Covid leaves Japanese restaurants with few appetizing options

Noritsugu Saida opened a lavish seafood restaurant on Yokohama’s waterfront at the end of 2019, just in time for its clientele to be quarantined as Covid-19 tore up their cruise ship, the Diamond princess.

However, after a year of the pandemic, cruise ships pose only a minor problem. Government restrictions make it difficult to run a profitable restaurant in Tokyo, but tough rental conditions in the Japanese real estate market make their closure extremely costly.

Saida’s predicament shows how well the Japanese service industry has supported the economic weight of the government’s Covid-19 strategy. The sector has neither customers nor adequate compensation for forced closings.

The resulting stress on the industry created cracks in Japan’s famous social solidarity, prompting a major restaurateur to defy government demands to shut down and sue the city of Tokyo for violating its rights under the Constitution.

Japan lifted a Covid-19 nationwide emergency state last month, but restaurants are still being asked to close at 9 p.m. because the government believes they are the main source of infections.

“The busiest time for people to eat and drink in Japan is when they return home with colleagues,” said Saida, co-founder and president of Luckbag Group, which operates 10 restaurants in the greater Tokyo area. .

“Nine o’clock is a little better than eight o’clock. But people who would not come out under the state of emergency still do not. Employees of large companies are afraid of getting into trouble. “

After a year of voluntary compliance, Japan recently passed a law allowing it to refine restaurants that don’t shorten their hours when asked. The city of Tokyo immediately issued 27 warnings, including 26 to restaurants run by Global Dining, the operator of Gonpachi, famous for his appearance in Quentin Tarantino’s film. Kill Bill.

As with a growing number of restaurants across the city, Kozo Hasegawa, the founder of Global Dining, had kept his establishments open in defiance of demands to close. He is funding a legal challenge to what he sees as an unconstitutional attempt to target him.

“Last year our sales fell 46% and we had a record net loss,” he said. “In total, we increased our debt by 1.3 billion yen ($ 11.8 million) on top of our old debt.” Hasegawa has denied that there is a serious health risk from Covid-19 and considers staying open a matter of survival for the company.

This is in part because of the limited support from the government. Japan’s restaurant grant during this year’s state of emergency reached 600,000 yen, which was helpful for family-owned cafes, but had little impact in large restaurants with dozens of employees. .

Saida said he asked for the money but had not yet been paid. He understood Hasegawa’s decision to stay open: “If you go bankrupt, that’s it, so it makes sense to do what you need to do to survive.”

As it became clear that neither weddings nor corporate meals would recover anytime soon, Saida realized he had to close some restaurants – but in Japan, that’s easier said than done. .

“There’s a situation where you want to close a restaurant but you can’t,” he says from the small apartment where his headquarters staff have retired to cut costs.

In the best-case scenario, he must give six months’ notice and pay 20 million yen to restore the premises to skeleton. At worst, he’s locked into a seven-year lease without a termination clause.

To make matters worse, so many restaurants want to close that renovation contractors are charging double the normal prices.

Saida has found some hope through an online “restaurant rescue” platform called Taikyo Navi, which aims to parachute new restaurants into existing premises. He has found a taker for one of the restaurants that Saida needs to unload.

“The exit cost is zero. We don’t have to pay anything for the obsolescence and we get our full deposit back, ”he said. “Just getting that 20 million yen deposit back is helping our cash flow tremendously.”

Standard contracts for commercial real estate in Japan are rigid and include large deposits and brokerage fees, before restaurant equipment costs are factored in. Under Taikyo Navi, new tenants offer to take over the existing contract and fittings

“Before Covid-19, we had 600 members for this service – our main users. In the months following the start of the pandemic, we reached 3,000, ”said Manabu Shintani, managing director of Actpro, the consulting firm that launched the service.

The restaurant that Saida has managed to unload is in a residential area, but it is still struggling to find a solution for two downtown restaurants that rely on renting private rooms for weddings or corporate clients. If he can survive until more than Japan gets vaccinatedhowever, he believes the opportunities will be spectacular.

“Tokyo’s restaurant market is the most competitive in the world,” he said. “With so many closures due to the coronavirus, all the competition will be gone.”