz:

" Even the best burger consists of mainly white bread, red meat, fatty sauces, and very little vegetable "

Wendys used to have a salad bar, and it was kind of fun watching the high-school girls maxing out the "1 plate" policy by building impressive mountains of salad by means of clever vegetable architecture. So unless Higa takes that off the menu, you can get all the vegetable you want at Wendys.

2 ( +2 / -0 )

"baked potatoes"

Yessssssss!

0 ( +1 / -1 )

WilliB,

Heheh, didn't know you had a lot of fun watching what high school girls do!

0 ( +0 / -0 )

Not a fan of fast foods, but I have one really big question. Will Wendy's be all 100% NON-SMOKING? Only then will I venture my precious body inside their doors to take a peek. Lead the way (after the very very very profitable, popular, and crowded) Starbucks, Wendy!

3 ( +5 / -2 )

Vanilla and chocolate flavored Frosties always do the trick for me (although I can rarely eat the whole thing these days). The burgers are okay (nothing to write home to mom about), but adding foie gras to a burger? To me that like serving a exquisite cake made with the finest of Belgian chocolates, only to sprinkle it with alfalfa sprouts and pass it off as something edible.

1 ( +1 / -0 )

Please open the next shop in Shinjuku! Can't wait for chilli.

0 ( +0 / -0 )

Garbage meat. Look it up.

Better off bringing White Castle here. At least you know you are paying for junk.

On TV tonight there were literally hundreds of people on line. Make me Buick.

-1 ( +1 / -2 )

What I was trying to say is, you're in the country with the best and healthiest food in the world, and are asking for more fast food chains to come here. Now I start to understand why some foreigners in Japan feel ashamed for their peers.

No-one is forcing Japanese to flock en-masse to the likes of McDs, KFC, Starbucks, Wendys etc. There is a strong demand, and this food seems to suit the Japanese taste, especially youngsters. They can choose to eat the old style Japanese food (but let's face it Japanese polished white rice based food aint much better) or western fast food. Capitalism and free choice at their best. Personally, I can't stand hamburgers of any kind!

3 ( +3 / -0 )

Let me say...I'm glad that we have a fast food burger option here in Machida now, with Burger King recently opened. Flame-broiled and you can certainly tell--yummy! Of course there are Mos Burger and Freshness Burger, but ewwww, they just can't compare. BUT, the best burger to be had here is at Jami Jami, a Japanese independent burger joint--WOW! Now, if they could expand, LOOK OUT, In N' Out Burgers of CA, USA. Anyhow, I am glad that Wendy's is stepping back into the burger game and any kind of competition is healthy, even if burgers are not. Though, I would argue that any day, especially after a 70km bike ride to Yokohama Bay and back! 'Nuff said!!

1 ( +1 / -0 )

Wendy's is great, I prefer that fast food over McDonalds. I remember I had a Chinese classmate in Tokyo, he never heard of or been to a Wendy's, so I took him to one in Tokyo. A few weeks later I was walking by that same Wendy's and I saw him with a bunch of his friends eating there again too lol.

I was bummed they left two years ago, but glad to hear they are coming back.

Now all Japan needs is some Popeye's Chicken franchises, KFC stinks!!!

3 ( +3 / -0 )

At least they seem to know why they failed the first time "perhaps the missing element was their failure to adapt to the Japanese market."

Lots of American business fail because of their arrogant attitudes "This is how we do business in the US so we will do the same in Japan too" .

-2 ( +0 / -2 )

Lots of American business fail because of their arrogant attitudes "This is how we do business in the US so we will do the same in Japan too" .

Good thing that doesn't happen to Japanese businesses. Like a Japanese car maker would never lose a multimillion dollar sexual harrassment suit for failing to adopt to US business standards. That would never ever happen.

That was sarcasm, by the way.

4 ( +5 / -1 )

Wendy's survived for 30 years before they pulled out, from my understanding it was a difference in opinion with the then franchisee, but now making a comeback with a new franchisee Mr. Higa. Wish em the best!

1 ( +1 / -0 )

I miss some of the sides items. Not Wendy's but in general. Some good mash potatos and brown gravy, Macaroni and cheese, and etc........

0 ( +0 / -0 )

16 dollars for just a burger!? Seriously no thanks!

0 ( +1 / -1 )

I got food poisoning from a Wendy's baked potato in Takadanobaba years backs, and a friend of mine had the same experience. Never really liked the place: expensive, slow, so-so. Hope the new one is better.

0 ( +1 / -1 )

Are you optimistic about Japan’s economy?

Yes, I am. During the crisis, it was widely reported how resilient the Japanese people were. I think that says a lot for the people. The economy will come back because of that spirit. I was here during the bubble economy and it was a great market. We were growing 200% prior. I believe that will come back and we are still the world’s 3rd largest economy. We have rule of law, we are politically stable, although I do wonder about the political leadership sometimes, but there is still wealth in Japan.

Yes, the Japanese people in general demonstrate a lot of resilience in the face of adversity. To say that this "spirit" will be the primary factor behind an economic resurgence is not realistic, though. Much has changed since Japan boomed economically for a few decades, and much has been done wrong by political and business leaders over the past couple decades to exacerbate the problems, with no end in sight.

The fast food market is "saturated" in Japan, so we'll see if Wendy's can make another successful run in Japan.

-1 ( +0 / -1 )

dominos is gourmet pizza?? now that's news !!

3 ( +3 / -0 )

In America Wendy's offer a "Square" meal Hope that it is the same in Japan

-1 ( +0 / -1 )

I wonder if Wendy's sources their meat comes from Australia and fries from the US like McDonalds does.

0 ( +1 / -1 )

Man are you staying in Japan or leaving... get a grip Wendys. It sort of funny... they treat this company kinda like gourmet fast food. Its not.. Sooo.. Wendys if your reading this... stay or leave but I'm getting tired of reading about how you left for 2 years and now your back... who cares

2 ( +3 / -1 )

WOW! Dominos can be called GOURMET???? Yikes. I will not even order from Dominos. It is awful. COSTCO pizza is so much better. I understand that Higa might be good at his job but I really don't think he has brought gourmet anything to Japan with Dominos. If he plans on doing Wendy's the same way has done Dominos, than we can expect big ad campaigns that will push Wendy's into a possible number three or four in sales in ten years but quality will not be good.

1 ( +1 / -0 )

Higa says this: For Wendy’s, it’s their first investment outside the United States.

-----. There are hundreds of locations in Canada, not to mention other countries such as Mexico, Dominican Republic, Aruba and many others.

0 ( +0 / -0 )

Higa is correct. It is Wendy's first investment in a joint venture outside the U.S.

0 ( +0 / -0 )

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