Big on buffets

China's largest all-you-can-eat Japanese chain Kamii has filed for an initial public offering in Hong Kong as it charts out a plan to expand its nihon ryori restaurants across the mainland.

Nihon ryori broadly translates as "Japanese food" in English, and Kamii group says it falls into this sub-category of restaurants that offers a variety of traditional Japanese cuisine.

They are one of the most popular options within the Japanese all-you-can-eat market in the mainland, with a 71.8 percent market share in terms of revenue in 2020, according to a CIC report. And Kamii was the largest of its kind in terms of restaurants and revenue in 2020, according to the report.

Launched in 2004 in Shanghai, the Taiwan-backed group currently operates two brands.

Its flagship brand Kamii specializes in nihon ryori buffets while a new brand Niku offers affordable all-you-can-eat Japanese grill, with hot pot cuisine in the pipeline.

It currently operates 46 Kamii restaurants and one Niku outlet.

Kamii targets the middle and high-end market and its customers spent an average of 282.7 yuan (HK$348) in 2021.

Its revenue rose 45.7 percent to 359.8 million yuan last year from 247 million yuan 2020. Revenue had declined 62 percent in 2020 over 2019 amid the pandemic, but while revenue growth returned in 2021, its net profit of 31 million yuan was still shy of the 48 million yuan earned in 2019.

Kamii is aware that it needs to increase customer traffic and its table occupancy rate.

Seat occupancy and turnover rate is not high. From 2019 to 2021, the average seat occupancy rate was 63 percent, 59.5 percent and 64.8 percent respectively while its table turnover rate was 0.6, 0.6 and 0.7 respectively, none of which exceeded a rate of 1.

The operator also has been slow to expand, compared to other restaurant chains.

Kamii took six years to extend its business out of Shanghai and has opened just over 50 restaurants in 15 years.

During the pandemic, the chain saw 14 restaurants shut down in one year and it now has fewer restaurants than it did before the pandemic.

In addition to diversifying its business footprint through the launch of the lower-priced Niku brand, which has an average spend of 226 yuan, Kamii plans to further expand its portfolio by opening Japanese tea houses to cater to different customer tastes.

Unlike other Japanese restaurants that focus on first-tier cities, Kamii has rooted its shops in new first-tier cities and provincial capitals, particularly in southwest China.

Kamii plans to use the proceeds from the IPO to open new restaurants and develop new brands across the mainland, with approximately 19, 31 and 32 restaurants to be opened in 2022, 2023 and 2024 respectively across new tier 1, tier 2 and other cities.

The company was aiming to launch its retail business in the first half of 2022 at its restaurants and through third-party online platforms.

However, it lacks experience in retail business and may not be able to attract as many customers as targeted while third-party manufacturers who are not under its direct supervision, could raise unexpected liabilities.

Guosen Securities (HK) Capital is the sole sponsor of the listing.