Saizeriya
Corporate History & Strategy

Saizeriya's founder Yasuhiko Shogaki was enrolled in the physics department at Tokyo University of Science and initially aspired to become a researcher. However, through thesis research at a national research institute, he realized he lacked passion for an academic career and concluded that a food business would be the most suitable choice for starting a venture from scratch. In July 1967, he opened a restaurant as a sole proprietor in Motoyawata, Chiba Prefecture, but the following year a fight between yakuza gangs broke out in the establishment, and the shop was completely destroyed by fire when a kerosene heater was thrown.

Using the fire as an opportunity, in May 1968 Shogaki opened 'Saizeriya' Store No. 1, an Italian restaurant, in the same Motoyawata location. At the time, Western cuisine was still in the early stages of penetration in Japan, and there were no authentic Italian restaurant chains. Shogaki chose Italian cuisine based on the hypothesis that as long as the ingredients were good, the dish would be less dependent on the chef's skill. His belief was that 80–90% of deliciousness is determined by ingredients, 5–10% by temperature and humidity control, and only 5–10% by cooking technique.

However, in the 1970s, the yen was weak at around 300 yen to the dollar, making imported Italian ingredients expensive. The procurement cost of core ingredients—dairy products, cheese, tomatoes, olive oil, and wine—became a bottleneck. Conversely, the weak yen functioned as a barrier to entry, suppressing the emergence of competitors.

For the first five years after opening, Saizeriya struggled to attract customers. Operating a 30-square-meter restaurant on the second floor of a produce shop—a location easy to overlook—daily sales remained around 30,000 yen. After deducting rent, the effective salary for the Shogaki brothers was essentially zero, and it is estimated that continuing operations would have been impossible without financial support from the family, which had a medical background.

Around 1975, Shogaki made a last-resort gamble by halving all menu prices. Offering spaghetti at 200–300 yen was an extraordinarily low price point for the time. According to Shogaki, the threshold at which people perceive something as 'cheap' is half the market rate, and the price of food that is consumed and disappears is determined at twice the price of a magazine—an 'empirical rule.' Weekly Shonen Jump cost 190 yen, and twice that was 380 yen, which matched Saizeriya's price range.

The price halving turned Saizeriya into a popular establishment. From this experience, the management policy was established: disregard 'location,' which is conventionally prioritized in the restaurant industry, and offer food at half the market rate while investing in ingredient costs. The business was incorporated as Mariannu Shokai Co., Ltd. in 1973 with capital of 10 million yen, laying the foundation for chain expansion.

The principles Shogaki established during the founding period can be summarized in three points. First, a poor-location strategy that avoids prime sites to minimize store opening costs. Second, low pricing benchmarked at half the market rate. Third, a cost allocation design that invests in ingredient quality rather than chefs' skills. As a science-trained founder 'scientifically decomposed' what makes food delicious, a business model emerged that placed ingredient procurement as the source of competitive advantage.

Specializing in Italian cuisine offered the structural advantage of enabling consolidated purchasing. Unlike typical family restaurants that offer diverse menus causing ingredient categories to be dispersed, focusing on Italian cuisine allowed bulk procurement of common ingredients such as cheese, tomatoes, and olive oil. This procurement structure would later evolve into direct imports from overseas and the establishment of the company's own factory in Australia.

By the late 1970s, multi-store expansion using a dominant area strategy began, but the entire foundation had been formed during the first decade since founding. It was a business model born from a science-minded founder's deconstruction and reconstruction of restaurant industry conventions.

In December 1977, Saizeriya opened the 'Ichikawa Kitaguchi' store in Chiba Prefecture, marking the start of multi-store expansion. However, the company did not pursue nationwide expansion, instead adopting a dominant-area strategy limited to the Tokyo metropolitan area where demand was strongest. In May 1979, it opened its first Tokyo store (Koiwa Kuramae), in April 1981 its first shopping center location (Funabashi LaLaport), and by November 1988 had built a 20-store network. The policy of concentrating in specific areas and building awareness through word of mouth rather than relying on advertising was rooted in the founding-period experience.

In October 1987, the company developed its own order entry system and began standardizing store operations. In 1989, it started opening roadside locations (Kashiwa Mito Kaido store) and suburban locations (Jusco Kita-Toda store), broadening its range of site types. The 12 years in the Tokyo metropolitan area served as a preparatory period for Saizeriya to develop the store management know-how and ingredient procurement infrastructure needed for nationwide expansion.

