The coffee shop chain Komeda's Coffee has managed to steadily add new stores during the coronavirus pandemic. Okitane Usui, president and chief executive officer of the parent company Komeda Holdings Co., talked to The Yomiuri Shimbun about his unique management strategy.
-- Leaving it up to franchise owners
Komeda's Coffee is a full-service coffee shop in which the staff both takes and brings orders directly to the table. Many of its shops are located in suburbs and have strong bases of regular customers. Sales have exceeded pre-pandemic numbers and profit margins are gradually returning to levels prior to the pandemic.
Usui: Most of our coffee shops are franchises, and what sets us apart is that each owner has a great deal of discretionary power. There are no picky instructions from the head office based on a manual. Instead, owners who know their communities best operate at their own discretion, which makes it possible for them to offer fine-tuned services that best serve customers. That is our greatest strength.
Given that the greatest value comes from providing a relaxing place, customers tend to spend longer time in our stores. High rents make it difficult to increase profits, so we opened many shops on residential roads and in locations a bit distant from train stations.
In the typical franchise system, the head office collects royalties based on sales, but we do things differently. Komeda franchises pay a fixed fee based on the number of seats. In this system, the more a store sells, the more it profits. This gives the owner motivation to work.
The major role of the head office is to provide delicious sandwiches and pastries, coffee and other products to the shops. Selling at wholesale to the franchises is our main source of revenue.
For Komeda, brand appeal is important, but the power of independently operating owners is indispensable. Even when the head office develops a new item, it is left up to each shop to decide whether it wants to put it on their menu. For pricing as well, the head office only establishes minimum levels, and it is the respective owners who actually sets prices. During nationwide promotional campaigns held twice a year or so, our stance is that it is us who needs to kowtow to the franchises to cooperate.
The owners know that they are the ones responsible for their shops. I think that in a good sense, they don't want to hear from the head office. There are supervisors from the head office who make the rounds of the franchises, but they are mainly there in a supportive role.
I have always detested the idea of telling someone to do this or that. Komeda's business model perfectly matches that tenet.
-- Maintaining a relaxing space
Komeda's Coffee was founded by Taro Kato in Nagoya in 1968. In 2008, he sold all of Komeda shares he owns to an investment fund and stepped away from management. Usui joined the company in 2013. Prior to that, he worked in banking before moving around, taking positions with such companies as McDonald's Japan and Sega Corp. He was serving as vice president in charge of East Asia at a U.S.-based coupon group-buying site operator when he joined Komeda.
Usui: To be honest, I knew almost nothing about Komeda when I was contacted by a head-hunter who I had known for a long time. I talked it over with three of my former colleagues at McDonald's Japan, and they were unanimous in recommending that I join Komeda. As I had wanted to do work again that involves dealing with consumers, I decided to take the job.
I clearly remember the first time I entered one of the shops. It was located in Tokyo's Sangenjaya district, and along the steps leading up to the second floor, there was a line of signs reading "Komeda's Coffee, Komeda's Coffee, Komeda's Coffee." My first impression was, "Hmm, that's not very sophisticated."
Anyway, after a while, a line of customers started to form. I had never seen such a thing at a coffee shop, so I was impressed. I guess it was around 10 a.m. and the sunlight coming through the window made the inside of the shop quite warm. It wasn't just the room temperature, but the atmosphere that made it warm. Komeda's concept is to provide the ultimate place to just sit and relax. And that was a place to feel totally at ease.
About a month after I was hired, I got a phone call from my parents. "We just went to a Komeda's," one said in an animated voice. "We could relax, and it was just great." As the chief executive, it gave me renewed conviction maintaining a comfortable, relaxing space was more important that all else.
Since joining the company, every Thursday morning I put on an apron and work in the kitchen as one of the staff. Being on site is the best way. You can't make decisions based only on reported numbers. I think what I'm doing is just common sense.
-- Sharing space with rivals
Komeda's Coffee incorporates the concept advocated by the United Nations' "sustainable development goals (SDGs)," considering the environmental impact in choosing coffee beans and serving plant-based menu items.
Usui: Compared to other coffee chains, the price range at Komeda's Coffee shops is not low. This is because we offer not only coffee and food, but also the ultimate place to relax. So how can we enhance that value? My answer is get customers to think, "If I go to a Komeda's, I can do something good."
Since we are not a very big company, we cannot do audacious things. Even so, in addition to efforts concerning food and ingredient purchases, we steadily do what we can, such as placing cards about SDGs in stores to help raise awareness.
In today's stress-filled society, more people tend to be tired mentally than physically. On top of that, the pandemic came along. For most people, the home is likely the most relaxing place, but it is also where they spend their day-to-day lives, and at times they will have the desire to get away from it all. Komeda's Coffee can be regarded as "a living room in town." People tend to think the average age of our customers is high, but actually, we have customers from all age groups.
-- Expansion plan
Currently, there are about 950 stores nationwide, a number the company plans to expand by 200 by 2025.
Usui: In Nagoya where the first shop was opened, we have more stores than McDonald's. Extrapolating that across the nation at the same ratio, it works out to, theoretically speaking, having about 3,000 stores. But that figure being hardly realistic, and anyway, we are looking to steadily increase the number of shops that set down roots in their neighborhood rather than put priority on numerical targets.
One of our key management policies is connecting people with communities and society through "comfort." Our stores connect with the customers and have a good impact on the local area. I want us to be a vital part of the local infrastructure.
We have many competitors, not least of which is Starbucks. However, each has a business model different from ours, and I believe that these days it does not make sense to see things from the perspective of winning or losing.
I used to enjoy thinking of ways to battle with competitors. But now I think it is important that each player firmly provide their own value within the same market. Rather than a battle over who has more stores, I feel we are entering an age of "co-creation" in which we work together to contribute to the community and society.
-- Okitane Usui
Born in Ehime Prefecture in 1958. After graduating from the Faculty of Commerce and Management of Hitotsubashi University, joined Sanwa Bank (now MUFG Bank) in 1983. Served in executive positions at Nike Japan, McDonald's Japan, Sega and other companies. Joined Komeda Holdings in July 2013 and became president in November 2014.
-- Gosei
Gosei means "five reflections," and is a set of admonitions for taking a retrospective view of one's behavior. For example, one is "Am I acting in all sincerity?" The list was devised by the principal of the former imperial Japanese naval college in 1932 and has been passed down to today. Okitane Usui entered the National Defense Academy of Japan to fulfill a dream of becoming a fighter jet pilot, but dropped out and entered Hitotsubashi University. The framed "Gosei" was presented to him by the National Defense Academy when he left, and he has since displayed it in his workplace.
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