The Wendy’s Co. (NasdaqGS:WEN - News) recently announced the opening of its first restaurant in Tokyo, Japan. The new restaurant has come up in the Omotesando area in Tokyo and is a part of Wendy’s collaboration deal with Higa Industries Co. Ltd. Earlier, in March this year, the company entered into a development agreement with Higa Industries Co. Ltd. to open approximately 100 Wendy’s units in Japan. Per the deal, Higa Industries will develop and operate Wendy’s restaurants across the country in the coming years.
The Japanese deal estimates the long-term market potential to be about 700 restaurants. Wendy’s Japan will specifically focus on locally relevant menu, including the Avocado Wasabi hamburger and the Truffle and Porcini Grilled Chicken sandwich.
Higa Industries, led by Ernest Higa, boasts superior local market knowledge and has a proven track record of venturing into industries as diverse as lumber, medical and restaurant, within the Japanese market.
The latest restaurant opening in association with Higa Industries marks Wendy’s return to the Japanese market after it discontinued its franchise agreement in the country back in 2009. Wendy’s had decided against renewing its contract, citing the franchiser’s tardy development. This resulted in the closure of 71 restaurants in that country.
The recent deal with Higa affirms management’s intention of making Japan one of the prime markets for international expansion, considering its recovering economy and status of being the second largest quick-service restaurant market in the world. The company seeks to fully capitalize on the country’s potential.
Japan has emerged as one of the prime targets for several other restaurant companies. Krispy Kreme Doughnuts Inc. (NYSE:KKD - News) also entered into a development agreement with its Japanese franchisee, Krispy Kreme Doughnut Japan Co. Ltd., to set up and operate 73 new restaurants in Japan within the next five years. Another peer McDonald’s Inc. (NYSE:MCD - News) with a much wider scale of operation enjoys a prominent presence in Japan.
In an attempt to strengthen its international presence, Atlanta-based Wendy’s consistently enters into long-term development agreements with franchisees in the Middle East and North Africa, Singapore, Turkey, Russia, Argentina, the Philippines and the Eastern Caribbean. Additionally, the company is exploring growth opportunities in China, Brazil and other key international markets.
Wendy’s currently retains a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating. We also maintain our long-term “Neutral” recommendation on the stock.
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