Pret A Manger co-founder seeks IPO, U.S. expansion for to-go Asian concept

Dive Brief:

Julian Metcalfe, co-founder of Pret A Manger, is looking to go public with his U.K.-based, 15-year-old concept, Itsu, according to MarketWatch. Itsu features sushi, udon bowls and other Asian-inspired items.
Metcalfe plans to float Itsu on the stock market within the next five years with an objective of adding 1,000 U.S. stores.
The first U.S. location opened in New York City in June 2018. Construction is set to begin on Wall Street this summer for a second location. There are currently 75 locations open in Europe.

Dive Insight:

Although 1,000 units seems ambitious, there's no doubt Metcalfe is looking at the long-game here. The company is in discussions with potential franchise partners who share a 20-to-30-year view of expansion, the MarketWatch story notes.

Itsu seems to have a solid business model so far that can sustain it through a five-year float period. For example, the company generates a 45% profit margin, according to Metcalfe. Comparatively, the average profit margin for a quick-service restaurant is 6% to 9%.

Still, the company's 2018 financials show a revenue loss of over $7.2 million, though quarter-over-quarter sales improved by 3.6%. However, the financials also show that the company gains more profits from its grocery business, which doesn't seem to be part of the U.S. expansion plan. These could pose major challenges with any IPO plan.

But there is plenty of opportunity nonetheless. Global ethnic cuisine is experiencing a compound annual growth rate of nearly 12% through 2024, according to Mordor Intelligence, and Asian cuisine is a big part of that jump. In 2017, the Pew Research Center showed there were 20 million Asian-Americans in the U.S., or a 72% increase since 2000.

No doubt more consumers are also craving healthier options, and a 1,000-unit chain that focuses on such options is one way to offer more accessibility to this growing consumer base. Considering these trends, there seems to be a void of major chains focused specifically on healthier Asian cuisines. A glance at Restaurant Business's Top 500 Chains includes only two Asian concepts in the top 100: Panda Express and P.F. Chang's.

With so much blank space, Itsu will have plenty of competition in the U.S. from other emerging Asian food chains. Bonchon, a Korean barbecue chicken chain, is targeting 500 units in the U.S. by 2026 while its CEO Flynn Dekker said during the ICR conference last week that it has the potential to reach 1,500 units. Benihana is growing its fast casual spinoff in stadiums and arenas, while Kura Sushi CEO Hajime "Jimmy" Uba said during ICR that the revolving sushi chain, which currently has 24 units in five states, has the potential to reach 300 units in the U.S.

Unlike these other chains, Itsu is a grab-and-go concept, which bodes well for its growth as more consumers, particularly younger ones, seek out this option. There are plenty of other smaller concepts, including New York City competitor Wasabi Sushi and Bento, likely itching to crack this space, but Itsu is testing technology that enables customers to create their own sushi via its app. This could be another differentiator as the company scales.