Takaya Awata went from a college dropout to a billionaire selling bowls of chewy udon noodles across Japan. Now, he\u2019s betting the humble dish can become a global fast-food category alongside burgers, chicken and pizza, with the U.S. at the center of Toridoll Holdings Corp.\u2019s overseas ambitions. <\/p>\n
\u201cWe want udon to become one of those major global categories,\u201d Awata, 64, said in an interview at Toridoll\u2019s headquarters in Tokyo. The founder and chief executive officer wants Toridoll, with almost \u00a5280 billion ($1.8 billion) in annual revenue, to join the trillion-yen ranks of the world\u2019s largest fast-food chains, primarily by growing its flagship Marugame Udon brand. <\/p>\n
The challenge is scaling up the business and finding a way to win over consumers unfamiliar with a staple of no-frills Japanese cuisine. Unlike the better-known, thinner and yellowish ramen noodles typically served up in a seasoned bouillon, udon are thick, chewy white noodles that swim in a much simpler broth.<\/p>\n
Toridoll already has Marugame outlets in several countries, including Canada and the UK, and a beachhead in the U.S. with a couple of dozen locations on the West Coast. All told, it operates almost 2,100 restaurants, more than 40% of which are outside Japan. This has given Awata a net worth of around $1 billion, according to the Bloomberg Billionaires Index.<\/p>\n
Other fast-food purveyors based in Japan have tried to crack the lucrative American market, but have faced significant obstacles. Casual chic rice-burger chain MOS Burger tried and failed, as did ramen noodle chain Dosanko. Beef bowl vendor Yoshinoya, which first came to the U.S. in 1975, radically downsized in the early 1980s before rebuilding. <\/p>\n
\u201cThe U.S. is a very challenging market,\u201d said Kazunori Tsuda, an analyst at Daiwa Securities Co. \u201cSales per store can be three or four times those in Japan, but labor costs and rents are also three to four times higher.\u201d<\/p>\n
In Japan, Marugame\u2019s formula for success is based on freshly prepared noodles served with fast-food speed and prices. Customers move along a cafeteria-style line, placing orders for just-boiled noodles and then paying when they receive them. A basic bowl costs as little as \u00a5390 ($2.40), but the typical customer in Japan spends double that amount on extra toppings such as tempura-battered shrimp or a side order of onigiri rice balls. <\/p>\n
Prized \u2018koshi\u2019 texture<\/p>\n
Even as it expands the gospel of udon overseas, Toridoll is sticking to its hallmark feature of making noodles from scratch inside every restaurant \u2014 and in full view of customers \u2014 despite the added labor. By using fresh ingredients and made-to-order service, it aims to give Marugame noodles a prized elastic texture, known in Japanese as koshi, reserved for the best udon.<\/p>\n
Toridoll did try to sell pre-made noodles at a short-lived venture in China, but it wasn\u2019t able to compete with local rivals offering the same fare for less and eventually withdrew from the market. That taught the company an important lesson. <\/p>\n
\u201cFrom a conventional perspective, there are many aspects of our operations that appear inefficient,\u201d said Ryosuke Matsuura, Toridoll\u2019s strategy and business development manager. \u201cFor us, those \u2018inefficiencies\u2019 are actually one of our competitive strengths.\u201d<\/p>\n
To keep costs down, Toridoll is automating parts of its business customers don\u2019t see by, for example, using artificial intelligence for demand forecasting, staffing and inventory management.<\/p>\n
Shares of the company are mostly unchanged this year, but have more than doubled over the past five years. Last week, it reported a worse-than-expected drop in quarterly operating income on higher labor costs, even as profit and sales in the U.S. grew. For the full year, it expects higher income and a 3% increase in revenue to \u00a5287 billion \u2014 well short of its \u00a51 trillion long-term goal. <\/p>\n
In one promising sign for future growth, some of the 21 Marugame outlets operating on the West Coast of the continental U.S. regularly rank among Toridoll\u2019s 10 highest-selling locations globally by revenue, with spending per customer approaching \u00a53,000 \u2014 more than triple the average amount spent in Japan. Now, more than a decade after Toridoll made its first U.S. landing in Honolulu in 2011, the company wants to gradually expand inland and eastward to more U.S. states.<\/p>\n
\u201cGiven the size of the restaurant market, the U.S. is one of the world\u2019s largest opportunities,\u201d Awata said. \u201cEstablishing a solid foothold there will be one of our major priorities going forward.\u201d<\/p>\n
Shredded cheese<\/p>\n
In the CEO\u2019s view, Marugame\u2019s selling points are a sense of theater surrounding its hand-tossed noodles \u2014 something like the iron griddle showmanship of hibachi chefs \u2014 and the general trendiness of Japanese food culture in the U.S., where words such as umami (savoriness) and snacks like edamame (steamed soybeans) have gone mainstream in recent years. To broaden its appeal, Marugame offers some items at its overseas locations that aren\u2019t usually sold in Japan, such as shredded cheese topping and a bite-sized deep-fried omelette.<\/p>\n
But Toridoll may bite off more than it can chew in the U.S. as it expands beyond Asian food-friendly hubs like Los Angeles, San Francisco and Seattle. <\/p>\n
\u201cIt comes down to an issue of consumer awareness,\u201d said Benjamin Bahena, foodservice analyst at Euromonitor, adding that sushi and ramen are clear forerunners when it comes to Japanese cuisine in the U.S. <\/p>\n
Awata said Toridoll is open to acquisitions as a way to obtain market positions that would take years to build organically. But its track record on takeovers has been mixed. <\/p>\n
Hong Kong rice-noodle chain Tam Jai International Co. Ltd. has nearly doubled in size since being acquired by Toridoll, though its success remains limited in its home market. In the UK, Toridoll sold an underperforming Greek food chain and cut weaker pizza locations it acquired through taking over Fulham Shore Ltd.<\/p>\n
Awata expects overseas revenue to surpass domestic sales eventually, arguing that Japan\u2019s shrinking population and workforce limit growth at home. And the lifelong baseball fan is sanguine about minor setbacks Toridoll has suffered as it tries to break out of the minor leagues of the international foodservice business. <\/p>\n
When he opened his first restaurant in 1985 \u2014 serving grilled chicken kabobs \u2014 after dropping out of Kobe City University of Foreign Studies, Awata expected to spend his career sweating behind the counter. He eventually grew beyond chicken and opened the first Marugame Udon shop in 2000.<\/p>\n
\u201cWe expanded our business and increased our store count while making a lot of mistakes along the way,\u201d he said. \u201cIt\u2019s like baseball: If you can hit 30%, you\u2019re doing well.\u201d<\/p>\n
Ishikawa and Hasebe write for Bloomberg. <\/p>\n","protected":false},"excerpt":{"rendered":"
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