Watami to switch to fast food as customers ditch izakayas

JAPAN – One of the largest pub operators in Japan, Watami has announced its decision to pivot its operations to fast food as fewer customers throng its operated pubs.

Miki Watanabe, CEO of Watami, a company that operates 340 pubs and eateries in Japan, has expressed his interest in acquiring more fast-food brands following his recent purchase of the Subway franchise operator in Japan.

In an interview with the Financial Times in Tokyo, Watanabe revealed his plans to explore opportunities for acquiring local franchises of major global brands such as McDonald’s, KFC, and others.

Watanabe highlighted that Japan’s pub sector, particularly izakayas (traditional pubs), is still recovering from the pandemic.

He pointed out that only 80% of customers have returned to these establishments, while fast food has seen a notable increase in popularity, with delivery services even surpassing pre-pandemic levels.

This shift in consumer behavior is largely attributed to changes in Japan’s business culture, where the pandemic led to fewer office workers spending long nights out drinking, and younger generations increasingly abstain from alcohol.

In response to these changes, Watanabe decided to pivot his focus from izakayas to fast food. He has committed to opening as many as 3,000 Subway outlets in Japan over the next 25 years, with 178 currently in operation.

Watanabe also indicated that Watami might pursue acquisitions of other major Japanese franchises, such as McDonald’s or KFC, if the right opportunity arises.

Additionally, he plans to expand the company’s bento lunchbox delivery service for elderly customers and explore acquisitions in the U.S. and Southeast Asia.

However, Watami’s plan to expand Subway faces strong competition from Japan’s convenience stores, which already offer affordable and easily accessible sandwiches, often tailored to evolving consumer preferences.

Watami has also encountered financial difficulties, with net profits dropping 44% to ¥1.8 billion (US$12 million) in the six months ending September.

Increased costs have hindered the company’s recovery to pre-pandemic revenue levels, although a tourism boom in Japan has somewhat offset this, with foreign visitors now contributing 3% of Watami’s total revenue.

Watanabe, a 65-year-old former politician who once ran for Tokyo governor in 2011, warned that Japan’s ongoing “hyperinflation” and a weak yen would likely lead to the closure of many izakayas as consumers face reduced spending power and rising import costs.

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