This report analyses the Japanese market.
42% of new ramen shop openings close within a year; 72% close within three years.
The ramen industry is now one of the world’s most popular food and drink. You can go to any major city in the world and find a ramen restaurant with a hint of Japanese origins. Although opening a ramen shop is a popular side business for business owners, data shows that 42% of new ramen shops close after less than a year and 72% close within three years. Running and building a ramen shop is more difficult than one might think. Looking at the figures alone, the closure rate is no different from that of ordinary businesses. We looked at ten key points to find out if there are any rules or tricks to prevent shops from closing.
10 points to avoid making mistakes when preparing to open a ramen restaurant.
(Point 1) Passion (Passion)
A common motive for starting a business – “I’ll do it because it looks profitable.” is apparently also a common motive in failure cases. Opening a ramen shop because the company or job is uninteresting after working as a salaryman is also a common example of a failure pattern.
Phil Knight, the founder of NIKE, attributes one of the reasons for the success of NIKE’s business to “having passion”. He explains in his own writings how to improve the business and how to put his life on the line in manufacturing and selling shoes. There is no one genius on the team. Instead, he teaches that there is no ability that can match passion. If you translate this into opening a ramen restaurant, it can be said that the opening of a ramen restaurant starts by asking yourself whether you can put your life on the line to run a ramen restaurant, rather than just saying, “It looks profitable, so I’ll give it a shot.
Is running a ramen restaurant a business that I should put my life on the line for?” The answer to this question does not seem to be that you should work part-time in a ramen restaurant. For example, by training in a bad shop, you may develop strange habits. Also, many excellent ramen shops do not accept trainees. Even if you are able to work, you may be asked to pay for the training. Or you may be made to do nothing but washing dishes and hear people say, “It wasn’t supposed to be like this”. It can be a little difficult to gauge your own passion in a part-time job.
Instead, it might be a good idea to attend a ramen school. It is said that only 30% of graduates of one ramen school open their own ramen restaurant. It may come as a surprise that 70% of those who attend a ramen school have examined themselves and found a gap between their ideals and reality. However, you should consider whether you have a passion for it, so that you don’t waste money and your precious time in life, which you only have once. Most of the time, you don’t even realise you have a passion.
(Point 2) Candor
Our society is built on learning from the know-how created by our predecessors. Most of the elements needed to open a ramen restaurant are learnt from others to build your own style, so without honesty, good information will not be inputted.
Even after opening a new ramen restaurant, there is no doubt that every day is a learning experience. You still need to be honest in order to take on new challenges.
(Point 3) Consistency
Consistency, here you can think of it as not blurring. People today often change their thinking when they receive information from outside. Some of these changes in thinking can be referred to as ‘blurring’. For example, the case of the McDonald’s fiasco: McDonald’s, which had valued QSCVs, at one point reduced the price of its hamburgers to half price. As a result, they succeeded in increasing sales, but as soon as they put the price back, customers started to leave. The customers’ perception of McDonald’s changed because of the price change.
This does not simply mean that price changes are a bad idea. Nor does it mean that you should not change the menu. It means that it is important to stick to the vision and mission you have set for yourself. I think the word ‘concept’ is a good fit for those who have not yet opened their own business. In the case of ramen shops, it may be easier to understand that if the commitment and concept are not clear, customers will easily drift away. There are many shops that are thriving even if they have a large or small menu. Try to create a restaurant with a consistent concept.
(Point 4) Careful preparation
One of the major failures that comes up immediately after opening is in-store training before opening. In the worst case scenario, there are cases where a shop opens with only one or two days’ training prior to the opening. In most of these cases, in-store operations are said to be disrupted. For larger companies with multiple shops, it is common to have experienced professionals from other shops go out to the site. Some famous ramen shops spend two months on pre-opening training. That is how important the pre-opening preparation is. New ramen shop owners often regret opening a new ramen shop without knowing the importance of pre-opening training. These days, you have to assume that if customers are dissatisfied with your restaurant, they will write reviews on social networking sites that will damage your image. Even if that is the case, I don’t think new openers have the financial wherewithal to spend two months preparing for the opening. In such a case, they do not spread flyers or advertise on the website at the time of the opening. In such a case, it seems that such a strategy will lead to avoiding confusion at the time of opening. If you don’t advertise on the web or flyers, it is possible to have only one customer per day at the opening. However, by dealing with customers slowly and gradually, you can gradually get used to unimaginable accidents and customer service. In the long run, not generating bad word of mouth is more likely to result in a positive outcome than sales at the opening.
