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    Foreign Exchange

  • Domestic brands are turning their attention to international markets, opening the door for foreign brands to make inroads in the U.S.

    Canada-based Freshii established roots in the U.S. with its fresh food focus.

    As a result, YO! Sushi plans to open between five and 10 U.S. locations over the next two years, starting with the Philadelphia and metropolitan Washington, D.C., areas. Company executives are also looking at sites in Boston, Chicago, Miami, Atlanta, and Dallas.

    “We are very particular on site location, and prefer to select the absolute right location and go a bit slower than choosing marginal locations,” Vickers says. “We are an urban concept, and work very well in higher-end shopping malls, transport locations [like] large railway stations and airports, as well as heavy footfall downtowns.”

    While there are many Asian restaurant chains in the U.S., not many of them are focused solely on Japanese cuisine, Vickers says. “We believe competition comes from urban brands with similar check averages who offer consumers fresh, flavorful menu choices in a vibrant environment quickly,” she says.

    Like YO! Sushi, many international quick-service operators test the waters in the U.S. market with just one store. “Sometimes they will use it as an innovation kitchen to test everything,” Tristano says. “They need to present a solid economic case in order to invest the company’s and franchisees’ money.”

    For example, Nando’s Peri-Peri, based in Johannesburg, South Africa, started with one unit in Washington, D.C., in 2008 and now has multiple locations in the nation’s capital. The concept offers a unique twist on standard quick-service chicken chains: Nando’s specializes in Portuguese-style peri-peri chicken, which is basted with a spicy sauce.

    “Units, averaging 3,800 square feet, operate primarily in high-visibility sites that have multiple levels,” states Technomic’s recent “International Imports” report.

    While international quick-service brands continue to plant flags on U.S. soil, none are guaranteed success, experts say. They face many challenges, including adapting their operating models and menus to U.S. consumers. “A number of these chains have had so much success in the country or trade area in which they operate, they believe they just have to open in America and they will have success,” Tristano says.

    Lane Cardwell, president of Cardwell Hospitality Advisory and former president of P.F. Chang’s, also says international brands face an uphill battle stateside. “A successful international entrant into the U.S. is always a strong brand in their home market and often in other countries around the world,” he says. “They begin with this advantage, but it usually isn’t enough of an advantage to translate into immediate success in the U.S.”

    As a result, most international brands choose franchise partners to grow their brand and raise awareness in the U.S. Still, the biggest challenge the operators face early on is site selection, Cardwell says. “Most strong international brands find their expansion in the U.S. goes slower than in other countries,” he says. “Urban D.C., Chicago, and New York City have become the go-to cities for initial franchising.”

    International brands that have grown slower in the U.S. than expected, Cardwell says, include YO! Sushi, Nando’s, and Wegamama.

    Pret A Manger has also grown slower than expected and has had a learning curve with U.S. consumers’ tastes and habits. The London-based grab-and-go sandwich chain was not successful for a period of time after it opened its first U.S. unit in New York City in 2000, says Martin Bates, president of Pret A Manger USA.

    “We came over thinking that we could transplant our London shops in New York,” Bates says. “We have been doing this for a long time in the U.K., where people eat pre-made, grab-and-go food. In this market, it is very much a customized product.

    “We have had to really educate people about the fact that we have a kitchen in the shop, it is made fresh, and it is put on the shelf in the last hour,” he adds. Pret A Manger also added more drip coffee machines instead of highlighting espresso machines, as it does in the U.K.

    Since tweaking its U.S. concept, Pret A Manger has grown to 50 stores in New York City, D.C., Chicago, and Boston and boasts an annual sales growth of 40 percent. Company executives plan to add 15–20 stores in the U.S. in 2013, and another 15–20 stores in 2014. “We don’t want to grow too fast. We have a key core culture that is hopefully evident in our shops, which we own and manage [instead of franchise],” Bates says.

    Although Pret A Manger executives keep an eye on Panera Bread and Chipotle, Bates says no other quick-service or fast-casual chain “does quite what we do.”

    London-based Asian noodle chain Wegamama, which has three stores in the Boston area, also needed to make some changes to its restaurants to appeal to U.S. customers. “Communal dining is comfortable to European culture, but not to Americans, so they added booths to their stores,” Tristano says.

    Likewise, YO! Sushi needed to adapt its offerings to American consumers. “Generally, the U.S. serves larger portions than the U.K. However, with sushi and small plates of Japanese classics, this was an easier transfer,” Vickers says. In addition, Americans expect free refills on soda and iced tea, whereas U.K. consumers do not, so YO! Sushi modified the drink menu to meet customer demands, she says.