Watami diversifies portfolio with Subway Japan acquisition

JAPAN – Izakaya restaurant operator Watami has announced it has acquired fast food chain Subway Japan in a strategic move to diversify its portfolio. 

Watami has acquired full ownership of Subway Japan, although the financial specifics of the deal were not disclosed. Watami confirmed it would finance the deal through bank loans.

As part of this expansion, the Tokyo-based izakaya chain has secured a ten-year franchise contract with Subway International, allowing it to operate Subway outlets throughout Japan with plans for substantial growth in outlet numbers.

In 2023, Subway Japan GK reported revenue of 536 million yen (US$4.8 million) and announced its intent to grow from 178 locations to over 3,000 nationwide.

The COVID-19 pandemic has pushed many in the food service industry, particularly izakaya chains like Watami, to seek alternative revenue streams, as reported by JAPANTODAY.

Restrictions, including reduced business hours and temporary bans on alcohol sales, have driven operators to diversify.

Although bars and izakayas experienced a 34.9% increase in sales in 2023 compared to the previous year, the sector is still at 66.5% of its pre-pandemic levels, according to the Japan Foodservice Association.

Fast-food chains, however, grew 10.4% in 2023, now operating 20.1% above 2019 levels, reflecting a shift toward takeout and delivery services.

To adjust to these evolving market trends, Watami has expanded its focus on new barbecue restaurant concepts and food delivery services.

The acquisition of Subway Japan aligns with Watami’s strategy to adapt and grow post-pandemic.

Founder and CEO Miki Watanabe, speaking at a press conference, confirmed plans to expand Subway’s presence to a similar scale over the next 20 years and to develop new menu items featuring organic vegetables from Watami farms.

Miki Watanabe said, “It has been 40 years since we started the Watami brand and while we are popular among the older generation, we wanted to change the brand to one favored by young people.”

“We want to set up an adversarial choice for consumers at lunch between hamburgers or sandwiches.”

Following this announcement, Watami’s stock rose 5.1% at intraday trading, closing up 3.9%, marking the highest increase in more than two-and-a-half months.

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