Business Overview and History
Yoshiharu Global Co. is a California-based restaurant operator that has carved out a niche for itself in the realm of authentic Japanese cuisine. Founded in 2016, the company has rapidly expanded its footprint, establishing itself as a leading player in the fast-casual dining segment. With a commitment to quality, innovation, and providing a truly immersive Japanese dining experience, Yoshiharu Global has positioned itself for long-term success.
Yoshiharu Global Co. was incorporated in the State of Delaware on December 9, 2021, but its roots trace back to 2016 when the first restaurant was opened. Prior to September 30, 2021, the Yoshiharu business consisted of seven separate entities, each wholly owned by James Chae and each holding one store, except for JJ, which held two stores and the company's intellectual property.
In October 2021, Mr. Chae took a significant step towards consolidating the business operations by contributing 100% of the equity interests in each of the entities to Yoshiharu Holdings Co., a California corporation. This move was aimed at streamlining operations and creating a more unified corporate structure. On December 9, 2021, Yoshiharu completed a share exchange agreement whereby Mr. Chae, the sole stockholder of Holdings, received 9.45 million shares of Yoshiharu, representing 100% of issued shares at that time.
A major milestone in the company's history came in September 2022 when Yoshiharu Global consummated its initial public offering (IPO). The company offered 2.94 million shares of its class A common stock at a public offering price of $4.00 per share, generating gross proceeds of $11.76 million. This successful IPO marked Yoshiharu's debut on the Nasdaq Capital Market under the symbol "YOSH", providing the company with additional capital to fuel its expansion plans.
However, the company faced some challenges in 2023, including posting operating losses and net losses for the year. Yoshiharu Global incurred $3.79 million in operating cash outflows and $1.47 million in capital expenditures related to current and future restaurant openings. The company's financial performance was impacted by restaurant startup costs and increased general and administrative expenses, reflecting the growing pains often associated with rapid expansion in the restaurant industry.
Despite these challenges, Yoshiharu Global has continued to grow its presence in the market. As of September 30, 2024, the company operated 15 locations, with an additional 2 under construction. This expansion demonstrates the company's commitment to its growth strategy and confidence in its business model.
Yoshiharu Global's flagship offering, its signature Tonkotsu Black Ramen, has become a customer favorite, praised for its slow-cooked pork bone broth and freshly made, tender chashu pork belly. This commitment to quality and attention to detail has been the hallmark of Yoshiharu Global's success, allowing it to stand out in the competitive restaurant landscape.
In 2024, the company made strategic strides in expanding its international footprint, entering into non-binding memorandums of understanding (MOUs) with Chengdu Octaday Entertainment Group and Xing Sheng Group to bring its expanding cuisine to the Sichuan and Liaoning provinces in China, respectively. These partnerships underscore Yoshiharu Global's ambition to become a global brand, leveraging its proven operating model and unique culinary offerings.
Product Segments and Business Strategy
Yoshiharu Global Co. operates in the Japanese restaurant industry, specializing in ramen and other Japanese cuisine. The company has two primary product segments: its core ramen offerings and its broader Japanese dining experience.
Ramen Segment Yoshiharu's primary focus is on its ramen menu, which features a variety of signature ramen dishes. The company's acclaimed Tonkotsu Black Ramen, featuring a slow-cooked pork bone broth, has become a customer favorite. Yoshiharu takes pride in making its ramen broth and other key ingredients like pork chashu and flavored eggs entirely in-house, allowing it to uphold high quality and flavors. The company believes its meticulously prepared broth, rich in collagen and nutrients from the slow cooking process, is a key differentiator for its ramen offerings.
Japanese Dining Experience Segment Beyond its core ramen menu, Yoshiharu aims to provide customers with a comprehensive Japanese dining experience. The company's restaurants offer a variety of Japanese dishes such as rice bowls, appetizers, and other entrees. Yoshiharu also serves alcoholic beverages, including sake, to complement its Japanese cuisine. The company's restaurant environments are designed to create a warm, friendly atmosphere where customers can comfortably enjoy their meals.
Business Strategy Yoshiharu Global has pursued a disciplined new restaurant development strategy, aiming for over 100% annual unit growth over the next 3-5 years, though this growth rate is not guaranteed. The company is also exploring initiatives to grow sales of alcoholic beverages and plans to start franchising in 2025. These strategic moves are designed to capitalize on the growing consumer appetite for Asian cuisine, particularly ramen and Korean BBQ, which is widespread across demographics and presents Yoshiharu with opportunities for expansion in existing and new U.S. markets, as well as internationally.
Financial Analysis and Liquidity
Yoshiharu Global's financial performance has been characterized by steady revenue growth and a focus on operational efficiency. In the nine months ended September 30, 2024, the company reported revenues of $9.2 million, up from $6.7 million in the same period of the prior year. This 36.3% year-over-year increase was driven by the opening of new restaurant locations, as well as the company's ability to maintain positive comparable restaurant sales.
