Six-Unit Ramen Chain Yoshiharu Files for a Nasdaq IPO With a 1,000-Store Ambition

This is an English adaptation of a FoodBud historical article originally published on February 4, 2022.

Yoshiharu, a Japanese ramen chain founded in 2016, moved quickly from reported IPO plans to filing an S-1 prospectus. At the time, the company operated only six restaurants, with three more under construction.

The proposed offering was for 4 million shares, with an estimated price range of US$4-5 per share, and the company planned to list on Nasdaq.

Store Base and Expansion Plan

Yoshiharu’s core product is Japanese ramen. As of the filing period, it had:

• 6 operating restaurants
• 3 restaurants under construction
• 8 new restaurants expected to open in 2022

The company estimated that the U.S. market could support 250 Yoshiharu stores, while international markets could support at least 750 stores.

Yoshiharu was also pursuing franchise licensing in the U.S. market and believed franchised stores could add 20 units per year. Over the following 3-5 years, the company planned store growth on a model of doubling annually.

Yoshiharu identified Jinya Ramen Bar as its largest competitor. Jinya operated 40 U.S. stores and had also opened franchising.

Market Context

The company cited growth in the Asian population in the U.S. as part of its market rationale. The Asian population was expected to grow from 20 million in 2020 to 24.4 million in 2030. Its share of the U.S. population was expected to rise by 15%, from about 6% to 6.9%.

Revenue and Unit Economics

For the nine months ended September 30, 2021, Yoshiharu reported revenue of US$4.4 million, compared with US$1.9 million in the same period of 2020.

Average check increased from US$13.51 in 2019 to US$15.59 in 2020, a 15.4% increase. For the period ended September 30, 2021, average check was US$15.74.

Annual unit volume was US$1.1 million in 2019, then fell to US$900,000 in 2020 under the impact of the pandemic. For the period ended September 30, 2021, AUV reached US$1.2 million, up 42.5% from US$815,000 in the same period of 2020.

Restaurants were typically 1,500-2,500 square feet, or about 139-232 square meters. Store leases were generally 10 years.

New Store Buildout and Staffing

Yoshiharu’s new-store development cycle was about 12-24 weeks. Investment per store was US$350,000-550,000.

A typical store staffing model included:

• 1 general manager
• 2-3 supervisors
• 8-12 employees

Each store installed eight cameras for monitoring and management. As of September 30, 2021, Yoshiharu had about 120 employees.

Cost Structure

For the first three quarters of 2021, Yoshiharu reported:

• Raw materials: US$1.345 million, or 30% of revenue
• Labor: US$2.0 million, or 45% of revenue
• Rent and utilities: US$466,000, or 10.5% of revenue

Delivery-related fees were US$384,000 in the first three quarters of 2021, up 109.3% from US$183,000 in the same period of 2020, mainly because delivery grew significantly during the pandemic.

The article viewed 30% raw-material cost and around 10% rent-related cost as reasonable, but noted that labor cost at 45% created pressure on the model. Yoshiharu remained loss-making, with net losses of US$134,000 in 2019, US$450,000 in 2020, and US$43,000 for the first three quarters of 2021.

In 2020, cost ratios were:

• Raw materials: 28.5%
• Labor: 48.7%
• Rent and utilities: 13.8%
• Delivery fees: 7.7%
• Depreciation and amortization: 3.6%

Founder Control and Related-Party Borrowing

Before the offering, founder James Chae held 90.06% of Yoshiharu’s voting power. After the offering, he was expected to hold 74.4%, leaving him firmly in control.

Chae immigrated from South Korea to the U.S. as a teenager and had more than 20 years of experience in finance and retail. He had previously served as president of APIIS Financial Inc.

Yoshiharu frequently borrowed from APIIS Financial Inc. As of September 30, 2021 and December 31, 2020, Yoshiharu owed APIIS Financial Inc. US$1.338 million and US$911,000, respectively.

Note: IPO terms, expansion targets, market forecasts, and financial figures are historical and reflect the article’s 2022 source context.