Cost-cutting and management restructuring are expected at Japanese restaurant chain operator Ootoya Holdings Co. in the wake of Wednesday's announcement of a successful hostile takeover bid by major restaurant operator Colowide Co.
Ootoya had been struggling with sluggish sales due to the spread of the novel coronavirus while trying to fend off Colowide's bid.
-- Philosophical differences
The conflict between the two companies began last October, when Ootoya's founding family transferred their shares in the company to Colowide. Colowide became the largest shareholder and approached Ootoya with a proposal to collaborate and make the company its subsidiary.
Ootoya's business had been sluggish due to an increase in menu prices last year and the revelation that a part-time employee had made inappropriate videos at its restaurant, leading to a decline in customers.
One of the biggest differences between the two companies was the idea of setting up a "central kitchen," where food to be used in multiple restaurants is consolidated in a single location for cutting and other processing. Colowide proposed this system to reduce costs and improve performance. But Ootoya, with a shokudo diner corporate culture, insisted on providing an extensive menu that was prepared in-house at its restaurants and opposed the proposal, saying "it would damage [Ootoya's] brand value."
As Ootoya maintained its hard-line stance, Colowide proposed a board of directors election at Ootoya's general meeting of shareholders in June, but this proposal was rejected. Nevertheless, Colowide did not give up and decided to launch a takeover bid in July.
-- Urgent need for recovery
With the success of the takeover bid, Colowide will now proceed with the restructuring of Ootoya. In August, Ootoya announced its consolidated financial results for the April-June period, which showed a net quarterly loss of 1.5 billion yen.
Sales have been sluggish since last year, and the social effects of the coronavirus pandemic was an additional blow, with total same-store sales in July falling 28.6% year-on-year. Bringing about a recovery in sales is an urgent task.
Colowide, owner of the Amataro izakaya pub chain, has grown it business through a series of mergers and acquisitions. The company has acquired Kappa Sushi, Freshness Burger, Gyu-Kaku, and other restaurant chains, aiming to become the top restaurant operator in the nation by sales.
With its number of restaurants increasing with the addition of Ootoya outlets, the company expects to reduce costs for ingredients and improve logistics efficiency through bulk purchasing. The cost savings from cost reductions could result in lowering prices on Ootoya's menu.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
