Greg Sutch talks the challenges and rewards of Japanese franchising.
GF: Thank you for speaking with us, Greg. Could you give me some insight into the work Intralink does in Japan?
GS: We have worked with lots of companies throughout the years that operate through franchise models. I got involved in 1995, and the first brand I worked with was Knickerbox. They were bringing underwear to the highstreet; it was a novel concept, and they were interested in the Japanese market.
GF: Would you say that penetrating the market is difficult?
GS: Culturally it’s very different, and historically, relatively few Japanese people have spoken English. In Tokyo, space is at a premium and if you have a traditional retail model, it’s all about location. Also, typically, the tenancy agreements are quite short term. They might only be two- to three-year leases, but you could be expected to put down a 12-month deposit.
GF: What are the key benefits of entering the Japanese market?
GS: It’s a terrific place. It’s efficient, well run, politically stable, and while there’s been a few economic bumps in the road the past 20 years, it’s generally financially stable. It’s a lighthouse for the region. Frankly, if you do well in Japan, that bodes well for your success in other Asian markets. That’s because Japan is regarded as a sophisticated and quite difficult market. If [a franchise] is good enough for the Japanese – and they’re very, very fussy – then it’s good enough for China and others in the region.
GF: Is the market centered around Tokyo, or should franchisors consider other areas?
GS: That’s a really good question and one that franchisors don’t ask themselves. It depends on what your product is and who your target market is. I certainly wouldn’t limit it to Tokyo, as I’d be looking at some of the other regional cities.
GF: Intralink recently played a role in taking Hamleys to Japan—does the historical heritage of a brand like this help with franchising?
GS: It’s very important, yes; more so than any other market. The history of a brand, the story behind it and the founder – that ticks boxes. I know that’s important in other markets as well, but I think it’s particularly so in Japan: your consumer is really interested in context.
GF: What do you see in the future for Japan, and will the country’s aging population dictate businesses?
GS: I’m confident about Japan. Japanese culture, generally, is really popular in the West. There are also some great events coming up: you had the Rugby World Cup that’s just finished, and the Olympics next year. I think the aging population actually creates opportunities. With fitness, there’s a growing market for the older generation that wants to stay in shape. Education is also huge, as the Japanese believe in lifelong learning. It’s not an easy market, and you’ve got to do your homework. Don’t be fooled: you can go into Tokyo and think, “this is terrific,” but it’s highly competitive and there are strong local brands. But if you get it right, you can do extremely well.
Our interview with Greg Sutch was originally published as part of a larger feature on Japanese franchising, which you can read here.
ABOUT THE AUTHOR
Kieran McLoone is the deputy editor for Global Franchise magazine.