focus japan

Franchisemeets.com

FOCUS:Japan

April 2016

Think Life. Think [email protected] https://franchisemeets.com

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第二部

April 2016

Overview of Japan franchise Industry: Japanese consumers Japanese tastes The Way In-How to Enter Japan

Bene�ts of opening a franchise in Japan

Do you have to open your franchise in Tokyo?Japan Franchise

LawJapan Hot franchise sectors

Understanding Japanese business manners

FOCUS: Japan Franchise Market

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Key Franchise Points

* 23% of household expenditure goes on food compared to 5-7% in the US and 10-12% in Europe.

At a Glance

Japan’s economy is recovering moderately with the economic growth forecast for 2014 at 1.4%. Consumer con�dence is strong and consumption has been supported by limited to no individual debt.

Due to the size, status and sophistication of the Japanese market, it is regarded as a trend-setter and origin of content for all Asia. Because of this, Japan o�ers a great test bed for franchisors wishing to enter Asia as a whole.

The World Bank reported that consumption in 2012 was 61% of GDP.. Retail food sales were just shy of $500 billion and expenditure was $3,735 per capita, representing the second biggest expense behind housing.

In October 2012 there were 1,286 franchising chains with 245,263 outlets. 2012 total sales were

¥22.2 trillion equating to around 10% of overall retail sales.

In order, the biggest sectors:

1. Retail. 2. Convenience store. 3. Restaurant. 4. Service sector.

Approximately 39.6% of total turnover at franchised outlets is from convenience stores (CVS) and about 18.1% from food service chains. The biggest growth (14% increase) 2011-2012, was seen in the internet and TV shopping sectors.

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The franchise industry started in 1963. It was originally developed in the QSR sector by a Japanese restaurant company in Kyoto. The franchising industry has since become a multi-billion dollar industry across a wide range of sectors.

Overseas franchising has helped the development of Japan's franchise industry since the early 1970's and the number of companies that have chain headquarters located in Japan has surged since the appearance of foreign capital companies.

Over the years Japanese consumers have become open to overseas franchise concepts although care must be taken to match products/services to local tastes, culture and thinking.


* Opening an o�ce in Japan requires a Japanese registered Director however a satellite o�ce can be opened by a foreigner

Foreign franchising businesses should not always think Tokyo, Japan has a choice of economic regions, as will be discussed later in this edition, each with their individual bene�ts and slightly di�erent tastes.

There are a number of ways to enter the market:

1. Establish an o�ce in Japan and open a corporately owned subsidiary. 2. Enter into joint venture partnership. 3. Sign a Master franchise agreement. 4. Run a test bed shop via an individual franchisee.

Chain name & LOGO

メイクリーンお仏壇本舗 MAY CLEAN

Patented Technology !

Country

Industry

Year Started

Number of locations

Domestic Franchise Fee

Type of Agreement

Japan

Cleaning Services

1979

130

$130,000 for 1 location

Master/Multi-unit/License

Email: [email protected]: ＋81 75 361 1171

Company Pro�le

MAY CLEAN specialize in Buddhist altar and the temple cleaning and repair services.

MAY CLEAN’ S experience and know-how has been developed and refined for over 21 years. They

have cultivated specialist skill and have patented technology meaning their service is about one-third

of the cost of conventional methods. The company holds patents for their proprietary cleaning

solutions. (No. 2,033,333, No. 3,437,385). This is the May Clean strength that others can not imitate.

They have contracts to clean the altars, equipment and statutes in 900 temples covering all Japan.

Their honed cleaning methods also mean they are a green company Eco company and clean with the

least amount of water.

SALES POINTS

√ Low cost

√ Standard of cleaning

√ Use of patented cleaning techniques

√ Authentic cleaning method

Full training and support provided including:

• Sales

• Cleaning methods

• General theory

• Specialised Buddhist altar work

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The biggest consumers are the elderly population (accounting for 44% of all consumer spending) and young single people. The seniors market in Japan can not be underestimated. With 22% of the population over 60 and the movement of retired people back into convenient urban areas, tailored products targeting this group will enjoy a growing market. Domestic retailers have responded to this market through increased home delivery, online shopping, mobile services and segmented promotions.

