This report analyses the Japanese market.
Chapter 3: The Essence of Ramen Soup continued.
As many as 42-3% of new openings close within one year and 72-3% within three years, and with the current average life span of a ramen restaurant being 2.4 years, 1.6% of all ramen restaurants in the country are disappearing every year.
The reality in the ramen restaurant industry is therefore that every year it becomes clear which shops will survive and which will not, and of those that do survive, 1.6% drop out every year.
However, as there are a significant number of new openings each year, the difference between the number of openings and closures is 1.6% (about 300-400 shops), which is surprising given that the industry as a whole is declining by so much.
Japan’s population has only declined by 2-3% from its peak, so it is astonishing to see how rapidly the number of shops is declining.
In other words, we should understand that we have entered an era in which it will be difficult to survive in any sector in Japan in the future.
1. "Cherry blossoms that fall, cherry blossoms that remain, cherry blossoms that fall", as the monk Ryokan taught.
We, the people who do business on the planet, are all ultimately doomed to disappear, but we are working hard to extend that time of dispersal backwards and into the future, if only a little.
The best way to extend the time of dispersal as far into the future as possible is to increase productivity and become more profitable, as we have explained many times since the beginning of this booklet.
What is needed to survive and reinvest are the resources that can be reinvested, and the objects of reinvestment are people, software and hardware.
This is no different in any business.
I hold monthly ramen schools in different locations and constantly discuss this with students from all over the world, but this will never change, no matter what country you are in, no matter who you are.
2. strategies to increase sales and generate profits
Now we are approaching the second half of this booklet.
The fundamental need to recruit good people is to create a shop that is profitable and has a queue.
Next, we will give you four key strategies for increasing sales and making a profit.
Strategies to deliver high value (high product quality)
There is a Ramen Jiro near our Tokyo branch, and there is always a long queue. Why do so many customers queue for over an hour to get to this popular restaurant?
The answer is simple.
It’s because you can experience a taste or value that you can’t find anywhere else. Or it is not just the taste, but also the value, including the volume. Ore no Italiano and Ore no French have taken the world by storm, and Ikinari Steak has been doing well, but the ingredient cost ratio of these restaurants is said to be 60%.
Sushiro, the leader in the conveyor-belt sushi industry, has an ingredient cost ratio of 50%, while the average ingredient cost ratio for the entire food service industry is 40%.
However, most udon noodle and ramen shops, which are struggling, operate with a raw material cost ratio of around 30%. This is because of past habits, and the fact that 30-40 years ago, udon noodle and ramen shops were able to attract enough customers to thrive at that level.
Therefore, the easiest way to increase customer satisfaction and sales is to increase the raw material cost ratio: increasing the raw material cost ratio by about 10%, using better ingredients and increasing quantities will make a big difference to customer satisfaction.
If you ask shopkeepers if they would be willing to pay out their own money and eat their own products at that price, the truth is that many of them would not. Most shopkeepers mistakenly believe that if they increase their raw material cost ratio, they will lose profit.
Profit, however, actually depends on the number of customers.
Increasing the raw material cost ratio also means increasing the product power, and any shop or business only starts to make a profit when it crosses the profitability break-even point. And the bigger the break-even point is exceeded, the bigger the profits will be. Therefore, in order to make a large profit, it is essential to acquire a large number of customers. If you don’t have enough customers, you can never bring in enough profit.
This is easily seen when simulating the business model taught in the management lectures at our noodle schools.
Delicious taste and beautiful appearance
As long as you are in the business of providing food, it is a given that it has to be good, and with the recent advent of gourmet websites, you can easily be compared with rival restaurants across the country.
In my experience, if your restaurant scores 3.5 or above on a gourmet website, it is unlikely that you will fail and close.
If graduates of our noodle school follow the proper procedure after graduation and open a restaurant, it is not difficult to get a score of 3.5 or higher on the gourmet website.
In recent years, with the development of social networking services, Insta-Eye has become popular, and beautifully presented dishes are spread by customers on the internet.
Therefore, in this day and age, it is no longer necessary to advertise yourself at all.
However, if you panic at the opening of your restaurant due to a lack of preparation and serve low-quality food, resulting in an initial score of around 3.0, it will be very difficult to recover afterwards.
This is why you should never advertise with flyers or other advertising at the time of opening, and you should never make any effort to attract a large number of customers, as all staff are unfamiliar with the restaurant at the time of opening.
This part is taught in detail and strictly at our noodle school.
Seating capacity has a significant impact on sales and profits
Recently, most of the students who come to our noodle school try to build a small shop with 10 to 20 seats.
When we ask them, “Why do you want to build such a small shop?”, a large number of them reply, “I don’t want to hire employees.”
And when we ask them, “What kind of customers do you want to attract?”, many of them answer flatly, “I want to attract family customers”.
There is no doubt that the age of labour shortages is a prerequisite, but it is more important to first establish a restaurant that is viable as a restaurant and that customers want to go to.
First of all, a restaurant is only viable if customers come to the restaurant.
Considering the severe shortage of staff in the future, it is extremely difficult for such a small restaurant to make enough profit and get good staff…
Because the more talented people you have, the more you will think about your future.
The possibility of being here five or ten years from now and being happy is a very serious issue for people who join the company.
If they are paid the same salary, they will want to work in a place with a high future potential.
Therefore, in order to be the shop of choice for good people, the shop needs to be of a certain size.
No good person would want to work in a small shop with just the owner and two or even two or three people, who are always rubbing noses with the owner.
You can see this very clearly in the ramen industry when you look at a shop like Ippudo, which has succeeded in globalising its business.
After analysing the business models of shops that have succeeded in securing manpower and developing a chain, I realised that it is difficult to develop a chain unless one shop has monthly sales of around 10 million yen.
But to sell 10 million yen a month, you need a shop with at least 40 seats.
Number of parking spaces is also an important factor
When opening a restaurant in Japan, most locations are automobile locations that require parking.
Nevertheless, there is no shortage of people who are forced to open a restaurant with little or no parking.
The only condition that can never go wrong in such a bad location is a score of 4.0 or higher on a gourmet website.
If the score is above 4.0, the restaurant is always thriving, no matter what location it opens in.
However, a score of 4.0 or above is very narrow, within the top 0.1% of the udon noodle and ramen restaurant market, and is very difficult to achieve in reality.
In addition, in suburban shops, no matter how many seats are available, if there is insufficient parking space, customers will not be able to enter the shop.
Therefore, the number of parking spaces is a very important factor for suburban shops, even more so than the number of seats.
For the convenience of our customers, we constantly analyse the trade area and determine the number of parking spaces required. (Yamato’s analysis of shop openings)
Continued in Chapter 5 How to win in the global market.