In parallel with multi-store expansion, founder Yasuhiko Shogaki pursued the 'industrialization' of Italian cuisine. Based on the founding-era hypothesis that 80–90% of deliciousness is determined by ingredients, he incrementally built a system for directly importing ingredients from Italy and other countries. Core Italian ingredients—cheese, tomatoes, olive oil, and wine—are limited in variety, enabling bulk procurement.

Typical family restaurants offering diverse menus see ingredient categories dispersed, with individual procurement volumes remaining small. Saizeriya, by specializing in Italian cuisine, converted this structural difference into a purchasing advantage. The yen's appreciation through the 1980s provided a tailwind, and the procurement cost of imported ingredients declined. This ingredient procurement system became the foundation for the later development of the company's own factory in Australia and its own farm in Fukushima.

Entering the 1990s, Saizeriya expanded its store openings from the Tokyo metropolitan area to the entire country. In May 1991, it entered Aichi Prefecture (Toyota Sogo store), and in March 1992, Hokkaido and Toyama Prefecture, surpassing 50 stores in June 1992 and 100 stores in July 1994. The store-opening pace was underpinned by founder Yasuhiko Shogaki's benchmark of a 20% investment return. The calculation was: borrow three times the equity from banks, invest the entire amount in store openings, and if an ordinary income margin of 20% is secured, revenue will grow at 130–150% year over year—reaching 200x in 20 years.

Shogaki described this mathematics as 'by no means an impossible figure for a food business.' Selecting locations that could deliver a 20% investment return was the core of the store-opening decision, which inevitably meant not prime locations in front of stations but rather second floors of station buildings or basement levels—places with lower rents. By around 1993, the company was securing an ordinary income margin of 10%, achieving a store-opening speed for an Italian restaurant chain that outpaced all competitors.

Saizeriya's location strategy was an extension of the founding-era empirical rule that 'if you halve the price, customers will come.' Rather than paying prime-location rents, it was more capital-efficient to open stores in poor locations to minimize costs and invest the savings in ingredient costs. In Shogaki's words, 'locations with poor conditions that nobody wants to touch' were precisely the places that could generate an ordinary income of 20% or more on the invested amount.

In May 1995, the company began opening stores in the Kansai region (Rokko Island store), further expanding the geographic range of its nationwide rollout. The combination of suppressed store-opening costs and low-priced menus charted an exceptional growth trajectory in the restaurant industry during the post-bubble period of sluggish consumer spending. The uniqueness as an Italian restaurant chain and the investment criteria assembled by a science-trained founder formed the structure that supported the nationwide expansion.

In 1994, having reached a 100-store network, Saizeriya was featured on a television program. The next day, long lines formed at stores, but operations could not keep up with the sudden surge in customers, and service quality deteriorated. Complaints flooded in, and once the TV buzz subsided, customer traffic dropped abruptly. The incident exposed a structural problem: a temporary spike in customers exceeding a store's processing capacity could erode the trust of existing customers.

From this experience, Shogaki fundamentally reversed course, rejecting customer acquisition through advertising. The choice was to hold prices steady, improve ingredient quality, and wait for customers to return through word of mouth. Indeed, although the ingredient improvements were never advertised, customer traffic reportedly returned to an upward trend.

For the fiscal year ending August 1997, Saizeriya's advertising expenses were just 60 million yen against revenue of 19.4 billion yen—a ratio of 0.3% to revenue. In the restaurant industry, where advertising expense ratios of 1–3% are typical, Saizeriya's 0.3% was an extremely low level. The cost allocation design of redirecting funds not spent on advertising toward ingredient costs was an extension of the 'invest in ingredients' policy that had been consistent since the founding period.

The customer acquisition model that did not rely on advertising functioned throughout the latter half of the 1990s. Customer numbers gradually increased, and revenue continued to expand. In April 1998, Saizeriya registered its shares for over-the-counter trading, listed on TSE Second Section in July 1999, and promoted to TSE First Section in August 2000. The TV feature's failure ultimately became the catalyst for establishing a unique management model that redirected advertising spend toward ingredient costs.