Japanese consumers seek good quality, appetising and healthy food. Since the 1960's the Japanese diet has become more global and willingness to experiment combined with travel opportunities means


* The biggest consumers are the elderly population accounting for 44% of all consumer spending.

they are highly food-educated. A selling point for convenience stores is to have a high turnover of products so the Japanese are used to new experiences and innovative products.

Japanese consumers are also extremely health conscious consumers. There has always been a culture of health focused foods and they have a strong belief in foods with health bene�ts. Products that are calorie free, fat free and/or carbohydrate free will remain popular.

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The most popular savoury tastes :

* Soy sauce. * Sesame. * Salt. * Consomme. * Seaweed. * Curry.

Recently there has been an increase in demand for vinegar, cheese, horseradish, spicy �avours such as chili and pepper; and �avours that can replace or simulate the taste of salt.

Japanese consumers are regularly exposed to various foods and �avours from around the world so new, interesting global brands are popular. Although Japanese love their original �avours, franchisors often blend their existing recipes with Japanese �avours to make them less unfamiliar. These cross-over �avours are also becoming increasingly popular and trendy amongst domestic food manufacturers.


* Doughnuts and Popcorn are a huge trend at the time of writing.

Main purchase decision drivers:

* Easy to prepare, consume and dispose of. * Quality and freshness. * Healthy, low-calorie and nutritious. * Convenient and accessible. * Innovative packaging. * Packaging and in-store marketing.

A well-thought out marketing strategy should heed the above drivers along with innovative design, portion size, QR codes and mobile coupons.

As with any market, it is important to link your product bene�ts and experience with local consumer buying behaviour. An understanding of culture, values, beliefs, tastes and buyer psychology can be indispensable.

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For franchisors, pop-up stores or an experiential campaign combined with solid marketing is an e�ective way to introduce your product, gauge the market and gather essential feedback before full scale entry.

For brand licensing, export stores and high end supermarkets are a good entry point though an understanding of the distribution system is needed. In addition to about 200 single stores, there are around 900 chain owned specialty supermarkets that stock a range of foreign brands.

Partners/Masters:

Identifying the right partner in Japan does require time and e�ort and Japanese partners/masters usually want to see a business plan that has a clear marketing strategy or strong growth partnerships are successful, Japan can serve as a launch pad for the rest of the Asian market.


* Have a clearly de�ned marketing strategy and well-developed business plan.

potential. Many foreign franchisors have stressed that in order to conduct business in Japan it is essential to have a business partner with a deep understanding of the Japanese market.

There are a number of large Japanese companies very receptive to partnering with foreign franchise concepts at all stages of development-not only companies who have a large overseas domestic footprint-wdi.co.jp is one good example. When such business Japan can serve as a launch pad for the rest of the Asian market.

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Overview

Despite the global economic situation Japan remains a solid market for luxury packaged products and gourmet foods. This is mainly due to Japan having a cultural adversity to debt, so unlike most western countries the individual’s debt to savings ratio is very positive.

In terms of eating out we are seeing a new trend in price conscious consumers and the market is reacting. In a country where quality has always been valued over cost, price orientated campaigns are now an integral part of promotion.

QSR restaurants, franchise restaurants, cafes and home delivery businesses have been less a�ected by this lifestyle change compared to independent one site owners, so there exists an opening for overseas franchisors who have a strong domestic base. With people also entertaining more at home there remains good opportunities to sell quality, store bought produce.

Other growth food sectors for franchises to consider:

Health foods. Frozen foods. Ready-to-eat foods. Private brands. Organic and fair-trade products. Desserts. Summary

Travel opportunities, curiosity, media in�uence and existing products means a global lifestyle is desirable in Japan and this rolls over into their perception of food.

