YO! FY lfls up 4%

YO! Sushi, the Mayfair Equity Partners-backed group, saw like-for-like sales increase by 4% in the year to 27 November 2017, as EBITDA increased from £7m to £8.5m.

Total sales across the 92-strong company – 76 owned and 16 franchised - for the year increased 1.7% to £89.9m.

The company, which is now led by Richard Hodgson, said that the increase in sales was driven by “innovative new menu items and significant increases in to-go and delivery”. It said that the growth in EBITDA over the 12 months reflected a “resilient performance despite exposure to well publicised sector headwinds”.

Hodgson joined the group as chief executive in December 2017, taking over from Robin Rowland, who remains on the board. Hodgson told MCA that since the period end, the company’s UK restaurants had been trading ahead of the Coffer Peach Tracker.

He said that the further development of its YO!TOGO offer resulted in a 21% like-for-like revenue increase in to-go and delivery

During the period, the company said it made a “significant investment” into its UK estate with six new sites opened, including two in London Tottenham Court Rd and London Bridge. Two franchised restaurants also opened in the period in Paris and Sydney.

The company closed its flagship US site in Manhattan earlier this month, leaving it with two restaurants in the US. Hodgson told MCA he has no plans to open more there in the foreseeable future.

At the same time, a new internal change programme, “Say YO! to the Future”, has been initiated to best position the YO! group for next 5 – 10 years. The company has also tweaked its overall message from “happy teams, happy guests, healthy business” to “happy teams, happy guests, happy partners” to reflect its now more multi-branded business.

The year culminated in the “transformational acquisition” in November 2017 of Bento Sushi, one of the largest sushi brands in North America, creating one of the biggest sushi companies outside of Japan.

The company said that this had significantly diversified its business model by creating “a global multi-channel, multi format Japanese food platform to meet growing demand for sushi via restaurants, kiosks and supermarkets”.

In April of this year, the group’s diversified offer was further strengthened by the acquisition of sushi manufacturing group Taiko Foods, supplier to Waitrose.

YO! intends to leverage the combined expertise of Bento and Taiko to explore more opportunities with supermarkets and convenience stores in the UK.

Since the year-end, the company also launched a new internal change programme, “Say YO! to the Future”, initiated to “best position the YO! group for next five – 10 years”.

Hodgson said: “YO! has always been an innovator and first mover, since first bringing the kaiten belt to the UK over 20 years ago. The last year has seen the group significantly diversify its strategy and business model and more than double its turnover with the acquisitions of Bento and Taiko. This positions YO! as a global multi-channel, multi-format food group well placed to take advantage of the worldwide demand for naturally healthy Asian food in restaurants, at home and on-the-go.

“It is still early days in terms of fulfilling that potential, but we are already seeing exciting opportunities as the group moves to the next stage of its growth and development.”

Going forward the group expects to report numbers including Bento and Taiko. This year however, the numbers only include YO! Sushi’s casual dining restaurant and franchise business.

Comment by MCA’s Mark Wingett, including an interview with YO! chief executive Richard Hodgson on building a multi-platform, global business.

It has been a significant 10 months in the life cycle of YO! Sushi, but it’s the next five to 10 years that could prove even more of a landmark period for the business, of which former PizzaExpress chief executive Richard Hodgson took the helm last November.

After speaking to “a lot of private equity houses” about a possible return to the sector and considering going back to the retail/supermarket industry, it was the combination of Mayfair Equity Partners’ global vision for YO! and the upcoming deal to acquire Bento Sushi that got Hodgson on board.

He says: “Everyone else I talked to in terms of private equity spoke about consolidation in the restaurant sector, but that was mostly putting together two struggling brands. Mayfair has a longer term look - one that wasn’t just based on the UK restaurant scene. There’s is a global view for YO! and the sushi market in general and it is one I share. I was very transparent with them, in regards that there needed to be a retail factor in the decision for me to take the job.”

In April 2018, the company acquired Taiko Foods Limited, the first company to produce sushi for a supermarket. The combined YO! Sushi group, which has doubled in size since Hodgson’s appointment, is now well positioned to take advantage of the global trend for Japanese food and healthy-eating as a global multi-channel and multi-brand sushi platform.

