Business | Sandwiched

Japanese fast-food chains feel a squeeze

Burger and buckwheat-noodle joints alike find it hard to raise prices

Three-star service
|TOKYO

SHIMMERING spreads of raw fish sashimi, succulent beef from massaged cows, and, for a decade, the capital with the most Michelin-starred restaurants: few nations rival Japan for fine dining. Its fast-food scene has also thrived for centuries. From the 1700s bowls of cold soba noodles, made from buckwheat, were cycled to wealthy clients on towering trays. Sushi began to glide past customers in 1958, when the first conveyor belt was installed. In 1970 its first homegrown hamburger chain opened, a year before McDonald’s entered the market.

Fast-food chains continued to be a rare bright spot for Japan during its two-decade-long economic slump. Since 2008 the size of the market has increased from $35bn to $45bn (those figures include convenience stores, or konbini); that of restaurants has declined every year in that period. But fast food is now being squeezed: by a combination of higher wages and still-tepid consumption, and by foreign rivals winning over more Japanese stomachs.

Tomoaki Ikeda, president of Yudetaro, a soba chain in the greater Tokyo metropolitan area, says that after a decade of budget dining, Japanese expect everyday food to be cheap. Once, plumping for their cheapest bowl of noodles, priced at ¥320 ($3), was considered a little shameful, he says; now it is their best-selling dish. It is having to pay staff more: a wage increase last year of 0.5% was the biggest since 2010. Yet a survey by Shinsei Bank, a lender, suggests salarymen still spent on average only ¥587 on a workday lunch last year. Yudetaro’s healthiest options, which appeal to its mostly middle-aged male customers, are usually also its cheapest (like most fast-food joints in Japan, Yudetaro lists the kilo-calorie count for each dish).

Many in the industry fret that a hike in Japan’s consumption, or value–added, tax, planned for 2019, which may not apply to food sold at konbini, will make chains even less attractive as they try to raise prices. Konbini offer everything from cheap egg-salad sandwiches to rice lunch-boxes that can be reheated and eaten in-store. According to Euromonitor, a market-research firm, 7-Eleven, one of Japan’s three biggest konbini, accounts for over a third of the fast-food market alone by value.

To lure back customers, chains are homing in on service. Yudetaro now fries its tempura to order at its standing stalls, often in train stations; at outlets, it has replaced bar counters with tables and seats. MOS Burger, a local chain that opened in the 1970s, has sent staff new quality guidelines, from how to slice tomatoes to the temperature of the water in which the lettuce is dipped before serving (4°C).

MOS Burger’s winning recipe has been to offer healthy, localised versions of the American hamburger: it serves, for example, thick slices of tomato and heaps of lettuce in its burgers. Since 1987 it has sold a rice-burger variant that swaps out bread halves for seared rice cakes, and since 2004 a lettuce-burger (lettuce-for-buns). It also lets franchisees around the country pitch ideas for new burgers, adding a couple a year to its nationwide menu from the few hundred suggested (in 2016, one was a lotus-root-and-chicken burger).

Recently foreign rivals have been beefing up their offerings too, including MOS’s arch-rival, Makku—McDonald’s Japan. It had been buffeted by food-safety scandals, but had its first sales increase in 2015 after six years of decline. Takao Shigemori, a food analyst in Tokyo, says the American chain—now with 3,000 outlets—has been revamping its menu to appeal to Japanese customers. This month it introduced three new beef burgers, on Asian-style steamed buns, one with teriyaki sauce.

Still, foreign firms remain laggards in other ways, says Mr Shigemori. Since 1997 MOS Burger has displayed on boards in each outlet the names of the farmers who grew the lettuce or tomatoes being served in the store that day. At Yudetaro outlets, customers can watch the soba noodles being cut and boiled. Unlike at other chains, the firm does not do deliveries as it did in its early days, because it wants its noodles always to be eaten at their very freshest. Its hope is that this way, the company will keep delivering.

This article appeared in the Business section of the print edition under the headline "Feeling sandwiched"

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