Carl’s Jr to re-enter Japan market with its 1st store in Akihabara

CarlsJr_AkihabaraAs we conducted “Retail Brands Consumer Awareness & Usage Survey” in June 2016 covering the burger restaurant chain brand Carl’s Jr, we recently visited their 1st store in Akihabara (picture) that just opened in March 2016.

Carl’s Jr once entered Japan market in 1989 but left the market only after several years, due to the partnership issues.  This is their 2nd Japan entry with a new partner, and we really hope it works this time.

Enjoying delicious burger lunch with ice cream shake, we discussed how Carl’s Jr should expand stores in Japan in order to make it.  We’d like to share our ideas here.

Generally speaking, not easy

Many retail brands that generated consumer buzz with its 1st store aim to grow as big as McDonald’s or Starbucks Coffee in Japan.  Many of them aim to build 1000 stores in Japan.  It is easy to dream to be the next Starbucks, but generally, it’s not easy to realize it.  In many cases, growth come to a standstill already at an early stage of chain store development.

Actually, increasing the number of stores itself is not so difficult in Japan.  As shopping centers frequently open, expand, remodel and refresh tenants, new sites pop up all the time.  A retail brand can earn store counts by picking up those opportunities, opportunistically.

On the other hand, it is not easy for the brand to become the consumers’ choice and continue to earn enough profit to keep investing in continuous store expansion.  A retail brand could waste its growth opportunity if it chooses opportunistic-store-development approach.  Needless to say, it should choose strategic-store-development approach instead… so, here comes an idea!

Store visit report

We visited Carl’s Jr Akihabara store on June 24th Friday, 2016, beween 11:35 AM to 13:00 PM.  Weather was cloudy.

We expected to line up as it was lunch time, but there was no customer line.

There were 22 customers inside the store against total 57 seats; 14 customers were seated, 8 customers were waiting to order.

Carl’s Jr Akihabara is located between Akihabara station and Suehirocho station, facing the crossing, and large people traffic is flowing in front of the store.  This location should have the potential to earn over 120 transaction per hour with a standard fast food store.  You may also want to know, how was Carl’s Jr performing?

So, we sat next to the entrance and counted customer transactions for 90 minutes.

[11:35 AM – 11:59 AM] 25 transactions (seats became full at 11:55, 1 transaction chance lost)

[12:00 PM – 12:15 PM] 21 transactions (6 transaction chance lost)

[12:15 PM – 12:35 PM] 26 transactions

[12:35 PM – 13:00 PM] 34 transactions

[12:00 PM – 13:00 PM] Total 81 transactions

1 – 2 customers came into the store every minutes constantly.  Average time spent in store:  around 30 – 40 minutes.

Breakdown of customers: about half the customers were business people presumably working around the store (including 3 female groups).  Business people making the rounds, student job seekers were another large customer segment.  Rest were foreign tourists (6 Asians and 8 Westerners), 6 high-school student travelers, 3 family with children.

Surprising finding was that, there were already many Carl’s Jr repeaters (presumed frequent users) who seem to be working close to the store.  Common appearance of those “fans” were, regardless of gender, “people who want to have big meals”.

Potential customer segment seemed to be clear.  Exactly as Carl’s Jr’s tag line says; consumers who want to “EAT LIKE YOU MEAN IT.”

Targeting consumers who “EAT LIKE YOU MEAN IT.”

Regardless of gender, certain proportion of consumers have desire to eat big meals occasionally (me, too).

Those people are avid and enthusiastic about eating.  Therefore, they have strong sense of purpose with restaurants to visit.  They are not price sensitive.  They eat and leave immediately.  They don’t have high expectation towards fast service — waiting time even increase appetite.

Carl’s Jr should target such enthusiastic eaters.  They should choose store location where people who want to “EAT LIKE YOU MEAN IT.” gather.  They don’t necessarily open stores in fashionable locations like Starbucks Coffee.

According to the press, Carl’s Jr. is planning to open only 150 stores in 10 years in Japan.  If so, they should be highly selective about the store locations and open stores only where target customers gather.

Shopping centers might want to invite Carl’s Jr. as a brand with novelty, but they shouldn’t opportunistically open stores in such locations.  Given the pricing and the thickness of the meal, potential loyal customer segment is considered to be limited.  Carl’s Jr. shouldn’t expect sustainable high volume sales in shopping centers.

Carl’s Jr also shouldn’t rush to expand geographical coverage area before high brand awareness is built and brand image is formed in central Tokyo, in order to maximize potential.

How should Carl’s Jr select new store locations, then?

Possible starting point of the thought process is, to find areas / locations where stores of other “EAT LIKE YOU MEAN IT.” type restaurants (restaurant brands that Carl’s Jr can co-exist) are recording high sales.

What are the restaurant brands that people who want to “EAT LIKE YOU MEAN IT.” occasionally visit, line up and buy?

Some examples could be Ramen Jiro or Ikinari Steak.  I would list up the markets such stores are located, and find the common conditions with the markets that such stores are recording high sales.

We want Carl’s Jr to be enduring in Japan market, so we’ll continue to watch and update how they expand stores.