10-K: Yoshiharu Global Co. 2023 Annual Report: Stock Structure, Growth Strategy, and Financial Performance

Yoshiharu Global Co.'s 2023 annual report details its stock structure, growth strategies, and financial performance, including a reverse stock split and expansion plans.

Summary

• Yoshiharu Global Co. operates a chain of Japanese restaurants, specializing in ramen.
• The company has two classes of common stock: Class A with one vote per share and Class B with ten votes per share, with the CEO holding all Class B shares.
• A 1-for-10 reverse stock split was implemented in November 2023.
• The company reported a net loss of $3.0 million in 2023 and $3.5 million in 2022.
• Revenue increased to $9.2 million in 2023 from $8.3 million in 2022.
• The average unit volume (AUV) was $1.1 million in 2023, down from $1.2 million in 2022.
• The company plans to expand by opening new corporate-owned restaurants and through franchising.
• Ten restaurants were operational as of December 31, 2023, with one new location opened in February 2024 and three existing restaurants in Las Vegas expected to be acquired in early Q2 2024.
• The company anticipates approximately $350,000 in costs per new location in development.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there is revenue growth and expansion plans, the company is still operating at a loss and faces significant risks. The sentiment is neutral to slightly negative due to the financial losses and challenges ahead.

Positives

• Revenue increased by 11.3% year-over-year.
• The company is actively pursuing new restaurant development and expansion into new markets.
• Yoshiharu is exploring franchising opportunities to further expand its brand.
• The company is exploring new revenue streams such as instant ramen and partnerships with grocery retailers.
• The company has a remote management system to monitor restaurants in real-time.

Negatives

• The company reported a net loss of $3.0 million in 2023.
• Average unit volume (AUV) decreased from $1.2 million in 2022 to $1.1 million in 2023.
• The company has a limited number of restaurants, making it susceptible to fluctuations in results.
• The company is geographically concentrated in California, making it vulnerable to regional economic conditions.
• The company has incurred operating losses and may not be profitable in the future.

Risks

• The company may not be able to successfully implement its growth strategy due to various factors including site selection, lease terms, and competition.
• The company's operating results and growth strategies are closely tied to the success of future franchise partners.
• The company faces significant competition from other restaurants.
• Supply chain disruptions and inflation could adversely affect the company's profitability.
• The company is subject to risks associated with long-term non-cancelable leases.
• Delays in obtaining construction permits can have a material adverse effect on the business.
• The company may become involved in lawsuits regarding intellectual property.
• A breach of security of confidential consumer information could substantially affect the company's reputation.
• The company's marketing programs may not be successful.
• The company depends on its senior management team and other key employees.
• Minimum wage increases could significantly increase labor costs.
• The company may not be able to raise capital on favorable terms.
• The company is an emerging growth company and may not be able to fulfill public company obligations.
• The company's management does not have experience managing a U.S. public company.

Future Outlook

The company aims to achieve over 100% annual unit growth rate over the next three to five years, expand into new markets, and initiate sales of franchises in 2024. They also plan to explore new revenue streams such as instant ramen and partnerships with grocery retailers.

Management Comments

• Our mission is to bring our Japanese ramen and cuisine to the mainstream, by providing a meal that customers find comforting.
• We believe that slowly cooking the bone broth makes it high in collagen and rich in nutrients.
• We also strive to present food that is not only healthy, but also affordable.

Industry Context

The restaurant industry is experiencing growth, with sales exceeding $1.0 trillion in 2023. Yoshiharu operates in the intersection of full-service and limited-service segments, and is well-positioned to benefit from the increasing multiculturalism and demand for quality, value, and healthy options.

Comparison to Industry Standards

• Jinya Ramen Bar, a direct competitor, operates approximately 40 locations in the United States and also franchises their restaurants.
• The National Restaurant Association (NRA) reports that full-service restaurant sales are expected to increase to $324 billion in 2023, a 6.2% increase from 2022, while the limited-service segment is forecast to reach $395 billion in 2023, a 6.8% increase from 2022.
• Yoshiharu's AUV of $1.1 million in 2023 is a key metric to compare against industry averages and competitors, though specific benchmarks for ramen-focused chains are not provided in the document.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently involved in litigation that is expected to have a materially adverse effect on its financial condition or results of operations.

Related Party Transactions

• The company has received unsecured borrowings from James Chae and his affiliate APIIS Financial, Inc., which are repayable on demand.
• The company has a history of related party transactions with James Chae, including the transfer of assets and equity.
• The company has a related party transaction policy to review and approve related party transactions.

Stakeholder Impact

• Shareholders may be concerned about the company's continued losses and the decrease in AUV.
• Employees may be affected by potential changes in labor costs and the company's growth strategy.
• Customers may be impacted by changes in menu offerings and restaurant locations.
• Suppliers may be affected by the company's expansion plans and supply chain initiatives.
• Creditors may be concerned about the company's ability to repay its debts.

Next Steps

• The company plans to open additional restaurants in existing and new markets.
• The company expects to complete the acquisition of three existing restaurants in Las Vegas in early Q2 2024.
• The company intends to initiate sales of franchises in 2024.
• The company is exploring the development of instant ramen noodles for retail distribution.
• The company intends to explore partnerships with grocery retailers to provide for small-format Yoshiharu kiosks in stores.

Key Dates

Keywords

ramen, Japanese cuisine, restaurant, franchise, expansion, reverse stock split, financial performance, restaurant industry, food service, Yoshiharu