Japan Food Service Franchising
According to the Japan Food Service Association, during 2015 and 2019, Japan’s food service industry only grew at a 1.05% compound annual growth rate (CGAR) to a total market size of US$250 billion in 2019, which was in line with the country’s overall economy. Nonetheless, there are some business segments in the sector have shown remarkable growth such as tapioca bubble tea shops and food trucks. These two growth areas share common characteristics of low initial investment requirements and higher return on investment (ROI).
Originated from Taiwan, Chun Sui Tang’s tapioca tea has ignited the trendy beverage boom in Japan attracting teenagers and female consumers. Also referred as boba tea, bubble tea, or pearl tea, tapioca tea is an iced drink consisting of tea mixed with milk or fruit flavors, sugar, and chewy small tapioca balls made from cassava plant. The Tokyo Shoko Research reported as many as 60 brands are operating tapioca tea businesses in Japan today. Many of the stores are small parlors offering “to go” orders only. In 2015, Gong Cha entered Japan establishing its a wholly owned master franchisee subsidiary and operates 65 franchisees today. The Japan Franchise Association exemplified Gong Cha as an inspirational model for other Taiwan brands in the Japanese market.
Food truck business - “kitchen car” - may not fit in a franchise model neatly, but has enjoyed remarkable growth. Tokyo Metropolitan Government’s data indicates that in Tokyo alone, there were 2,772 registered licensees operating food trucks in 2017, a 7% CGAR since 2015. These mobile kitchen cars serve variety of dishes such as beef bowls, sushi rolls, and ethnic casual take-outs including Indian curry, Italian pizzas, Thai, Vietnamese, Chinese, and even Mexican tacos. One food truck broker reportedly received more than 100 inquiries from interested individuals wishing to operate “TLunch” (portmanteau word of food truck and lunch) business.
Except for few successes, U.S. franchisors, particularly the “big box” food service concept restaurants, have encountered difficulties in recent years finding suitable partners facing Japan’s economic stagnation, domestic market saturation and home-grown competition. Japanese investors and franchisees have become increasingly demanding on ROIs with close attention to how a new venture will align with their core business competencies for strong growth potentials in the market. During the last five-year period, only a handful of global brands succeeded in Japan. These brands offer unique trending lifestyles appealing to associated gourmet products or enabling consumers to a limited number of stores in strategically selected locations. Recognizable brands include Carl’s Jr., Shake Shack, Benjamin Steak House, Pizza Cucinova and 800° Degrees Neapolitan Pizzeria.
Therefore, thorough market research, flexible entry strategy formulation, and a long-term commitment are highly suggested ingredients for the U.S. food service sector companies considering launching a franchise-based business in Japan.
The U.S. Commercial Service welcomes your inquiry on market opportunities in Japan. For further information and consultation, please contact the U.S. Commercial Service Tokyo at Office.Tokyo@trade.gov.