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GLOBAL CAPITAL

Reversing the flow of flavors

Yes, McDonald's is all over the planet, but now foreign food franchises are creating and feeding a hunger on U.S. shores.

February 03, 2007|Evelyn Iritani | Times Staff Writer

It was an irresistible aroma that drew Ed Lee to a crowded kiosk in Hong Kong's Mongkok subway station in 2004. One bite of Beard Papa's crunchy choux pastry shell and creamy vanilla filling and the Southern California entrepreneur was smitten.

The next year Lee, 47, and his partner, Joe Lung, 41, both immigrants from Hong Kong, opened their own Beard Papa Sweets Cafe at the Hollywood & Highland center in Hollywood. It was a hit from the start, with security guards having to be called in to control waiting crowds and sales reaching 5,000 cream puffs a day during peak holiday times.

Business has indeed been sweet for Lee, Lung and like-minded entrepreneurs who are bringing foreign brands to the United States.

For decades, American icons such as McDonald's, Pizza Hut and Kentucky Fried Chicken have spread around the globe. Their success has transformed diets and dining habits, sparking an occasional backlash in some countries over the loss of homegrown tastes and eateries.

That flow of flavors is starting to reverse. Recently, there has been a wave of foreign companies exporting popular foods to the U.S., tapping into a "nostalgia factor" among this country's exploding immigrant populations, said Marcel Portmann, director of international development for the International Franchise Assn. in Washington.

For The Record
Los Angeles Times Tuesday February 06, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 56 words Type of Material: Correction
Foreign food franchises: An article in Business on Saturday about the franchising of foreign brands in the U.S. said that the GyuKaku chain served \o7yakitori and that parent company Reins International was based in Osaka, Japan. The chain serves a different style of grilled meats and vegetables known as \o7yakiniku, and Reins is based in Tokyo.

"You are selling them a piece of their childhood," he said.

Since 2004, Muginoho Co. of Osaka, Japan, has opened 22 Beard Papa franchises in the U.S.; it plans to add 10 this year, half in California. The company initially targets communities with large Asian populations, although the cream puffs have developed a loyal fan base among non-Asians as well.

In San Francisco, site of the second-most-popular Beard Papa store after Tokyo, half the customers are non-Asian, said Akira Okura, the company's West Coast representative.

"It's time to get themselves to Denver," Colorado resident Elise Baudouin said after sampling the cream puffs with her sister, Anne Leer, during a recent visit to Hollywood. Leer became a convert after she was taken to a Beard Papa store in Gardena by a friend.

Portmann says foreign companies expanding to the U.S. usually begin with company-owned stores.

But, he notes, they often switch to franchising so they can expand more quickly. Prominent examples include Guatemalan chicken chain Pollo Campero and Filipino fast-food company Jollibee.

In California, fast-food restaurants and retail establishments were the most popular category of franchises opened in 2005, the franchise association said.

Few foreign companies have had enough capital and management expertise to tackle the competitive U.S. market, said Bob Goldin, vice president of Technomics Inc., a Chicago-based food consulting firm.

But he predicts growth in this market because of the "American interest in authenticity and ethnic food." A weak U.S. dollar also lowers the cost for foreign companies of investing in the U.S.

Franchising carries risks, particularly for foreign companies unfamiliar with America's well-developed and heavily regulated system, in which operators buy the right to market and distribute the franchiser's products and to use the brand for a fixed period.

Reins International, the Osaka-based owner of the Gyu-Kaku yakitori chain, opened its first company-owned restaurant in West Los Angeles in 2001. The company has since opened 10 additional locations, offering Japanese-style grilled meats and vegetables cooked at the table. Two more are scheduled to open in California this year.

Geoff Moss, the Japanese company's U.S. spokesman, said it was considering going the franchise route in the U.S. but wanted first to make sure that it could maintain quality. Most of the chain's 840 outlets in Japan are franchises.

"The advantage of keeping it all under one roof is it's run the way we want it to be run," Moss said. "When you're franchising, you're bringing in a lot of different operators."

Adapting a foreign flavor for a U.S. audience can be tricky. Roberto Denegri is executive vice president for Pollo Campero, whose loyal followers waited as long as seven hours to get a taste of home at the opening of the first location in Los Angeles in 2002.

Pollo Campero, which has opened 27 company-owned and franchise restaurants in the U.S., is seeking to expand its customer base without alienating its loyal Central American customers. The company won't alter the basic menu -- marinated and battered chicken, French fries and coleslaw -- but it is adding a salsa bar, rice, burritos and other extras to try to appeal to a broader palate.

Pollo Campero is establishing franchises in Mexico, Ecuador and Spain and plans to do so by year-end in Indonesia. The company hopes to expand to China one day to tap into a growing interest there in Latin American culture.

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