How 3 Japanese restaurants make profit margins over 30%
According to Japanese government records, the average profit margin of Japanese F&B outlets is 8.6%. Even large restaurant chains struggle to reap profits of more than 10%.
Despite such harsh business conditions, a handful of standout F&B joints are still able to achieve profit margins of more than 30%.
One example is Komeda's Coffee, a coffeehouse chain that attracts customers with free items and makes most of its profits on drinks.
Its key to success is targeting the breakfast period before 11am by providing their “morning service" – complimentary toast and eggs with every drink order. To many, this sounds like the most bang for your buck. However, its cheapest coffee item, a house blend, is 420yen ($5.16 SGD).
Their business model is to keep the cost of toast and eggs extremely low by the restaurant group purchasing in bulk – this way, they can guarantee a fixed profit margin.
The strategy allowed Komeda’s Coffee to become listed on the Japanese stock exchange in 2016, and its profit margins exceeded that of many large restaurant chains.
The coffeehouse’s charm also lies in its avoidance of the typical cafe chain formula: targeting the office crowd. Komeda’s styles itself as "the neighbourhood living room” with nostalgic decor and a relaxing atmosphere that appeals to older folk and families.
Grilled meat for one
Jiromaru Yakiniku is a hugely popular single-diner restaurant in Tokyo with no seats. With a dining area of only 13.2 sqm, the small space can only serve 12 diners at a time. Despite this, it serves up to 180 customers daily.
Yakiniku is usually perceived as a meal eaten with family or friends, but it challenges this notion by selling meat by the slice instead of by the plate like other grilled meat restaurants. It caters to single diners, who get to try more different cuts of meat and only order what they need.
Jiromaru serves high-quality, A4 - A5 grade Kobe beef at a cheap 190 - 300 yen per slice. Other menu items like organs (viscera) and drinks are sold at regular prices, and the profits from these balance out the beef's high cost. Ultimately, the food cost is kept to under 50% of the price.
Although their average customer check is lower than that of a typical grilled meat restaurant’s, and their food cost is high, this standing restaurant is so popular and has a such a high turnover rate that it still makes over 30% profit.
Customers love the value for money so they are very satisfied even though they have to eat standing. Jiromaru is also located in the CBD area, near offices, where people are more likely to dine alone.
1-minute steaks = lightning speed turnover
Kyoto Katsugyu, located right in front of busy Kyoto Station, specialises in wagyu beef katsu. The menu is simple, letting the beef katsu take centre stage. The restaurant takes pride in its high-grade wagyu beef, using a loin cut for all their steaks.
Their secret to success lies in the speed of cooking – each finely-breaded steak is deep-fried for 60 seconds, achieving two things: it keeps the meat impossibly juicy and significantly cuts down cook time.
The guiding principle of this restaurant is speed – from frying, to cutting the steak and plating, everything is done simply, precisely and without fuss. This attention to speed has allowed the restaurant to attain a remarkable 39.8% profit margin.
Kyoto Katsugyu’s busiest time period is lunch, and their strategy is to keep the average check of each guest high and the table turnover rate high at the same time.
What these 3 high-performing outlets have in common:
- They all have an innovative new take on familiar food concepts.
- They choose their outlet locations carefully and take into consideration if any demographic of customers are being left out by existing restaurants. This way, they discover their potential niche by serving these people’s needs.
Cheryl Tay is the editor and marketer at iCHEF Singapore. She also manages iCHEF Club, a growing community of F&B owners in Singapore – organising events, an online newsletter and the F&B Entrepreneur Bootcamp, the only regular workshop on opening a new restaurant in the country. In her spare time, she attempts to read every book that’s ever won a literary prize and watches cat videos. Like any proper Singaporean, her love for food runs deep – especially spicy food. Chili is life.