ManagementManagement IntegrationIntegration betweenbetween DoutorDoutor CoffeeCoffee andand NipponNippon RestaurantRestaurant SystemSystem
April 26, 2007
Doutor Coffee Co., Ltd. Nippon Restaurant System Inc. Contents
1. Background of the Management Integration 2. Purpose of the Management Integration 3. Basic Management Policies for the Integration 4. Company Descriptions 5. Positioning in the Restaurant Industry after the Integration 6. Management Objectives 7. Strategies for the Holding Company 8. Synergies anticipated from the Management Integration 9. Schedule for the Stock-Transfer 10. Structure of the Management Integration 11. Outline of the Holding Company 12. Directors and Auditors 13. Time Schedule for the Integration
2 １．Background of the Management Integration
ChangingChanging environmentsenvironments surroundingsurrounding thethe twotwo companiescompanies Situation of the restaurant Consumer trends Social and economic industry situations z Declining size of the domestic market z z Declining size of the domestic market z IncreasedIncreased awareness awareness for for safety safety and and z health z Aging and declining population zCompaniesCompanies from from other other sectors sectors and and health z Aging and declining population foreign companies entering the market z z Changes in the population structure foreign companies entering the market z ConsumersConsumers becoming becoming more more and and more more z Changes in the population structure z Reorganization of the industry and selective z Widening gap between social classes z Reorganization of the industry and selective z Widening gap between social classes increased number of mergers and z increased number of mergers and z IncreasedIncreased preference preference for for convenience convenience acquisitionsacquisitions
Only a small number of companies with high competitiveness can survive
NewNew valuesvalues toto bebe createdcreated byby thethe integrationintegration ofof DoutorDoutor CoffeeCoffee andandNippon Nippon RestaurantRestaurant System,System, twotwo strongstrong companiescompanies inin thethe areasareas ofof ““drinkingdrinking”” andand ““eatingeating””
3 2. Purpose of the Management Integration
MeetingMeeting thethe diversifieddiversified expectationsexpectations ofof thethe consumersconsumers
PromotingPromoting innovativeinnovative shopshop developmentdevelopment through through synergysynergy effectseffects brobroughtught aboutabout byby thethe combinationcombination ofof businessbusiness developmentdevelopment capabilitiescapabilities andand storestore develdevelopmentopment capabilitiescapabilities
Maximizing the enterprise value as a group
BecomingBecoming anan ““ExcellentExcellent LeadingLeading CompanyCompany”” inin thethe JapaneseJapanese restaurantrestaurant industryindustry
4 3. Basic Management Policies for the Integration
FieldField workwork isis thethe highesthighest prioritypriority ServingServing ourour customerscustomers isis thethe basicsbasics ofof allall
MutualMutual respectrespect betweenbetween thethe twotwo companiescompanies andand treatingtreating eacheach companycompany equallyequally
CreatingCreating aa corporatecorporate cultureculture thatthat isis openopen andand challengingchallenging
ActiveActive communicationcommunication amongamong employeesemployees
5 4. Company Descriptions (1/2)
DoutorDoutor Coffee Coffee NipponNippon Restaurant Restaurant System System FiguresFigures after after the the integration integration (Simply(Simply added added the the results results of of two companies) FiscalFiscal Term Term MarchMarch 2007 2007 MayMay 2006 2006 two companies)
SalesSales 68.668.6 billion billion yen yen 27.827.8 billion billion yen yen 96.496.4 billion billion yen yen
OrdinaryOrdinary Income Income 4.74.7 billion billion yen yen 5.95.9 billion billion yen yen 10.610.6 billion billion yen yen
RatioRatio of of Ordinary Ordinary 6.8 ％％ 21.1％％ 11.0%11.0% IncomeIncome to to Sales Sales 6.8 21.1
TotalTotal Assets Assets 53.453.4 billion billion yen yen 3434 billion billion yen yen 87.487.4 billion billion yen yen
