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Burger King Japan passing reins to Hong Kong investment fund

Fast-food chain struggled to grow under South Korea's Lotte Group

Burger King is transferring franchise rights to a Hong Kong private equity fund after failing to reach 100 locations in Japan under current leadership.

TOKYO -- Burger King, the world's second-largest hamburger chain, will transfer Japanese operations to a Hong Kong private equity firm, aiming to make growth sizzle with more locations.

The restaurant chain has opened fewer than 100 Japanese stores under the leadership of South Korea's Lotte Group. Market leader McDonald's Holdings (Japan) is staging a rapid recovery after several slow years, pressing Burger King to rethink its approach.

The Burger King brand, originally American, is owned by Canada's Restaurant Brands International and has 16,000 stores worldwide, mainly in the U.S. The master franchise right for Japan operations had been held by a Singapore branch overseeing greater Asia.

That franchise right will shift to Hong Kong's Affinity Equity Partners, which has set up Burger King Japan Holdings to operate the company locally. A management team will be selected by November.

The burger chain had backed out of Japan in 2001 amid slumping earnings. But in 2007, Lotte and Japanese enterprise support company Revamp revived it under the Burger King Japan name. In 2010, South Korean fast-food chain and Lotte unit Lotteria bought the company and made it a subsidiary.

Lotteria had managed Burger King in Japan per the wishes of the North American company that is the real holder of the Japanese operating rights. But under Lotteria, the chain opened only 98 stores in Japan, with just one new location this year. Though McDonald's Japan shut many stores in recent years as earnings slackened, it remains far ahead with about 2,900.

Affinity had shown results operating Burger King in South Korea, and was judged capable of jump-starting the Japanese business with new locations. Lotteria will keep its stake in Burger King Japan and remain involved in operating existing locations.

Japan's fast-food industry has undergone heavy reshuffling of late. The local arm of U.S. hamburger chain Wendy's bought Tokyo-based First Kitchen, while restaurant operator Colowide purchased the company that runs domestic chain Freshness Burger. Japan's shrinking population gives the market few prospects for growth, but companies including premium U.S. burger joint Shake Shack apparently see enough demand to keep advancing in the country.

(Nikkei)

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