(Updates with analyst comments in eighth paragraph.)
Dec. 28 (Bloomberg) -- Wendy's Co., the third-biggest U.S. fast-food chain, 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 1,280 yen ($16) at Wendy's in Tokyo's Omotesando luxury shopping district, the first of a targeted 100 shops. "We think the fast-food market here is ready for something different," Ernest Higa, chief executive officer of Wendy's Japan LLC, said in an interview at the restaurant's opening yesterday.
Wendy's is re-entering Japan under a plan to expand outside the U.S., where it got 92 percent of revenue in 2010, after posting losses in six of the past eight quarters. The Dublin, Ohio-based chain is focusing on the world's second-biggest fast- food market first 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, international division president, said in an interview in Omotesando. The company expects to eventually expand to about 700 restaurants in Japan, compared with about 3,300 for McDonald's Corp.'s local unit, the nation's biggest fast-food burger chain.
Competitive Environment
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 focus," 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 coming back to Japan, the burger chain is counting on its premium menu to lure customers in a "very, very competitive" environment, Higa said.
"This is an aging society which 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," Kyoichiro Shigemura, a Tokyo-based senior analyst at Nomura Holdings Inc., said by telephone today.
Wendy's menu pits it against Japanese rivals including Mos Food Services Inc.'s Mos Burger in terms of taste and Lotteria Co., which has a 1,800 yen Matsuzaka beef burger, for premium items, Shigemura said. "The competition is really stiff," he said.
Slowing Growth
Japan's outlook for slow economic growth adds to the pressure on Wendy's to find a new niche in the industry.
The Bank of Japan last week said the economy's rebound from the March 11 earthquake has come to a pause, lowering its evaluation for a second straight month because of the local currency's strength and a cooler global expansion.
McDonald's Holdings Co. Japan forecasts sales of 304.5 billion yen this year, a third straight annual decline and 25 percent less than 2008 revenue.
"With the economic situation, you need to bring something that is unique and exciting," 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., which owns 49 percent, and closely held Higa Industries Co., with 51 percent.
Wendy's intends to triple the number of restaurants outside the U.S. to about 1,000, Chief Executive Officer Emil Brolick said on a conference call last month, without giving a time frame.
--With assistance from Subramaniam Sharma in New Delhi and Shunichi Ozasa in Tokyo. Editors: Dave McCombs, Garry Smith
To contact the reporter on this story: Cheng Herng Shinn in Tokyo at hcheng52@bloomberg.net
To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net
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