Family-style restaurants are feeling the squeeze as diners increasingly opt for meals more on the cheap, such as under-¥300 “gyudon” bowls of beef on rice and “bento” boxed lunches below ¥500.

The so-called family restaurants (shortened in Japanese to “famiresu”) long made up a middle range of eateries that filled the gap between gourmet restaurants and fast-food joints, offering modest alcoholic beverages, free coffee refills, parking (as most are located in suburbs not near commuter stations) and a place where children aren’t considered a nuisance.

What has befallen the family restaurants? Following are questions and answers:

What defines a family restaurant?

Although they come in many forms and their themes and fare vary, such eateries are generally considered places for parents to take the whole family to dine at a reasonable price, such as ¥500 to ¥3,000 per head, according to market researcher Fuji Keizai Co.’s Shuten Tanaka.

The restaurants, mainly part of large chains, are usually bright, always offer sit-down service, and are not the long, drawn-out dining experiences offered at fine-dining establishments.

What was the first family restaurant in the nation?

In 1970, Kotobuki Food opened what is considered to be Japan’s first family restaurant, called Skylark, in Fuchu, Tokyo. The company, now called the Skylark Group, has since closed the Skylark eateries and converted many of them into branches of a new budget chain called Gusto.

Which outfits run family restaurants and which are most popular?

The Skylark Group is the largest operator, boasting such widespread eateries as Jonathan’s, Gusto, Bamiyan, Yumean and Aiya. Seven & I Food Systems Co. runs Denny’s (from the U.S.) and other venues. Zensho Co. runs Coco’s, Big Boy and Jolly Pasta, while Royal Holdings Co. operates Royal Host and Saizeriya Co. has Saizeriya.

Bamiyan serves Chinese food; Yumean and Aiya offer only Japanese fare, Coco’s and Big Boy specialize in hamburgers and steaks, Saizeriya and Jolly Pasta are categorized as Italian family restaurants, and Denny’s, Gusto and Royal Host offer a wide spread of items not tied to one ethnicity.

Operators other than Saizeriya have multiple family restaurant brands as well as other types of eateries. Zensho, for example, runs the Sukiya chain of gyudon restaurants.

Operators tend to merge and become bigger to acquire better pricing power with food suppliers.

How is the industry faring?

Sales at family restaurants fell 3.3 percent to ¥1.436 trillion in 2010 from 2009 and will fall 2 percent to 1.408 trillion in 2011 from 2010, according to Fuji Keizai. The peak was probably about ¥1.7 trillion around 2000, Fuji Keizai’s Tanaka said. Fuji Keizai has statistics dating back only to 2003, including those showing a steady decline since 2007.

Outlets were down by 0.5 percent to 12,239 at the end of last year and are expected to number 12,205 at the end of this year.

Why have sales fallen?

Various factors appear to be behind the drop in sales, particularly the economic slump that has prompted many people to dine in.

Then there’s the decline in the population of children and in the penchant for driving, said Yusuke Takasaki of market researching company P&E Directions Inc.

Operators of family restaurants also failed to adapt to business environment changes, Fuji Keizai’s Tanaka said.

“It’s a losing industry,” Tanaka said. “They failed to add value. Other restaurant types, for example, McDonald’s and Sukiya, added value by offering new items. All family restaurants can do is lower prices, but that is not adding value.”

If the restaurants improve the quality of their fare and hence hike prices, they will be competing with higher-end eateries that tend to mainly attract parents who want to leave the kids at home and enjoy fine dining and fancy drinks, he said.

Fast food chains also starting to attract more families, siphoning off patrons from family restaurants. Sukiya not only cut prices to take customers from rival Yoshinoya, but also broadened its menu, offering for example six different gyudon amounts and a greater variety of toppings, attracting children and women who had before shunned such outlets.

Which chain boasts success?

Tanaka and Takasaki agree Saizeriya is on top. The company posted sales of ¥24 billion in the three months that ended last Nov. 30, down 0.9 percent from a year earlier, and an operating profit of ¥2.6 billion, off 32 percent.

The earnings may not look so good, but Saizeriya is in better shape than its rivals, which do not disclose their individual earnings, the two said. Other firms report companywide earnings, but not earnings for individual restaurant brands.

A Fuji Keizai report says sales of Saizeriya outlets amounted to ¥84.8 billion in 2009, up 2.5 percent from 2008, while the family restaurant industry saw a 6 percent drop. Saizeriya accounted for 61.3 percent of Italian family restaurants and 6.02 percent of entire family restaurants in 2009.

The key to Saizeriya’s success is that the company cut costs effectively and reduced retail prices accordingly and its chefs are mainly in name only, as they just reheat fare already prepared in large food-producing factories, which gets the meals on tables faster, a Saizeriya spokesman said.

All other chains have taken similar cost cuts, but not to the same extent as Saizeriya, Takasaki said.

What options do family restaurants have besides cutting costs?

They may have to consider relocating abroad because the business model doesn’t work in Japan amid its declining population, the two researchers said. Saizeriya, which already has outlets in Taiwan, China and the U.S., has the best chance to succeed overseas, Takasaki said, hinting other rivals may not be as successful.

“They cannot just open restaurants overseas. They have to export business knowhow, and Saizeriya has the best knowhow,” he said.

Restaurant operators will have to close unprofitable outlets, which are typically located along major thoroughfares in suburbs and boast ample parking areas, and look to merge, the two researchers said.

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