Japanese people love new experiences and exciting �avours so quality foods from the USA and Europe sell well. The increased consumption of foreign food has also created a knock-on increase in demand for foreign ingredients.

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The Bottom Line

The sophistication, infrastructure, economy and amount of spending can not be surpassed in Asia. The consumers are open to exciting new experiences yet there are still few brands in Japan compared to other Asian countries. One reason for this could be the language problem, however with the number of potential partners in Japan who have overseas experience and the drive by the government to globalise more, this should not be seen as a barrier to entry.

To conclude: The underlying wealth and the size of the market means Japan has to be on every franchisor's radar as an entry point into Asia. With the right knowledge and targeting a brand can become successful and quickly expand across Japan; if a brand becomes trendy, Japan can generate enormous rewards.

Franchise Meets reckons 8/10.

Chain name & LOGO

産地直送居酒屋「浜焼太郎」 HAMAYAKI TARO

Over 100 stores in Japan !

Country

Industry

Year Started

Number of locations


Type of Agreement

Japan

Casual Dining

2005

100


Master/JV/Multi-unit


Company Pro�le

Foodnavi focuses on attractive ingredients which when harnessed maximize the taste of food. They

utilize the buying power of their chain to purchase quality ingredients at a preferential cost.

Their brand HAMAYAKI TARO delivers a unique cooking experience in a lively, entertaining restaurant.

Food trends have limited effect on their performance and their brand that will prosper in any climate.

The customers cook the food themselves bbq style so food inexperienced franchisees can thrive, staff

costs are 75% lower than other restaurants and initial set up costs are reduced. With over 100 stores

in Japan they are a well-established franchise.

They offer flexibility in their franchise system allowing franchisees input into their franchisee and

adaption to local markets. They will also introduce real estate through their partner network.

SALES POINTS

√ Expected ROI after 2 years

√ Efficient management and operations

√ Low experience needed and ease of operations

√ Significant franchisor support and know-how


• Help with product development

• Management training

• Menu and PR materials

• Extensive business models analysis

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As with the food market, cosmetics are a fast changing, trend moving industry where favourable media coverage of a new brand can quickly open a billion yen market.

Japan's cosmetics and toiletries market was estimated to be around $18 billion in 2013 with imports having grown at an average of 9.5% since 2001. The domestic brand, Shiseido, maintains the top position in beauty and personal care.

Skin care and hair products were the largest import categories in dollar terms followed by make-up. The leading channels are drugstores, online purchases and supermarkets.

With the elderly population in Japan products targeting these consumers will be a growth market but speci�c segments within this market will have di�erent potentials if not fully researched. As an example, the fastest growth category in 2014 was anti-ageing though this growth was predominately amongst younger and middle-aged women.

For the seniors there is more appeal in products that have added vitamins, collagen or natural properties therefore marketing strategies have to be carefully and appropriately targeted.

Following the global trend, Japan has shown growth potential in the organic sector. This ties in particularly well with Japanese culture and thinking.

Summary

Japan is the second biggest cosmetic market in the world and the market is in a stable condition. Skin care products lead the industry. There are good opportunities for brands across the board and particularly for bespoke niche products that focus on natural elements. It is highly recommended franchise owners do their desktop research and then con�rm �ndings with a Japan consultant.

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Opening a new franchise in any country takes e�ort and time. But location, location, location is always key. Using a Japan franchise consultant who can advise you on primary and secondary locations to open your franchise is always a good idea.

Tokyo and the Surrounding Area:

Tokyo is the �rst choice for many franchisors though due to the high costs of opening an outlet it should not be assumed to be the only choice for a company taking its �rst steps into Japan. Being the capital however, it is the centre of government, business, fashion and culture.

The region centred around the capital is known as the Kanto region and produces 40% of Japanese economic strength. It has a population of 13 million and the main metro area is surrounded by the suburb prefectures of Kanagawa, Saitama, and Chiba giving a total population of over 35 million-roughly equivalent to the New York and Los Angeles metropolitan areas combined.

