American Burger Purveyors Feel the Pinch in Japan

Wendy’s underwhelming performance in the Japanese market is not only due to stiff competition from other American fast food chains. The burger brand—famed for the cute red-headed girl in its logo—has also found itself grappling against pharmacies and convenience stores, as it struggles to literally find its place in Japan’s crowded commercial market space.

A recent Japan Times article described Wendy’s struggles to secure with the first rule of business: location, location, location. It noted much of the region’s prime real estate had already been scooped up by 7-Elevens, drug stores and retail outlets, along with more established restaurants. Wendy’s Japan chief, Ernest M. Higa, was quoted as saying that that was the “biggest barrier” to success.

Wendy’s had already shuttered its location in Japan in 2009, when it was run by Sukiya beef bowl parent company Zensho Holdings Co. The burger chain hoped to make a Far East comeback in 2011 and approached Higa. He told the Times: “I thought it was a very difficult concept because McDonald’s is such a dominant player here in this market.”

His concerns were valid—McDonald’s and other big brands took up so much market share and physical space that there was scant room for Wendy’s to get a toehold. As a result, Higa fell well short of his goal to open 100 Wendy’s in Japan between 2011 and 2016. Instead, with only a year left in that mandate, the chain has only managed to open a meagre two outlets.

But that crisis pushed Higa toward an unexpected, and more innovative, sort of success. Rather than try to beat all of his competitors’ for superior sales and locations, he decided to join one of them. After teaming with First Kitchen, an established restaurant chain with 130 locations across the country, Wendy’s has seen a sales boost of 160 year on year, well above its current 120 percent threshold for success. The move was not so much a partnership but a merger in every sense of the word, with an already set up First Kitchen outlet in Tokyo’s Roppongi district also providing Wendy’s menus, blending the former’s reputation for upscale pastas with the latter’s international burger renown. The fast food companies plan to open a second joint location in Ueno in August.

Higa has high hopes for this hybrid strategy, telling the Times: “If I could combine these two concepts and re-brand Wendy’s when I bring it back not as a fast food hamburger chain but as a fast food casual gourmet hamburger chain, then there is a possibility to develop a new niche (market).”

But one of Wendy’s biggest beef patty rivals has taken an entirely different approach to fast food supremacy. Instead of going upscale, Burger King has gone viral in Japan, creating social media campaigns that focus on colored burgers, Whopper scented cologne, and other offbeat ideas that have inspired mouse clicks and growling stomachs.

In a Japan Times interview with Burger King Japan’s CEO Yasuyuki Murao, he also attributes much of the chain’s success to a mix of international and localized menu items and ingredients – including hydrated buns that accommodate Japanese customers lower levels of saliva. Thanks to those practices, Burger King has attained successes in Japan that Wendy’s can only dream of, opening 93 locations in the past eight years (when it returned to the Japanese market, after previously withdrawing, like Wendy’s). Burger King also aims to more than double its total of outlets by 2017. However, that number of outlets is still a far cry from McDonald’s behemoth total of 3000. Still, it’s worth noting that Burger King’s Japanese rise is the inverse of its status back in its homeland, where its faulty marketing and lack of innovation has resulted in a slip to third place behind Wendy’s Stateside savviness.

The field for runners up in Japan’s fast food race is about to get far more crowded too. According to Nikkei, Florida-based burger purveyor Carl’s Jr. will echo Wendy’s and Burger King’s efforts, and also re-enter the Japanese market this fall nearly 20 years after its first failed attempt to run successful franchises in Tokyo. Much buzzed New York chain Shake Shack will also elbow into the gourmet burger market that Wendy’s hopes to corner when it opens its first Japanese location in 2016.

These companies are no doubt attracted to Japan’s huge population and comparatively untapped potential for Western fast food, compared to the relatively saturated American market. But food quality scandals, delays from squabbling ingredient suppliers, and worst of all, a rising tendency to snack at convenience stores instead of at restaurants have all been crippling hurdles for the once indomitable McDonald’s, let alone smaller aspiring rivals. It remains to be seen whether or not many of these western brands will finally overcome such challenges and secure a permanent standing in Japan, or once again be forced to withdraw in a new era of fast food slowdown.

—Kyle Mullin

Image: Flickr

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