Hodgson says: “What is different about Mayfair is that they understood and understand the challenges about the UK, we feel they are going to get worse, because no one really understands the implications of Brexit. We are interested in building a global business that is naturally hedged, because we believe sushi is a cool cuisine that is underdeveloped in most markets, not just the UK. It is on trend because it is healthy, in a far less competitive market than says pizzas, burgers or coffee.

“I was very excited talking to Mayfair that with YO! there was the chance of building a global Japanese food business. Now we are starting at a low base, but the trajectory we could be on to get there is quite exciting.

“I had a good look at the Bento business in North America and the market there in general. I also spoke to former colleagues at Waitrose regarding the Sushi Daily counters they had and the opportunity there. What I found is that there is a real opportunity to take sushi to ‘the masses’ and not through building expensive restaurants but through working with partners. If you can partner with the right retailers, despite the challenge of online, they are still hosting millions of consumers every single week, therefore you have guaranteed footfall.”

With Bento the company has that model. It has a handful of restaurants but the bulk of its business is from concessions in supermarkets, at universities and in hospitals. Penetration of sushi is double in Canada than in the UK, with penetration in the US between those two countries.

Hodgson says: “So the conversation was around questions such as what if we don’t look to open 10,15 or 20 sites a year, what if we have the best known brand in the UK and diversify – have restaurants, plus packaged sushi in supermarkets, kiosks and also diversified by geography.

“I went over and looked at Bento, and thought it was a great opportunity. They have a 65% market share in Canada, and there is no reason that will decline, because they do a very good job. You then look at the US, the market is bigger, sushi penetration is again higher than the UK, there is one big player, which is losing market share and a whole host of smaller players with 2-5% market share. The Bento business is currently in growth at 55% year on year, and we don’t see that falling back anytime soon.”

The acquisition of Taiko further allowed Hodgson to delve into his 17 years of experience in the supermarket/retail sector, again sounding out former Waitrose colleagues about the brand and its potential.

He says: “Waitrose has a 5% share of the supermarket market but a 45% share of the sushi market, so it was a good place to start, especially with the success they were having with Sushi Daily. That sushi share should come down but only because the rest of the supermarkets will follow suit in stocking sushi as it becomes more popular.”

The owners of Taiko had been offered the chance to operate counters in Waitrose but felt it was outside their comfort zone, but with Mayfair’s backing and Hodgson’s experience this has changed.

He says: “We have opened three under the Taiko name and have an agreement to do a fourth. We will also look at tying up with other supermarkets going forward.”

But what of the group’s core restaurant brand? Hodgson has already admitted that the UK market is tough at present and could become further challenging.

He says: “Everything we do has to have the core brand in mind, and what impact it would have on it. We are building a global business but it will always be based on having a strong UK base.”

That is not to say that Hodgson will not the cut the brand’s cloth accordingly over the coming years. Only one UK restaurant is scheduled to open this year at the Intu scheme in Watford, with a further one opening scheduled for next year in Ashford.

Hodgson says: “I would rather have 80 strong restaurants than 140 with 20 of those sites underperforming. The business is robust but we are not going to over-stretch ourselves. There are things we can do to strength the restaurant business around the edges and we still get approached all the time regarding possible sites but expansion of the core format is not on the cards at present.”

It is the same view that Hodgson is taking with the group’s US restaurants. The company closed its flagship US site in Manhattan earlier this month, leaving it with just two restaurants in the US. Hodgson has no plans to open more in the foreseeable future.

He says: “The strength of the Bento business means that’s where our focus will be. I have no desire to open more restaurants in the US.”

There will be further launches in overseas transport hubs, with the currently-under-construction new Istanbul airport a future target.

There is also the possibility of the return of a grab-and-go version of the YO! brand.

Hodgson says: “It is certainly something we are working on and plan to introduce but again as along as it doesn’t harm the core brand.”

The company has come along way in the last 10 months and now has a portfolio of brands to work with and across a number of geographies, but Hodgson doesn’t rule out further acquisitions in the sushi space.

Hodgson says: “There is certainly more market share to go after and more business opportunities to explore in this space. Consumers across the globe are starting to see the long term benefits of sushi. Our target is to improve the quality and availability of sushi based on YO!’s heritage.”

A full interview with Hodgson will appear in the next MCA print edition