Tokyo has a well developed transport system and airport links.With the elderly population in Japan products targeting these consumers will be a growth market but speci�c segments within this market will have di�erent potentials if not fully researched. As an example, the fastest growth category in 2014 was anti-ageing though this growth was predominately amongst younger and middle-aged women.

Tokyo and surrounding area

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Kansai:

The Kansai region in western Japan is the second most important economic centre and has the second largest population. Kansai consists of Kyoto, Mie, Osaka, Hyogo,Wakayama, Shiga, Nara, Fukui, Tokushima and Tottori prefectures. Kansai would rank as the world's 11th largest economy if compared to the world's leading economies. Kansai's Gross Regional Product (GRP) is $917 billion.

Kansai covers only 12% of Japan's total land area but has a population of almost 25 million people concentrated in the cities of Osaka, Kobe and Kyoto. The biggest city is Osaka with a population just shy of 3 million and has an international airport. Consumers in Kansai are very receptive to new ideas hence the traditional Japanese saying that you should go to Kansai to see what the rest of Japan will soon be buying.

Successful foreign �rms such as Procter & Gamble use the Kansai area as a test market for launching new products in Japan.

236 foreign-a�liated companies maintained their Japanese headquarters in the region. Osaka o�ers bene�ts to foreign corporations to set-up in the region, such as the country's �rst 'zero local tax' system.

Kansai

Chain name & LOGO

元祖東京いか焼き「うまいか本舗」 GANSO-TOKYO-IKAYAKI

World’ s �rst Grilled squid QSR !

Country

Industry

Year Started

Number of locations


Type of Agreement

Japan

Fast casual

2013

38


Master/Multi-unit/Single unit/License


Company Pro�le

GANSO TOKYO is the World’ s first Grilled squid on a stick QSR. They hold a Japan patent for the

serving of skewered squid.

No preparation is needed for the food so there is very low food loss. The store format can be operated

by 1 person so labour overheads are reduced. The franchise fee and store requires very low capital to

open and net profit margin is at a proven 50%. The menu has over 100 items that can be chosen from

and adapted to local tastes, and the format is also available as a mobile unit.

They have 38 stores in Japan and are very keen to move into most countries in Asia. As there is little

preparation and cooking ability required the concept can be easily opened. Training will take place in

Japan and sauces will be bought from the franchisor, other ingredients can be sourced locally.

SALES POINTS

√ Flexible format and products

√ Can be operated by 1 person

√ High margins of 67.2%

√ Small space required


• Cooking techniques

• Sourcing suppliers

• Store reform

• Menu design/Localising products

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Central Japan:

The Chubu region has the third biggest population in Japan. The area consists of nine prefectures: Gifu, Shizuoka, Fukui, Ishikawa, Aichi, Mie, Nagano, Toyama and Yamanashi. The region accounts for 17% of Japan's GDP, and nearly 70% of Japan's total trade surplus with the United States. The biggest city is Nagoya with 2.2 million inhabitants and is Japan's fourth largest city.

The majority of industry is concentrated in the four prefectures of Aichi, Gifu, Mie, and Shizuoka. The region is the main centre of Japan's processing industry and approximately 20% of Japan's industrial production occurs here.

The region's infrastructure has been greatly extended around the Aichi-Expo site. The Chubu Airport Centrai has daily connections to Europe and a there is a new logistical hub for DHL. There has also been a certain trend, discernible for decades, for companies to relocate their headquarters away from Tokyo back to the Chubu area.

Central Japan

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Japan is the gateway into Asia with a sophisticated trend-setting market. A well researched, competitive brand can turn billions of yen in sales in a few years. A Japan franchise consultant can help you understand the market and the best entry methods.

Japan is a huge market with one of the world's largest economies and biggest, densest populations. The Japanese consumer is constantly becoming more westernised and open to experiencing new brands and products, so the Japanese market remains a rewarding investment target for overseas companies.

