Why Are Cool American Food Brands Expanding to Japan?

If there's one city occupying America's culinary cultural consciousness, it's Tokyo. Restaurateur Danny Meyer named Tokyo (and the rest of Japan) a major growth area for his beloved burger chain Shake Shack. Fine dining's foraging hero René Redzepi hosted an extended Noma pop-up in Tokyo this winter, and the American press fell over themselves for the chance to write about how well it all worked. California-born Blue Bottle Coffee opened last month in Tokyo to massive lines, and it now has two locations up and brewing. New York City-based pastry wizard Dominique Ansel is bringing Cronuts to Tokyo, while San Francisco's bread whisperer Chad Robertson is making plans for his own Tokyo Tartine shop. Tokyo, it seems, is having a moment.

It's not just business opportunities that are turning the American culinary community's eyes towards Tokyo and Japan. For many, Japan is a food mecca, a place famous for a culture of craftsmanship and doing things the right way. For the past several years, there's been a lot of talk about how Japan has taken traditionally American fixations — denim, whiskey, burgers — and made them better than their native original forms. Now America's preeminent food and beverage professionals are stepping through the looking glass that their Japanese peers have held up, hoping they like the view from the other side.

Reaching Existing Fans

For Maury Rubin, the baker who founded New York's City Bakery in 1990, expanding to Japan wasn't some pie-in-the-sky fantasy made real: The decision was "less inspiration and more right-under-our-nose business opportunity," Rubin explains. "City Bakery had a Japanese demographic since the very beginning, since the early '90s. That part of our customer base has just grown through the years."

"We have a reputation that goes on a pretty straight line from New York City to Tokyo."

The seed was planted early that Rubin's Japanese clientele was not a "novelty," but rather a potential new market. "This is a very considerable opportunity. We have a reputation that goes on a pretty straight line from New York City to Tokyo," Rubin recalls saying to himself when considering the expansion. "Let's pursue it."  Rubin also lauds Tokyo's pastry-savvy population, explaining: "The great pastry shops in Paris, when they want to expand — and this goes back a couple of decades — before they started coming [to the United States], they went to Japan. That connection has been in place for a long time."

City Bakery opened in Osaka in April 2013 and quickly followed that up with a Tokyo bakery that November. Opening in Osaka prior to Tokyo wasn't so much a strategy as following those three key pillars of real estate: "Location, location, location," Rubin says. "Even on the other side of the world." The Osaka outpost is located within Grand Front Osaka, a massive development project combining office, residential, and commercial spaces in a "town." According to Rubin, moving to Tokyo was "a matter of building on a success and keeping the momentum going," while opening in Osaka first allowed City Bakery to garner a bit more hype and anticipation prior to their opening. Both locations are currently thriving.

City Bakery, Tokyo [Photo: Official site]

Long before striking Cronut gold at his pastry shop in New York City, Dominique Ansel — who has plans to open in Tokyo this spring — had turned down an offer to work in Tokyo after his years at the legendary Fauchon bakery, instead opting to work at Daniel in New York City. "It was one of my dreams to open in Japan," Ansel says now. "I feel very honored and very lucky [to do it in 2015]." But part of the reason Ansel decided to pull the trigger on a Tokyo location is that he already has so many Japanese fans and visitors coming to his New York City shop. "We can reach out to our fans on the other side of the world," Ansel explains.

The Licensing Route

Having a built-in customer base already familiar with a product is nice. Having a low-risk business venture that brings money in — while pulling little investment or talent out — is even better. This is the appeal of the licensing agreement, through which an American brand licenses its name to a Japanese operating company. Each agreement is different, but the basic idea is that in exchange for lending an operating company your name, they promise to make you money and hopefully not drive your brand into the ground.

"I’ve jokingly said that we’re insourcing money."

For Portland's famous doughnut shop Voodoo Doughnut, currently working towards opening outposts in Taiwan and Japan this year, it's just sound business. "I've jokingly said that we're insourcing money," says co-owner Kenneth "Cat Daddy" Pogson of his international licensing agreements for the shop. "Instead of outsourcing jobs, we're insourcing money so that we can expand on our own here. By doing a license agreement and setting this stuff up, we start fueling our company with money rather than taking it from someone else."

Pogson also explains another reason for licensing: Expanding to Japan is lower risk for Voodoo than expanding to, say, San Francisco or New York City. Voodoo also has domestic expansion plans (most recently announcing a new Austin store), but these won't be licensed. Owning the American stores lets Pogson keep "a tight control" on the product and the brand stateside, where more people are watching. "I'm willing, as an owner, to let this go a little more wild in Asia with a license agreement," he explains. "If it doesn't work out, we've learned a lesson and got to do this grand experiment, but we're also not heavily invested." It's not accurate to say nobody in America will be watching what happens to Voodoo in Japan, but Pogson seems certain that it's not the same sort of scrutiny.

He may well be right in seeing licensing as a lower-risk way to enter a new market. It has worked well for City Bakery. For Rubin, the process went something like this: The licensing Japanese company Fonz sent people out to New York to work and learn in the City Bakery home kitchen, almost like apprentices. Rubin and his team then went to Japan to do quality control check ups. "The quality of [Fonz's] execution has made the travel part less necessary," Rubin says, quickly adding that he is still in frequent email and phone contact. The expansion, Rubin beams, has "born out richly." He's just completed a deal to further expand City Bakery from Osaka and Tokyo to the rest of the country. City Bakery will open in Fukuoka in late April, which has the bonus of being near Korea, one of Rubin's target markets.