Despite the company's rapid expansion, Yoshiharu Global has remained diligent in managing its costs. In the nine-month period, the company's restaurant-level contribution margin increased to 11.0%, up from 8.1% in the prior-year period. This improvement can be attributed to the company's ability to leverage its growing scale and optimize labor and food costs.
However, Yoshiharu Global's bottom line has been impacted by increased interest expenses and general and administrative costs associated with its growth initiatives. In the nine months ended September 30, 2024, the company reported a net loss of $3.2 million, compared to a net loss of $3.0 million in the same period of the prior year.
For the most recent fiscal year (2023), Yoshiharu Global reported revenue of $9.21 million, with a net loss of $3.04 million. The company's operating cash flow was negative $4.59 million, and free cash flow was negative $6.06 million, reflecting the significant investments made in growth and expansion.
In the most recent quarter (Q3 2024), Yoshiharu Global reported revenue of $3.02 million, representing a 48.9% increase year-over-year. This growth was primarily driven by the acquisition of three new restaurant locations in Las Vegas. However, the company's net loss for the quarter was $1.22 million, slightly higher than the previous year due to increased interest expenses related to the Las Vegas acquisition.
The company's liquidity position remains stable, with cash and cash equivalents of $1.71 million as of September 30, 2024. Yoshiharu Global has also secured additional financing to support its expansion plans, including a $1.0 million private placement investment and a $900,000 bank loan to fund the acquisition of three restaurants in Las Vegas. The company has a $1.00 million revolving line of credit available.
As of Q3 2024, Yoshiharu Global's debt-to-equity ratio stood at -39.49, while its current ratio was 0.31 and quick ratio was 0.30. These figures indicate that the company may face some challenges in meeting its short-term obligations and highlight the importance of careful financial management as it continues to pursue its growth strategy.
Geographic Markets and Expansion
Currently, Yoshiharu Global operates all of its restaurants in the Southern California region. The company has not yet expanded into other geographic markets within the United States. However, with 15 locations as of Q3 2024 and 2 additional locations under construction, Yoshiharu Global is demonstrating a strong commitment to growth within its home market.
The company's recent acquisition of three restaurant locations in Las Vegas marks its first foray outside of Southern California and represents a significant step in its expansion strategy. This move contributed $2.4 million in incremental revenue for the nine months ended September 30, 2024, highlighting the potential for growth in new markets.
Risks and Challenges
While Yoshiharu Global has demonstrated its ability to grow its business and navigate the competitive landscape, the company faces several risks and challenges that could impact its future performance.
One key risk is the company's reliance on a limited number of suppliers for its key ingredients, such as its signature pork bone broth. Any disruptions in the supply chain or fluctuations in commodity prices could adversely affect Yoshiharu Global's cost structure and profitability.
Additionally, the company's rapid expansion strategy carries inherent risks, as the company must carefully manage the opening of new locations to maintain its high standards of quality and customer service. Failure to do so could lead to subpar performance at new restaurants, negatively impacting the company's overall financial results.
Yoshiharu Global also operates in a highly competitive industry, with a growing number of fast-casual and full-service restaurant concepts vying for the attention of diners. The company's ability to differentiate itself and maintain its appeal in an increasingly crowded market will be crucial to its long-term success.
Outlook and Conclusion
Yoshiharu Global's future outlook remains promising, as the company continues to execute on its growth strategy and explore new avenues for expansion. The company's commitment to quality, innovation, and providing a unique dining experience has resonated with customers, positioning it for continued success in the fast-casual dining segment.
The company's recent forays into the international market, through its partnerships in China, underscore its ambition to become a global brand. If successful, these initiatives could unlock significant growth opportunities and diversify Yoshiharu Global's revenue streams.
Yoshiharu's mission to bring Japanese ramen and cuisine to the mainstream by providing a high-quality, affordable dining experience aligns well with current consumer trends. The growing appetite for Asian cuisine, particularly ramen and Korean BBQ, across various demographics presents significant opportunities for expansion in both existing and new markets.
However, the company must navigate a number of risks and challenges, including supply chain disruptions, operational execution, and intense competition. Careful management of these factors will be crucial as Yoshiharu Global seeks to capitalize on the growing demand for authentic Japanese cuisine and solidify its position as a leading player in the industry.
Overall, Yoshiharu Global's commitment to quality, innovation, and strategic expansion has positioned the company for long-term success. By continuing to refine its operating model, expand its geographical reach, and adapt to the changing industry landscape, Yoshiharu Global is poised to master the art of authentic Japanese cuisine and deliver value to its shareholders. The company's ambitious growth plans, including its aim for over 100% annual unit growth over the next 3-5 years and its intention to start franchising in 2025, demonstrate a clear vision for the future. However, investors should closely monitor the company's ability to execute these plans while improving its financial performance and managing its debt levels.