Inside Kura Sushi’s IPO Filing
Kura Sushi USA, a wholly-owned subsidiary of Osaka-based Kura Sushi Japan, filed an S-1 with the Securities and Exchange Commission last week and intends to raise approximately $58 million in an initial public offering. BMO Capital Markets and Stephens Inc. are underwriting the offering.
Kura Sushi’s 21 restaurants in California, Texas, Georgia, Illinois and Nevada averaged $3,457,000 in 2018 and the company sees restaurant potential in the U.S. to be over 290 restaurants, with an average annual restaurant growth rate of 20% over the next five years. That growth rate alone should draw investors to its shares.
Kura Sushi’s operating model is also interesting from an investment standpoint. Its use of technology is designed to buttress the industry-wide problem of rising labor costs. Customers select sushi rolls and desserts on small plates from a revolving conveyor belt protected by a proprietary dome. Guests can also access a full menu by way of a tableside ordering screen. This system allows Kura Sushi to minimize the number of front-of-the house employees.
In the kitchen, the company employs automated equipment and technology including sushi robots, RFID readers on the plates, robotic arms and food replenishment algorithms to reduce labor and food costs. The company also uses technology to analyze customer traffic, order demand, timestamps on the items on the revolving conveyor belt. Restaurant-level data is sent to the corporate headquarters to track and manage inventory and labor.
Kura Sushi Japan opened its first sushi restaurant in 1984 and now has over 450 locations. Just last month, the Japanese company offered up shares in Kura Sushi Asia Co. Ltd. on the Taipei Exchange. Kura Sushi Asia operates 18 outlets in Taiwan.
Despite the recent run of initial public offerings, the restaurant industry hasn’t seen its share of IPOs since 2015. That year, initial public offerings were completed by Shake Shack (SHAK-NASDAQ), Bojangles, Inc., Fogo de Chao and Wingstop (WING-NASDAQ).