Overseas restaurant chains testing the waters for European expansion typically open an outlet or two in London, Paris or perhaps somewhere in Germany. Japanese noodle purveyor Toridoll Corp. (3397) chose Moscow.
Since February, growing numbers of time-pressed Muscovites weary of American burger joints have opted instead for Toridoll’s Marukame restaurants. There, they can pick up bowls of udon or rice topped with meat, seafood, vegetables or chicken, and green tea or juice, for 400 rubles ($12) and up.
Toridoll, owner of Japan’s biggest chain of noodle restaurants, sees Russia as the gateway for a major expansion into Europe. The Kobe-based company settled on Moscow as its European beachhead because there’s a growing middle class, and with 10.5 million people it’s the biggest city in the region.
“Japan’s market is getting saturated,” said Tetsuo Kuzunishi, overseas business chief for Toridoll, 10 percent owned by mutual fund giant Fidelity Investments. “We expect huge markets outside Japan and are shifting our investment resources from the domestic market.”
The company has four branches in Moscow, with two more in the works and several planned for St. Petersburg. Next spring, Toridoll plans to open its first London restaurant.
Outside Japan, Toridoll has 45 outlets: in Hawaii, across Asia and Australia, and now Russia. By 2016, it expects 400 branches overseas. At home, where Toridoll has almost 800 restaurants, it plans to slow growth to about 25 openings a year from roughly 100.
Expansion abroad is “a good strategy” if Toridoll can convince enough Europeans to sample its food, said Mikihiko Yamato, deputy head of research at JI Asia in Tokyo. “They have had an edge with Japanese consumers,” Yamato said. “Now it’s a matter of adjusting to local tastes.”
Toridoll shares have recovered 15 percent since closing at a 2013 low of 786 yen in Tokyo on Nov. 8 after the company cut its estimate of net income for the year ending next March by 91 percent, to 300 million yen ($3 million). The stock is still 36 percent off an April high and the company has a market capitalization of just under $350 million.
“There’s still a long way ahead until their overseas business becomes successful,” said Mitsushige Akino, executive director at Ichiyoshi Asset Management Co. in Tokyo. “But it’s worth trying to go abroad.”
While Marukame is entering an increasingly crowded fast-food market in Russia -- with Burger King Worldwide Inc. (BKW), Subway Restaurants, Pizza Hut, KFC, Wendy’s Co., and McDonalds Corp. all aiming to woo diners -- the number of outlets remains low by world standards.
Russia has just one restaurant per 930 inhabitants, versus one per 150 in the U.S. and one per 300 in Europe, according to researcher Business Analytica.
Toridoll’s first “Marugame Seimen” restaurant, offering thick, chewy noodles called “Sanuki Udon,” opened in the western Japanese city of Kakogawa in 2000. For Moscow and most of its expansion outside of Asia, Toridoll is using the one-word name Marukame.
At all its restaurants, customers pick up their food on trays in front of an open kitchen, where cooks make the noodles and douse them in vats of boiling water.
The first Moscow branch, near the Tretyakov Gallery, opened in February and has attracted some 1,000 diners daily, almost double the company’s forecast. To avoid long queues, the restaurant doesn’t sell beer because customers who drink alcohol tend to linger, Toridoll says.
In the other three branches, 440-centiliter cans of brew from Japan’s Asahi are on sale for 150 rubles ($4.60), as well as beer snacks like edamame.
The menu makes some nods to Russian tastes. Unlike in Japan, where noodle restaurants typically don’t serve sushi, Marukame offers sushi rolls similar to those found in the 54 outlets of local Japanese-themed chain Planeta Sushi and many other restaurants in Moscow. There are more meat dishes, and an additional selection of rice with pork or chicken to accommodate Muscovites who may eat a rice course in addition to noodle broth and tempura.
Unlike in Japan, you can’t get cold udon or omusubi -- rice balls made with dried seaweed and fatty salmon, cod roe, leaf mustard or plum.
While young people, the bulk of Marukame’s customers, are enthusiastic, some older Russians are less enamored of the simple dining concept.
“It’s nothing special, just noodles and meat,” Lyudmila Larina said while dining at Marukame with her daughter after a movie.
“Mum, you just don’t get it,” replied daughter Daria, a regular at the chain. “This is real Japanese food!”
Ingredients such as soy sauce, dried seaweed and wasabi are imported from Japan. The rice is grown under Japanese supervision in Italy. Flour, the bulkiest ingredient for a noodle restaurant, comes from Russia to keep costs low.
Toridoll is planning up to 30 branches in the U.K. by 2019. If the business is successful there, which should be apparent within a year, it will consider expansion across Europe, according to Kuzunishi.
While the offerings will be similar to those in Moscow, “our menu creators are testing some new items for London,” and other European countries will have their own adaptations, Kuzunishi said. Details, though, are “still confidential.”