(Point 5) Values
What is the essence of business? What is the essence of management? Few people may think about such things before opening a ramen restaurant. However, it is necessary to at least think about values before opening a business. Think of values here as the order of priorities in opening a ramen restaurant. In other words, what values you want to put into your business can be described as what priorities you want to put into your business.
The values of Tokyo Disney Resort are as follows
・Safety
・Courtesy
・Show
・Efficiency
On 11 March 2011, the Disney Resort parks were hit by an earthquake with an intensity of 5 on the Japanese seismic scale. The park’s public address system, which normally does not even play announcements for lost children, broadcast the facts of the earthquake and damage in multiple languages 40 seconds after it occurred. They also handed out stuffed toys for sale to protect their heads. They also handed out sweets and gave top priority to the safety of customers. Only a few people left the park and went home that day, and most of them spent the night in the park. It is likely that they decided that it was safer for the guests to stay in the park than to go home. You will all remember that it was a cold day. Everyone can understand that thorough safety is the top priority.
Meanwhile, on the same day, JR East suspended operations on all lines for the entire day from the evening, and at the same time closed major stations by lowering the shutters. Many refugees returning home must have literally ‘lost their way’ in the cold. Other private railways were restored later that day and continued to operate until the end of the day. The railway companies responded very differently on that day. It could be said that it was such a confusing day. It must have been a difficult day for people in Tokyo, and from JR East’s point of view, they may have thought that if they didn’t close the station, people would go down onto the tracks. Closing the station was probably inevitable in part. The vice-president at the time later told the press about what happened on that day, saying that there were still things to be improved, such as the way the restoration was carried out and how priorities were set. On 23 June of the same year, JR East announced a “policy of stockpiling drinking water, blankets and medical supplies in major cities to prepare for a large-scale disaster and accept people who have difficulty returning home”. It even feels like everything is backwards when you consider that this is a “big company’s response.”
Where did this difference come from? It is undeniably a difference in values. Priorities have a big impact. In particular, JR East’s response shows that if values and priorities are not clear, both employees and customers will be in trouble. The same applies to ramen shops. Fires and explosions are not always absolutely certain. Accidents and localised disasters can occur even in neighbouring shops. You may have to make decisions about such unexpected things. It is by no means a stranger to the situation.
At Google, our values are not just about on-the-spot response: we want to make an impact on the world. At Google, we work with a group of people who share the values of “making an impact on the world”. What about ‘making money’? In this case, you will get people who put making money first. However, in most cases, it may be the pursuit of one’s own interests, not the interests of the company. Values also affect recruitment. Think and look carefully before opening a business.
(Point 6) Aim for the top
What is the highest mountain in Japan? The correct answer is Mt Fuji. That’s an easy question. Then what is the second highest mountain in Japan? Many people cannot answer this question. The general public knows the number one mountain in the industry, but not the number two. Furthermore, today, with the development of the internet and the speed at which information reaches us, you can’t be famous even if you are the best in your region. The higher the goal when opening a business, the better. The strategies and tactics you have to follow will be different if your goals after opening are on a global or regional level. It can be said that the scope for growth is different because the actions you take are different depending on the direction you are aiming for.
(Point 7) Do not imitate other shops
In fact, it is said that Hanamaru Udon was the pioneer in making self-service udon restaurants widely known. After learning of Hanamaru Udon’s success, many restaurants tried to imitate its central kitchen and self-service style, but failed. In such a situation, Marugame Udon succeeded by placing noodle-making machines in all its restaurants and providing freshly beaten and boiled udon noodles. Just because a restaurant is selling well does not mean you should imitate its methods. If we were to replace it with a ramen restaurant, it would be like “opening a pork ramen restaurant in Hakata.” It is like that. Ippudo, famous for its tonkotsu ramen, developed its business on a global scale with the idea of “overturning the conventional wisdom of tonkotsu ramen”. Ippudo did not achieve global expansion by copying others, but by creating something new and different in the industry – a trendy restaurant with unorthodox tonkotsu ramen and modern jazz music – and achieving success.