Keeping Control

Not everyone, however, is comfortable with the lack of control that is a fundamental part of licensing deals. Ansel is entering the Tokyo market in partnership with TSI Holdings Co. and Transit General Group. The former is a publicly traded Tokyo-based fashion company, while the latter is a food and retail behemoth that does everything from weddings to branding to operating cafes and "creating amusement space containing fashion, architect, music, design, art, and cuisine elements."

Together Ansel and his business partners have handled hiring, and training has happened at his New York City kitchen. Ansel is overseeing the creation of the menu, which will include Tokyo-specific pastries and updated twists on Japanese classics ("not gimmicky," Ansel swears). Where most licensing deals are a "copy/paste of what you [already] have," says bakery spokesperson Amy Ma, "this is a whole new concept." Ansel reiterates: "It's not a franchise, it's not a replica. It's a new business and we're bringing something special to Tokyo." He plans on being in Tokyo three to four times a year once the shop is up and running, and also plans on regularly sending team members from New York to Tokyo. "They're going to make it work no matter what," says Ansel of his Japanese business partners.

"The idea of relinquishing what we did or how we did it to an outside entity made me cautious."

For James Freeman, the CEO of the extremely well-funded Blue Bottle Coffee, the solution was to go it alone. Blue Bottle has been credited with helping popularize Japanese coffee-making techniques in America, and Freeman was aware of the high standards for coffee in Tokyo. "There's tremendous interest in coffee that's being generated in Japan and Tokyo in particular," he explains.

But Freeman didn't want to change Blue Bottle's approach to coffee-making upon arriving in Tokyo, and a licensing agreement felt at odds with the company's quest for coffee perfection. "I had been talking to a lot of people about a license, or a joint venture, and had started negotiating with several entities," Freeman explains. "I never signed on the dotted line with anybody just because this whole idea of relinquishing what we did or how we did it to an outside entity made me cautious." He goes on: "If you sign a license or joint venture... then you start getting pressure. It's like, 'Oh, well the Japanese public doesn't like this. You need to change it. Oh, you need to change that because Japanese public doesn't like that.' And I thought if we're going to do it, we need to do it [our way]. We need to be our best selves and not to worry about changing what we do because of our fears over what the public may or may not like."

The illustrious @1shot4theroad works alongside this talented crew at @bluebottlejapan Aoyama on opening morning. Congratulations to our esteemed colleagues in Japan on a successful launch!

A photo posted by Blue Bottle Coffee (@bluebottle) on Mar 6, 2015 at 7:23pm PST

Ultimately, Freeman was able to open his Tokyo location without a partnership or a licensing deal. That's not to say he didn't have any Japan-based help, though. Freeman did outsource things like guidance on HR and accounting, but he remains firm. "We ended up doing it all ourselves," he says. "It's basically all our own money and all our own recipes." Of the substantial investment his company made in getting the Tokyo shop open last month, he says much of it went to flying members of his team out to Tokyo and in to Oakland for training. And he had a few aces up his sleeve: "We have several Japanese-speaking employees that have been working for Blue Bottle Coffee for a long time that moved out to Tokyo. Our head of quality control has been with us almost five years, and we have a system manager, and a barista, [who] all speak great Japanese and are living there permanently. So that's very helpful in terms of maintaining this continuity of taste."

Tartine's Chad Robertson — who says Tokyo is home "to probably the best French bakeries in the world" — is approaching expansion to Tokyo much like Ansel, partnering with Japanese-based company TGP. "Tartine has control of Tartine," Robertson explains of the partnership. "It started out as a licensing deal — that was the initial sort of arrangement — but we were talking about it, [and] it changed into something else now."

The Tokyo Tartine will not be a copy of the San Francisco location, which, given Tartine's fierce commitment to local ingredients, makes complete sense. "We're going to be using all Japanese flour and all Japanese ingredients and really trying to start with our Tartine approach — and then really make it something special from our Tokyo perspective," says Robertson of the concept. "I think you're going to eat the bread in Tokyo and you're going to be like, 'This is Tartine bread, but this is Tartine Tokyo bread.'" Like Ansel, Robertson is handling hiring and training, which has been happening in San Francisco. He's also sending bakers out to Tokyo, and sees himself visiting Tokyo frequently after the opening. He's hoping to create a regular exchange program between his two shops.

Robertson is also piggy-backing onto Blue Bottle's entry into the Tokyo market. "We're still working with our Japanese company, they're kind of doing what they do on the ground for us," he explains. "But the business partner is Tartine with Blue Bottle." Along with a mutual respect, Robertson says part of what attracted him to Blue Bottle is how well it handled its recent Tokyo opening. "I was there I was just in the middle of the whole thing and there's a very clear view of how well-prepared, well-organized and professional the whole [Blue Bottle] launch was," he says. "And I like, 'Yeah, I would love to work with these guys.'"

Will It Work?

The interest in American brands is clearly there. As mentioned earlier, Blue Bottle and City Bakery opened to massive lines, but so too did Krispy Kreme, Clinton Street Baking Company, Slappy Cakes, and Hooters.

Obviously business owners are expanding to Japan with a hope of making money. But many also hope to prove themselves in an incredibly sophisticated market. "Our Japanese customers, they love good food, they know good food," says Maury Rubin. Dominique Ansel echoes his sentiment, calling the Japanese market "very selective." Whether they go the route of a licensing deal, a partnership, or flying solo, the challenge of keeping quality up from a home base across the world is always a challenge. But if these boutique American brands want to succeed in Japan for the long run, they'll have to keep quality up. Time will tell whether they'll be able to do it.