The talent pool for sushi concepts is slim, so the casual-dining brand is leveraging technology to make up for it.
In a cuisine category that’s proven difficult for brands looking to scale, Kura Sushi CEO Jimmy Uba said automation is what separates his brand.
According to the executive, part of what makes expanding sushi restaurants so difficult is the highly skilled labor required to make sushi. It can take several years—and in some cases, up to a decade—to become an adequately trained sushi chef, which he said limits the pool of available talent needed to staff growth-ready sushi restaurants.
He added that “99 percent of people in Japan can’t make sushi,” so operators looking to expand must source talent through other means.
This is where Kura Sushi separates itself. Rather than relying on sub-par talent or conducting searches for available sushi chefs, the chain has used automation to operate some of the most difficult jobs related to preparing sushi.
The brand has been able to “sidestep the skill issue” through the use of technology.
“None of our restaurants rely on an executive chef,” Uba said. “This is the reason why we’ve been able to grow to 35 restaurants ... and what will allow us to grow to hundreds of restaurants [in the U.S].”
Kura Sushi’s domestic unit count grew 28 percent in fiscal 2021 to 32 restaurants. Another was added during the chain’s first quarter, which ended November 30. The long-term goal is to reach roughly 300 units nationwide.
Automation not only allows the chain to be less reliant on executive chefs, it also provides greater value for the customer, Uba said.
While there are other rotating sushi restaurants throughout the country, not all of them have the technological advantages Kura Sushi does. The brand uses the more than 50 unique patents to differentiate the operations process, resulting in a unique experience at a highly competitive value.
The automation doesn’t stop in the kitchen. The company uses a remote management system, which includes a battery of cameras monitoring everything in real time. Workers receive instructions from those observing cameras at the company’s headquarters.
More automation is planned for the rest of the year. Tableside payment and a touch panel for drink ordering have already been implemented, giving servers more time to focus on “human connection” as opposed to running checks and payments, Uba said.
The chain is also testing robot servers as part of an ongoing pilot program. The innovation should be rolled out systemwide by the end of the fiscal year. Uba described the robots as “R2D2 with a tray.” The reviews from customers have been overwhelmingly positive, he added.
Although Uba expects these initiatives to help reduce future labor costs, the immediate goal is to reduce workload and improve the customer experience.
“It’s been stellar,” he said
Kura Sushi’s growth is also helped by its willingness to explore markets that may otherwise be overlooked. Instead of using a hub-and-spoke model, the brand identifies where the biggest pockets of opportunity are.
“We think of this as a huge real estate advantage,” he said.
In fiscal 2021, Kura opened units in Fort Lee, New Jersey, and Bellevue, Washington—two markets that would have been hard to reach if the chain grew regionally, Uba said. The two units are now among the best performers in the entire system.
“If we had been reliant on a hub-and-spoke model it would have taken us over a decade to get to the Eastern Seaboard,” he said. “Now that we know how lucrative it is, we’re opening a store in Pennsylvania, in Massachusetts, and a second store in New Jersey.”
Unit count isn’t Kura Sushi’s only example of growth. The rewards program, which launched in 2019, has seen its membership grow steadily over the past year.
There were around 100,000 members as of Q2 2021. That number has more than tripled to nearly 313,000 as of Q1 2022.
“The growth has been nothing short of tremendous,” investor relations manager Ben Porten said, adding that rewards members have higher return rates and larger average checks.
He said membership usually spikes during new openings, but those numbers only partially explain the massive influx of new customers.
Porten credited the measurable increase to two factors. The first is Kura Sushi’s ability to reach untapped markets and capture customers who may not have access to other sushi restaurants with rewards programs. He attributed the other reason to the brand’s marketing department. The team implemented promotions in which members who spend a certain dollar amount can win prizes. There’s also monetary incentives, like getting $5 back for every $50 used.
Total sales were $29.8 million in Q1, compared to $9.4 million last year. Same-store sales rose 19.9 percent against two years ago, and 154 percent year-over-year. Operating loss was $1.3 in the first quarter, versus $6.3 million in the previous year.
Food and beverage costs as a percentage of sales were 30 percent compared to 32.4 percent in in the year-ago period. CFO Steve Benrubi said the decrease was due to a “high-single digit” price increase taken in September. The increase was the largest in the company’s history, but has proven very effective; guests have shown minimal response to the hike.
Benrubi described it as the “best cost of goods” in recent memory. Kura Sushi’s non-reliance on primary proteins such as beef has insulated it from volatile spikes.