Building A Japanese Restaurant Powerhouse Through Franchising

Experts attribute that the fascination with Japanese food in the U.S. started in New York City back in 1964 when wrestler turned restaurateur Hiroake “Rocky” Aoki launched Benihana. Its hibachi steak was prepared right in front of guests on a grill at the table and created quite the stir. In fact, Benihana is still going strong with about 75 eateries in about 25 states.

Since then, a slew of Japanese restaurant chains such as Jinya Ramen Bar and Kura Sushi, regaled for its serving sushi on its revolving conveyor belt, have flourished in the U.S.

But the Japanese restaurant chain that has been most adept at expanding has been Teriyaki Madness, based in Denver, Co. It has grown due to the power of franchising since 129 of its 130 restaurants are franchised. For example, in 2022 it expanded by 29 locations; every one of which was franchised.

Of those 130 locations, 126 of them are based in the U.S., spanning 26 states. It has four outlets in other countries: two in Canada and two in Mexico.

According to Michael Haith, CEO of Teriyaki Madness, it differs from many of its Japanese competitors. “We’re fast casual,” he said, while most of its competitors specialize in dining-in. And he noted that 86% of its business stems from off-premises sales covering third-party delivery, pick-up, curbside and catering.

Most of its locations are 1,600 square feet and built for delivery more so than in-house dining. “We bring food to people in less than 30 minutes,” he declared. So it takes 10 minutes to cook the food and the rest is driving time.

Unlike its competitors, he said, “we don’t offer sushi.” All of its menu items cover 85 ingredients totally whereas most of its competitors offer hundreds of ingredients. It prefers to keep things simple and easy, he suggested.

Its three most popular dishes are: 1) Grilled spicy chicken with fresh vegetables and white rice; 2) Teriyaki grilled chicken with fresh vegetables and fried rice, 3) Teriyaki steak with Yakisoba noodles and fresh veggies.

He says one of the keys to its success is being “best in class technology.” And that entails customers’ ordering on its app and its loyalty programs.

When Haith acquired Teriyaki Madness via his firm M.H. Enterprises in 2016, the restaurant business was transforming. “It became clear to me that it was becoming about convenience and customer service at all levels. Not just quick service, but the expectation of reducing friction of the transaction was evident,” he said. He also saw the growing role of third-party home delivery taking prominence.

Haith described its target audience as “people who want healthy food, appreciate the quality of our food, and like ethnic food, especially Japanese.”

In March 2023 it signed an agreement with FranShares, a platform that has raised over $20 million to fund franchises, for an initial $12 million investment targeting multi-unit franchisees of Teriyaki Madness. Haith explained that FranShares’s funding will enable its “successful franchisees to partner with them to grow more aggressively. They’ll put fuel to the fire.”

Haith said that the influx of funds from FranShares will “provide a great way to grow, as opposed to relying on banks or private equity. They can grow to a point where they can buyout their partners.”

With the influx of funding from FranShares, growth is going to accelerate and spurt. He expects to reach 180 by year’s end, or an increase of 50 new locations.

He described the keys to its success, in very simple, direct terms: taking care of the customer, one customer at a time, and taking care of the franchisee and executing.

Though the restaurant business is changing, Haith acknowledged that “no customer ever asked me to include more robots.” Yet he envisioned that drone delivery to your doorstep is not far away, and though “tech can’t be ignored, it’s not the end all. There will always be space for the human element in the restaurant business,” he said.