NumberNumber of of 992992 753753 1,7451,745 EmployeesEmployees
NumberNumber of of Stores Stores 1,4701,470 318318 1,7881,788 NumberNumber of of 6 34 4040 StoreStore Formats Formats 6 34 MainMain Format Format DoutorDoutor Coffee Coffee Shop Shop YoumenyaYoumenya Goemon Goemon “Drinking”“Drinking” & & “Eating” “Eating”
6 4. Company Descriptions (2/2)
SharingSharing managementmanagement DoutorDoutor Coffee Coffee resourcesresources andand NipponNippon Restaurant Restaurant System System knowknow-how-how
Highly profitable management by accumulated AA leading leading company company in in the the caf caféé industry industry Highly profitable management by accumulated knowknow-how-how of of restaurant restaurant business business
z Brand development capability zz StoreStore development development capability capability using using franchise franchise system system z Brand development capability • Multiple brand development having Youmenya •• Accumulated Accumulated know-how know-how to to manage manage franchise franchise • Multiple brand development having Youmenya Goemon as the core brand storesstores Goemon as the core brand z Self-contained system zz Self-containedSelf-contained business business model model z Self-contained system • Has the self-contained system where it carries out •• Maintains Maintains the the quality quality of of the the products products by by completing completing • Has the self-contained system where it carries out procurement, processing and distribution of food, thethe procurement procurement and and roasting roasting process process on on its its own own procurement, processing and distribution of food, andand designing designing and and maintenance maintenance of of stores stores on on its its own own zz StrongStrong brand brand recognition recognition in in Japan Japan z Selective locations of stores •• Doutor Doutor Coffee Coffee has has sales sales network network throughout throughout z Selective locations of stores • The stores are located in large cities with the Japan,Japan, and and the the number number of of people people who who use use Doutor Doutor • The stores are located in large cities with the population higher than 1 million, and near the train CoffeeCoffee Shop Shop has has reached reached as as many many as as 220 220 million million population higher than 1 million, and near the train stations perper year year stations
7 5. Positioning in the Restaurant Industry after the Integration
Sales Ordinary Income Number of stores （FY2005） （FY2005） （FY2005）
MCDONALD'S MCDONALD'S 325,655 PLENUS 15,760 3,802 HOLDINGS HOLDINGS
ZENSHO 149,258 NEW COMPANY 10,557 PLENUS 2,390
REX 148,373 ZENSHO 10,532 NEW COMPANY 1,707 HOLDINGS
YOSHINOYA REX KENTUCKY FRIED 122,386 6,370 1,501 D&C HOLDINGS CHICKEN JAPAN
PLENUS 120,926 DOUTOR COFFEE 5,392 MOS FOOD 1,472 SERVICES ROYAL NIPPON RESTAURANT REX 101,533 5,165 1,425 HOLDINGS SYSTEM HOLDINGS
ROYAL COLOWIDE 93,064 5,014 DOUTOR COFFEE 1,424 HOLDINGS
SAINT MARC KOZOSUSHI NEW COMPANY 92,653 5,009 1,137 HOLDINGS SO-HONBU
OHSHO FOOD WATAMI 82,671 5,009 HURXLEY 1,061 SERVICE
DAISYO 80,741 SAIZERIYA 4,498 ICHIBANYA 1,010
0 100,000 200,000 300,000 400,000 0 5,000 10,000 15,000 20,000 0 1,000 2,000 3,000 4,000 （million yen） （million yen） （stores）
Source：Financial reports (FY2005) of listed companies classified as “Restaurants” by NOMURA Sector Classification System Note：”NEW COMPANY” represents the sum of “DOUTOR COFFEE” and “NIPPON RESTAURANT SYSTEM” 8 6. Management Objectives
AimingAiming toto becomebecome anan ““ExcellentExcellent LeadingLeading CompanyCompany”” inin thethe JapaneseJapanese restaurantrestaurant industryindustry
ExpectedExpected Mid-TermMid-Term GoalsGoals (FYE(FYE FebFeb 2011)2011) SalesSales 110 110 billion billion yenyen ––120120 bbillionillion yenyen OrdinaryOrdinary IncomeIncome 14 14 billionbillion yenyen –– 15 15 billionbillion yenyen
TheThe three-yearthree-year businessbusiness planplan afterafter thethe integrationintegration isis expectedexpected toto bebe completedcompleted beforebefore MarchMarch 2008. 2008.
