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BURGER KING VS. GIANTS IN JAPAN GROWTH STRATEGY MUST GRAPPLE WITH MCD'S, KFC

By Published on .

TOKYO-Burger King Corp. is trying to find a niche in Japan, where two old fast-food rivals from back home have a 20-year head start.

In Burger King's game of catch-up against McDonald's Corp. and KFC Japan, it plans to double its Japanese outlets this summer. That will bring Burger King to a total of eight restaurants, vs. McDonald's 1,042 outlets and KFC's 1,040. Big Mac and KFC are the top 2 fast-food chains in the country.

Roy Blauer, general manager of Burger King Asia Pacific, said his company waited two decades just to find the right partner, Seibu Railways Corp. Now, he said, Burger King is in a "test marketing" phase, a transitional period to study market share before establishing franchises.

Mr. Blauer doesn't see Burger King's late entry as an overwhelming handicap, especially with Seibu on board. The partner will provide high-traffic areas like retail, resort and hotel locations for Burger King restaurants.

One example is railway stations. McDonald's and KFC try to open outlets near the high traffic locations but, with Seibu's help, Burger King has done one better and opened inside the stations.

Industry insiders say Burger King tried 20 years ago and more recently to enter the market, using a franchise arrangement in which the company was paid royalties. But royalties were too high and the forays failed.

This time around, the royalty issue has been avoided because the eight new outlets, which started to spring up in September 1993, are company-owned. Mr. Blauer said a decision has not been made whether to market by franchise.

Not only will Burger King be going up against gargantuan-size competitors, but it's timing could also be better. Japan is still bogged down in a recession, and the fast-food market is suffering along with most Japanese businesses. There's also a belief the fast-food market is saturated.

Mr. Blauer sees Burger King's niche as a value positioning of providing "bigger and better product."

In its local promotions, he said, Burger King stresses that "you get more for the same" price than rivals provide. The company also cites the flame-broiling of its burgers, providing a taste more like barbecued food.

He said "we are offering an American product with 100% imported American beef," a fact touted in public relations campaigns.

Still operating only in Tokyo, Burger King has done no national advertising and has no agency of record. It has relied on Cosmo Public Relations to help with local promotions and newspaper ads built around stores.

Industry executives wonder whether Burger King is doing too little too late, noting the company would have to open about 200 outlets in Tokyo to really penetrate the Japanese market.

Mr. Blauer contended: "We are not chasing numbers," though he cautioned the company is interested in operating outlets that are viable from the start.

To really penetrate the market, he admitted outlets and sales must reach a "critical mass" that would provide a marketing budget for national TV and radio advertising "to really make a dent in the marketplace."

Mr. Blauer offered no prediction on when that might happen.

He was also reluctant to make projections about the number of outlets Burger King can open. But mentioning that McDonald's and KFC have more than 1,000 stores each, he said: "It is fair to say the market has that potential, but I cannot say we could open 1,000 outlets."

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