(Point 8) Distinctive individuality
We mentioned above about not imitating, but just as important as not imitating, having a distinctive personality is also important for a ramen restaurant to thrive. There are many examples, but the Lucky Clown burger shop in Hakodate has a different interior and exterior for all of its shops. Some are Father Christmas themed, others are circus themed. There are about 17 shops in Hakodate, and if you consider that there are only two McDonald’s shops and one Mos Burger shop, you can see how strong Lucky Clown is. Strong individuality is the biggest weapon in winning over fans. If you become a shop that rivals from all over Japan come to see, you will not be in a pinch, but your name recognition will rise on its own. Advertising costs could be reduced to zero. MENSHO and SOLANOIRO, which have recently become hot topics in the ramen industry, are also famous for their unique and original menus. Remember that distinctive individuality does not mean that the menu is unique, but that it solves a problem in the industry by proposing something that has never existed before.
(Point 9) Availability of funds
When opening a ramen restaurant and starting a business, there are three main stresses for a business owner. People, sales and money. Of these three stresses, money is probably the easiest to remove as a cause for concern before opening a restaurant. It is better to have enough money if possible. Even if you have debts, if you have cash, you are less likely to go bankrupt. On the other hand, if you are about to run out of cash, managers who are not accustomed to cash flow may become emotionally unstable and unable to make normal business decisions. That said, many people aiming to open a ramen shop are probably thinking about borrowing money. In fact, debt is said to be the easiest way to borrow money when starting a business.
So, if you do not make proper business decisions, you will be saddled with a large amount of debt. For example, if someone is trying to start a business with zero savings and zero debt after leaving the business, it is advisable to give up on opening a business. The bottom line is that if you are young, you can take it easy. However, if you are aiming to open a business when you are in your 60s, for example, we recommend that you do so with 100% of your own funds. Unlike when you are young, borrowing at an older age can be very stressful, even if the amount is the same.
<Pattern of borrowing OK>
Cash flow situation where there is no problem even if there are no sales for six months.
Young people in their 30s are prepared to fail, but the realism of a repayment plan in the event of failure is crucial.
A large sum of money for retirement is acceptable, but only to the extent that it is reasonable.
<NG partan>
Borrowing from parents and siblings is not acceptable; consider family members as the last trump card.
Borrowing after retirement is not acceptable.
No savings and 100% borrowing in the 50s.
<Trivia>
Ideally, borrowing should be without collateral and guarantor.
Borrowing from the Japan Finance Corporation (JFC) is recommended.
Leasing kitchen equipment is also a good option. This is an effective way to reduce the initial investment.
The above is a bullet-point summary. As far as many opening episodes are concerned, the most NG pattern of borrowing is to borrow from parents and siblings. Family is the trump card when things go wrong. If you can only borrow from your family from the start, give up opening a business.
(Point 10) Never give up
The above mentioned advice is to give up on opening a business by borrowing if you are older and do not have any personal funds. Having said that, here I will explain what not to give up. A business is like a building, it has a structure and is made up of many different elements. When you look at one, you cannot see the whole, and when you look at the whole, it is difficult to see one, and it takes experience and knowledge to grasp everything instantly. This combined experience, knowledge and skills can be called management level. For example, let’s say a ramen restaurant has revamped its menu. It is rare to see a noticeable impact on sales on the day the menu is redesigned. In most cases, it is not possible to make a decision in one day, so you have to take a long-term view. However, ramen shops also have to make a profit. They have to assess the situation early and think about their next move. No one can tell you just the right time. There is a time lag in business.
And the patience to read this time lag is a skill that a business owner needs and must develop in order to run a business for the long term. When opening a ramen restaurant, you need to have the patience to make good ramen and to run a company, respectively. For example, in the case of one ramen shop, even after more than 1,000 prototypes and more than 200 tastings, the product was not perfected until it tasted “just like this!”. There is an example of a ramen shop that, after more than 1,000 prototypes and 200 tastings, was still unable to produce a product that tasted like “this! If you lack patience, you might have compromised somewhere along the line and failed to open your own business. A ramen restaurant needs to serve the same taste every day, but in order for it to be perceived as the same taste, the ingredients and seasonings must be adjusted slightly in the middle of summer and in the middle of winter. Patience is still needed to produce “the same taste consistency.” The most important thing is to have the patience to repeat the process of trial and error in order to achieve the best ramen and the best management.
These are the 10 points to avoid failure when opening a ramen restaurant. If you go to the trouble of opening a ramen shop, you want it to last for a long time. Customers who love ramen will wish for this. And local people will be happy to see your shop become the most popular ramen in the world. Please try your best.