Kura Sushi Inc. (NASDAQ:KRUS) is pushing an aggressive expansion plan in North America, aiming to increase its U.S. restaurant footprint by about 20% each year as it races to establish market share ahead of growing competition from other Japanese chains.
The conveyor-belt sushi operator said it anticipates its count of U.S. outlets will top 100 this year. That milestone follows a period of slower-than-expected openings attributable to shortages of equipment, including the chain’s branded prize games, which the company has since added back into its restaurants.
The company’s first U.S. location opened in 2009 in California. Management has set a long-term target of roughly 300 U.S. locations while maintaining the 20% annual growth trajectory. Executives have stated that they do not intend to slow rollout in order to accelerate profitability.
In comments to the press, U.S. operations Chief Executive Officer Hajime Uba underscored the strategic rationale: "Competitors will inevitably expand in the US, and we want to secure those markets before they do," he said. He added, "As long as competitors struggle to expand while Kura continues opening stores, we can effectively capture much of the incremental demand."
The company faces new rivalry as other major Japanese conveyor-belt chains plan U.S. entries; rival Sushiro is scheduled to enter the U.S. market later this year. Management noted that growth opportunities in Asia are constrained unless expansion into China is possible, a factor that has driven many Japanese concepts to look to North America instead. "Growth in Asia has reached a ceiling unless you can expand into China," Uba said. "That’s why many Japanese restaurants are looking to North America."
Kura Sushi’s plan centers on rapid unit growth rather than reining in openings to improve near-term margins. The firm’s emphasis on maintaining its targeted annual store-add rate while pressing toward a 300-location U.S. base frames the company’s market approach amid rising competition and prior operational bottlenecks.
Sectors impacted - The expansion program has implications for restaurant operators, consumer discretionary spending, and commercial real estate markets tied to retail and dining locations.