Wendy's Co., the third-biggest U.S. fast-food chain, has added goose liver pate and truffles to burgers as it invests as much as $200 million on a return to Japan two years after leaving the country.
The Japan Premium sandwich sells for $16 at Wendy's in Omotesando, Tokyo's luxury shopping district, the first of a targeted 100 shops."We think the fast-food market here is ready for something different," Ernest Higa, CEO of Wendy's Japan, said in an interview at the restaurant's opening yesterday.
After posting losses in six of the past eight quarters, Wendy's is re-entering Japan under a plan to expand outside the U.S. (which accounted for 92% of the company's revenue in 2010). Based in Dublin, Ohio, Wendy's is first concentrating on the world's second-largest fast-food market as it looks for operating partners in China and Brazil.
"Japan is the most important of the three to me, because we are actually selling burgers here today," Darrell Van Ligten, president-international division, said in an interview in Omotesando. Wendy's expects to expand to about 700 restaurants in Japan. McDonald's Corp.'s local unit has about 3,300 locations.
Wendy's ended a 30-year run in Japan in 2009 after its partner, Zensho Holdings Co., declined to renew the agreement, saying it would focus on building its main Sukiya chain of beef-bowl restaurants.
"Our partner had a pretty significant business, which was their primary [emphasis]," Mr. Van Ligten said. "Given the size of the different businesses, Wendy's wasn't as much of a focus area as we would have liked it to be."
In its return, the chain is counting on the premium menu to attract customers in a "very, very competitive" environment, Mr. Higa said.
Kyoichiro Shigemura, a senior analyst at Nomura Holdings Inc. in Tokyo, said, "This is an aging society that has more single people who just want a meal fast. But restaurants are too expensive, so fast food is the correct sector to be in."
Wendy's menu pits it against Japanese rivals that include Mos Food Services Inc.'s Mos Burger in terms of taste, and against Lotteria Co., which offers a $23 Matsuzaka beef burger, for upscale items. "The competition is really stiff," Mr. Shigemura said.
Japan's outlook for slow economic growth adds to the pressure on Wendy's to find a new niche.
Saying that the rebound from the March 11 earthquake has paused, the Bank of Japan last week lowered its evaluation for a second straight month because of the currency's strength and cooled global expansion.
"With the economic situation, you need to bring something that is unique and exciting," Mr. Higa said. The "new fashion" of high-end fast food will give the chain what it needs to thrive, he said.
Wendy's Japan is a joint venture between Wendy's Co. (49%) and closely held Higa Industries Co., which Mr. Higa founded (51%).
Wendy's intends to triple the number of restaurants outside the U.S. to about 1,000, CEO Emil Brolick said on a conference call last month, though he did not give a time frame.