CreationCreation ofof “active“active investment”investment” opportunities opportunities forfor furtherfurther growthgrowth
EstablishmentEstablishment ofof restaurantrestaurant industryindustry asas aa “system“system industry”industry”
AimingAiming forfor overseasoverseas opportunitiesopportunities asas aa “Japanese“Japanese Brand”Brand”
9 7. Strategies for the Holding Company
“Multi-Brand Strategies” Enhance profitability (offense) and avoid risk (defense) in order to realize stable business operations
StoreStore developmentdevelopment takingtaking advantageadvantage ofof synergiessynergies broughtbrought aboutabout byby thethe combinationcombination ofof businessbusiness developmentdevelopment capabcapabilityility andand franchisefranchise know-howknow-how
DevelopmentDevelopment ofof aa newnew businessbusiness modelmodel byby thethe combinationcombination ofof “drinking”“drinking” and and “eating”“eating”
RestructuringRestructuring ofof existingexisting brandsbrands byby sharingsharing thethe twotwo companies’companies’ know-howknow-how
10 (Reference) Multi-Brand Strategies
Lifecycles of brands
Innovative Shop Development
Restructuring of brands
New New Format Model
11 8. Synergies anticipated from the Management Integration
•• NewNew format format development development NewNew Business Business •• NewNew business business model model development development DevelopmentDevelopment ––SuburbanSuburban model, model, Complex Complex model model Expected st nd st nd •• ExpansionExpansion of of store store locations locations (1 (1 floor,floor, 2 2 floor,floor, Synergy Effect basement, road surface) StoreStore basement, road surface) as of FYE Development • Sharing of information regarding properties Development • Sharing of information regarding properties February 2011 •• RestructuringRestructuring of of underperforming underperforming stores stores Ordinary •• DevelopDevelop franchisees franchisees to to open open formats formats which which Ordinary Income of StoreStore usedused to to operate operate only only in in directly-operated- directly-operated- Income of Operation shops 2 - 4 billion Growth Synergies Operation shops 2 - 4 billion •• SharingSharing of of operational operational know-how know-how yenyen
•• CooperativeCooperative development development of of products products ProductProduct •• CooperativeCooperative procurement procurement of of ingredients ingredients RelatedRelated •• SharingSharing of of logistics logistics centers centers
•• SharingSharing of of indirect indirect functions functions • Enhancement of human resources (recruiting as a Control • Enhancement of human resources (recruiting as a Cost Synergies Control newnew group, group, sharing sharing training training programs) programs) FunctionsFunctions •• CentralizationCentralization of of management management through through system system integrationintegration 12 9. Schedule for the Stock-Transfer
April 26, 2007 Execution of the Basic Agreement (both companies).
Late May, 2007 Board of Directors meetings to approve the Definitive (planned) Agreement and the Stock-Transfer Plan (both companies).
June 28, 2007 Shareholders meetings to approve the Stock-Transfer Plan (planned) (both companies).