In particular the Japanese market o�ers a wide range of lucrative opportunities to sell products and services that o�er luxury, convenience, originality, health, quality and educational bene�ts.

Additional factors:

With Japan joining the TPP this will greatly reduce the barriers of entry and encourage a greater movement of goods and services. The Government of Japan also actively promotes inward foreign direct investment and has established numerous grants and tax relief programs for overseas companies looking to expand into the Japanese market.

҉ 2015 World Nos. 1 Country Brand҉ The Trend Setter for Asia҉ 19.74 Million Tourists in 2015҉ $29.6 Billion Tourist Dollars in 2015҉ $1.48 Trillion Retail Market҉ World’s 3rd largest Consumer Market҉ Largest Urban Area in the World҉ TPP Trade Agreement

Chain name & LOGO

浅草グリルバーグ ASAKUSA GRILL BURG

Voted BEST 5 Asakusa restaurant !

Country

Industry

Year Started

Number of locations


Type of Agreement

Japan

Casual Dining

2008

1


Master/License


Company Pro�le

ASAKUSA GRILL BURG is a popular Tokyo steak & burger casual dining restaurant. They offer an

original patty of Odawari and carefully selected cuts of beef. They also sell a variety of iron plate

dishes.

The menu and cooking has been refined with experience so high quality dishes can be produced with

very little training. The restaurant can also be operated as a Café during quiet times with few menu

changes and with their supply of Fair Trade Sri Lanka coffee. They are offering a unique license

agreement costing $650 per month and includes: Intellectual property/Management and software

systems/Remote webcam management system/Know-how and opening support/Training.

Patties and sauce will be supplied by the licensor through their partner trading company. They are

seeking Asia expansion with trustworthy partners.

SALES POINTS

√ Low resource start up

√ Limited food knowledge needed

√ Operational software provided

Full training provided including:

• Hospitality

• Operational

• Software

• Cooking techniques

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Gifts

It is common to give gifts in Japan when doing business but not 100% necessary at the �rst meeting. Once business appears to be progressing or about to commence it is then a good time to give a gift. The quality of the gift is important not the value and the gift should be packaged to a high standard. It is also a good idea to give a gift that represents your company or the region you are from and a gift that can be shared by the receiver. It is deemed impolite to open gifts in front of the receiver. Business cards

The giving and receiving of business cards is a very important part of Japanese business. Try to get your cards printed in Japanese and take a lot of them. You will give a card to each member in a meeting, starting with the most senior �rst. Tilt your head and shoulders and hand over the card using both hands with the Japanese side face up. When receiving, also tilt head and shoulders and take the card with both hands. If you are unsure how low to bow-observe and copy! Place the card on the table with the most senior member's card on top. Do not write or bend the card. At the end of the meeting put all of the cards into a card case. Decisions

Westerners may �nd a Japanese meeting circular with no conclusions or decisions being quickly made-do not panic! this is normal procedure for a Japanese meeting. The decisions are made by the group who will often initially agree with the senior's view and then have a series of follow-up meetings where they will give their own opinions before reaching a group consensus. This can be a long procedure so please do not continually harass your contact with follow-up emails or calls as this will put undue pressure on your contact and will not a�ect the speed of the process.

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Meetings

Always con�rm your meeting 2 or 3 hours before and make sure you are punctual. Wait until you are seated in the meeting room as Japanese tradition stipulates seating places. English is usually not spoken during meetings but the company may provide a translator, if they don't, it is a good idea to invest in a translator though this can be pricey. Handshaking is acceptable but it is good to give a bow while shaking. Try not to keep sustained eye contact as this will make people feel uncomfortable. Small talk is common for the �rst 10 or so minutes followed by a formal meeting. A meeting will generally not overrun so be sure to keep to the agenda. Etiquette and harmony are very important and the Japanese are anxious to avoid unpleasantness and confrontation. Saving face is a key concept. so try to avoid saying "No", instead say "This could be very di�cult" or "Maybe", allowing colleagues to save face.

