QSR chain Pepper Lunch sold to J-Star

Japanese restaurant operator Pepper Food Service is selling its profitable Pepper Lunch chain to J-Star investment fund for US$79 million.

The sale is expected to provide a much-needed cash injection to the debt-ridden Pepper Food business in the hopes of restoring investor confidence in the firm, which also operates the struggling Ikinari Steak brand.

Pepper Lunch, which serves sizzling platters of meat-based dishes with sauces, has expanded throughout Asia on a franchised basis, including in Vietnam, Singapore, and Thailand.

The acquisition also includes the Pepper Lunch Diner, 92’s, Charcoal-Grilled Hamburger Steak Kuni, Tokyo 634 Berg, Musashi Hamburg, and CAB Steak restaurant brands. Collectively, the business operates 181 stores in Japan and 333 overseas.

In a statement announcing the purchase, J-Star said the 26-year-old restaurant concept has a strong market position in food courts, where affordable prices and quick delivery are required, by combining customer satisfaction and high productivity, with a unique cooking system in which selected steak meat is cooked right in front of customers.

“We will support the management team to establish a corporate foundation as an independent business, to accelerate domestic growth by leveraging its competitive advantage, as well as growth strategy through global expansion,” J-Star’s statement said.

Meanwhile, Pepper Food is expected to use the funds to sustain the remaining business in the hope it can stabilize and return to profit. Ikinari Steak currently runs an operating margin of 3 percent, a fraction of the 14 percent of Pepper Lunch and the other businesses sold.

Pepper Food is reportedly considering switching more of its owner-operated locations into franchises – although the appeal of the Inikari brand may be limited.

J-Star is an independent and partner-owned Japanese alternative asset manager with $300 million of assets under management.