October 1, 2007 Effective date of the Stock-Transfer (Date of registration of (planned) incorporation of the Holding Company)
October 1, 2007 Date of listing of the Holding Company (planned)
13 10. Structure of the Management Integration
• Jointly incorporate a Holding Company on October 1, 2007 by means of stock-transfer • Stock-Transfer Ratio; Doutor Coffee 1 : Nippon Restaurant System1.687
3.3. AfterAfter Stock-Stock- 1.1. CurrentCurrent SituationSituation 2.2. Stock-TransferStock-Transfer TransferTransfer
DoutorDoutor NRSNRS DoutorDoutor NRSNRS DoutorDoutor NRSNRS ShareholdersShareholders ShareholdersShareholders ShareholdersShareholders ShareholdersShareholders ShareholdersShareholders ShareholdersShareholders
Holding Holding Company Company Shares Shares Doutor NRS Shares Shares HoldingHolding HoldingHolding Company Company DoutorDoutor NRSNRS Company Company
DoutorDoutor NRSNRS DoutorDoutor NRSNRS
14 11. Outline of the Holding Company
NameName DoutorDoutor Nichires Nichires Holdings Holdings Inc. Inc.（（TentativeTentative name, name, TBD TBD））
LocationLocation ofof head head officeoffice NRSNRS Bldg., Bldg., 10-11, 10-11, Sarugaku-cho, Sarugaku-cho, Shibuya-ku, Shibuya-ku, Tokyo Tokyo
ExpectedExpected date date of of OctoberOctober 1, 1, 2007 2007 (planned) (planned) incorporationincorporation
AccountAccount Settlement Settlement EndEnd of of February February
StockStock Exchange Exchange TokyoTokyo Stock Stock Exchange Exchange
ChairmanChairman HirofumiHirofumi Ohbayashi Ohbayashi（（Chairman,Chairman, Nippon Nippon Restaurant Restaurant System System Inc. Inc.））
PresidentPresident YutakaYutaka Toriba Toriba（（President,President, Doutor Doutor Coffee Coffee Co., Co., Ltd. Ltd.））
15 12. Directors and Auditors
Board of Directors (Current Positions) • Chairman Hirofumi Ohbayashi （Chairman, Nippon Restaurant System Inc.） • President Yutaka Toriba （President, Doutor Coffee Co., Ltd.） • Director Minoru Yamauchi （President, Nippon Restaurant System Inc.） • Director Masanori Hoshino （Vice President, Doutor Coffee Co., Ltd.） • Director Rokuro Inamori （Managing Director, Doutor Coffee Co., Ltd.） • Director Takafumi Kidaka （Director, Nippon Restaurant System Inc.）
Auditors • 2 full time auditors will be appointed upon consultation of both companies • 2 external auditors will be appointed upon consultation of both companies
Mr. Hiromichi Toriba, the current Honorary Chairman of Doutor Coffee is expected to be appointed the Honorary Chairman of the Holding Company.
16 13. Time Schedule for the Integration
07.4 07.6 07.1008.2 09.2 10.2 11.2
PromotionPromotion ofof thethe Group’sGroup’s 3-year3-year businessbusiness planplan
EarlyEarly realizationrealization ofof synergysynergy effectseffects ofof thethe integrationintegration Approval of the of the Approval Basic Agreement Basic •• Promotion Promotion of of integration integration led led by by study study shareholders’ meeting groupsgroups •• Consolidation Consolidation ofof basis basis for for growth growth
A preparation committee to be set up AcceleratedAccelerated growthgrowth Incorporation of the Holding Company Holding of the Incorporation Incorporation of the Holding Company Holding of the Incorporation
17 Disclaimer
ThisThis materialmaterial containscontains forward-lookingforward-looking statementsstatements thatthat involveinvolve rrisksisks andand uncertainties.uncertainties. TheThe plans,plans, forecasts,forecasts, andand strategiesstrategies pertainingpertaining ttoo futurefuture businessbusiness profitability profitability stated stated inin thisthis documentdocument areare basedbased onon judgmejudgmentsnts byby thethe management management ofof thisthis groupgroup that that havehave beenbeen obtainedobtained fromfrom currentlcurrentlyy availableavailable data.data. Accordingly,Accordingly, wewe askask thatthat you you makemake nono investmentinvestment ddecisionsecisions thatthat relyrely solely solely onon thesethese businessbusiness forecasts.forecasts. Please Please understandunderstand ththat,at, duedue toto aa numbernumber ofof importantimportant factors,factors, actualactual performance performance may may produceproduce rresultsesults thatthat differdiffer significantlysignificantly fromfrom thesethese businessbusiness forecasts.forecasts. TheThe informationinformation andand opinionsopinions containedcontained inin thisthis materialmaterial havehave beebeenn obtainedobtained fromfrom sourcessources believedbelieved toto bebe reliable, reliable, butbut nono representationsrepresentations oror wwarranties,arranties, expressexpress oror implied,implied, areare mademade thatthat suchsuch informationinformation isis accurateaccurate or or completecomplete andand nono responsibilityresponsibility oror liabilityliability cancan bebe acceptedaccepted forfor errorserrors ororomissionsomissions oror forfor anyany losseslosses arisingarising from from thethe useuse ofof thisthis material.material.
18