Dining out

Having dinner with potential partners or clients is a necessary part of Japanese business. Japanese will �ll your glass will alcohol and this is expected to be reciprocated so don't �ll your own glass. Lift the glass with both hands and hold in the air while it is being �lled and when �lling anothers glass, turn the bottle so the label is facing the person. If your glass is empty it will be automatically re�lled by another party member so if you don't wish to drink more keep your glass at least half full. If you are o�ered food please accept and if you don't want to eat much just take a little and o�er to another person. Conversation will be more relaxed and they may ask you personal questions so please answer politely. You will �nd that tentative conclusions and decisions are more likely to be made during this period compared to the actual meeting.

Chain name & LOGO

総本家「備長扇屋」 BINCHO OHGIYA

Tokyo Stock Exchange Company !

Country

Industry

Year Started

Number of locations


Type of Agreement

Japan

Casual Dining

2001

52


Master/JV/Multi-unit


Company Pro�le

BINCHO OHGIYA is part of multi-brand owner Via Holdings (7918:Tokyo Stock Exchange).

With over 20 years experience and over 580 stores in Japan their leading Yakitori style restaurant chain

is ready for International development. BINCHO OHGIYA is a new Type of Yakitori (Chicken Kebab)

Specialty Store. It makes advantageous use of the good things about the original type of yakitori stores

while also acquiring new customer segments of families and women, and going beyond that to include

the demand for take-out yakitori.

Area Franchisees are sought from a company which is managing a food service business and has the

ability to understand the local market. Financial capability of development and funds for more than 8

stores is desirable. A franchisee can have confidence in the ongoing support from this company.

SALES POINTS

√ Well experienced company

√ Continuing development of new products

√ Grill techniques and proprietary sauces

√ Overwhelming product appeal


• "Grill Master" Certification System

• "Heartfelt Hospitality Master" System

• Management systems

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Law

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Introduction

The Japanese franchising law is relatively relaxed compared to other countries as there is no speci�c franchise law, the regulations are encompassed within overall trade and company laws which makes franchising a relatively straight forward

There is no uniform de�nition of franchising in Japan but the following 2 Acts are the most relevant laws regarding de�nition. 1. If a franchise business falls under the term "chaining business", it falls under the Medium and Small Retail Commerce Promotion Act. A chain business is de�ned as business that, pursuant to an agreement with uniform terms and conditions, continuously sells or acts as an agent for sales of products and provides guidance regarding management. In addition, a ‘speci�ed chain

business’ is de�ned as-'any chain business whose agreement includes clauses which permits its members to use certain trademarks, trade names or any other signs, and collects joining fees, or deposits any other money from the member when becoming a member’.

This law also covers information required to be disclosed by the franchisor and therefore some of the basics underpinning a franchise agreement such as initial fees, restrictions on business, types of products sold, trademarks, duration/termination of the agreement and royalty fees.

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Law

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2. Guidelines concerning the franchise system fall under the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade. This Act states a franchise system as:

“The franchise system is de�ned in many ways. However, the franchise system is generally considered to be a form of business in which the head o�ce provides the member with the right to use a speci�c trademark and trade name, and provides coordinated control, guidance, and supports for the member’s business and its management. The head o�ce may provide support in relation to the selling of commodities and the provision of services. In return, the member pays the head o�ce.”

The running of a small medium enterprise falls under the SME Act.

Laws regarding Limited liability partnerships fall under the Limited Liability Partnership Act.

Foreign investment is regulated by the Foreign Exchange and Foreign Trade Act.

Foreign Exchange and Foreign Trade Act.

Franchisors can register trademarks to protect such marks from infringing use under5 the Unfair Competition Prevention Act.Leased property disputes with franchisees or landlords is covered in the Land and Building Leases Act.

Franchisemeets.com

FOCUS:Japan

April 2016

Think Life. Think [email protected] https://franchisemeets.com

focus japan

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