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Japan's economic bubble appears to have burst.
The nation is slogging through its third year of recession, and U.S. restaurant chains there are struggling with fierce competition that is causing sharp declines in growth.
But special characteristics of Japan's foodservice industry spell continuing opportunity for savvy American specialists and niche-marketers who aren't already entrenched in mature segments of the vast Japanese market.
However, 1,000-unit McDonald's of Japan was stung by sales gains that plummeted from an 18-percent spike in 1991 to only a 2-percent bump in 1992. Last October, McDonald's Corp. said its Pacific region sale were strong "with the exception of our affiliate in Japan, which continues to be affected by a weak economy."
And KFC Japan, another 1,000-unit force there, faces the glum prospect of continuing flat per-restaurant averages, "unless we can figure out a value position, and we haven't been able to do that," says Steve Provost, a vice president for KFC, which retained a 30-percent stake in the Japanese chain after taking it public there in 1990.
These days in Japan, if you run a large chain like KFC, "you make money the old-fashioned way, by cutting food cost and labor," Provost adds.
The pressures have proved too much for some chains that made hopeful debuts in the last five years but recently have bailed out of Japan. Unable to crack the market despite the clout of strong Japanese partners, both the Carl's Jr. and El Pollo Loco chains have thrown in the towel.
OSF International, the Portland, Ore.-based pioneer of the antique-studded-warehouse niche of budget Italian dinner houses, blames Japan's recession for taking a bite out of business at its nine Old Spaghetti Factory branches in Japan. "It's affected sales; sales are down," says Robert Martin, OSFs...