Emerging Brands

Pepper Lunch hopes to put experiential sizzle into Asian fast casual

This Japan-born chain has 500 units across Asia and in May launched franchising in the U.S. and Canada, with an eye on university settings.
Pepper Lunch bowl
The Beef Pepper Rice is the top seller by far./Photo courtesy of Pepper Lunch.

In a world of food increasingly designed for takeout, Pepper Lunch is hoping to tap a hunger for experiential fast-casual dining.

The Japanese-born concept has more than 500 units in 15 countries, including five in the U.S., mostly around Los Angeles. Earlier this month, Pepper Lunch officially launched franchising in North America, bringing in restaurant industry consultant Troy Hooper to serve as co-CEO of parent Hot Palette Holdings to help grow the brand across the U.S. and Canada.

Pepper Lunch is pretty unique as a “DIY teppanyaki” concept. It is known primarily for the dish Beef Pepper Rice ($11), though versions of the dish can be made with other proteins, from chicken cutlets to eel.

Guests order at the counter, selecting various add-ons, like garlic chips or mushrooms. In the open kitchen, the meal is not so much cooked as assembled:

A scoop of pre-cooked rice is centered on a cast-iron dish that has been heated to 500 degrees—like a fajita plate but deeper. Thinly sliced raw beef is placed around the rice, along with the add-ons, seasoning and a spoonful of proprietary “pepper paste” herbed margarine.

Real Pepper Lunch bowl

A ring of paper serves as a barrier, but guests have to be careful./Photo by Lisa Jennings

The sizzling dish is then brought to the table, and by the time it arrives, the beef is about half cooked. A ring of paper warns that the cast-iron dish is very hot. It serves as a barrier to protect fingers, and the guest is invited to stir the meat and rice together to cook it, while adding proprietary sauces on the table, if they like.

It’s an interactive concept that borrows from Korean-style hot pot or cook-at-the-table barbecue—or even Benihana. And there are other dishes on offer, from chicken curry to pasta. Tofu is an option for vegetarians and guests can also get whole steaks.

But Pepper Lunch is also a speedy lunch option, notes Hooper. “During the lunch rush, it’s five minutes on average [from ordering to being served],” he said. “In and out in 24 minutes is our average from ordering to leaving.”

Pepper Lunch was founded in Japan in 1994, and it now has a presence in every Asian country, except North Korea, making it a familiar “staple brand” to many who come from or have traveled in that region of the world, Hooper said.

The franchisor was acquired by a large private-equity firm in Japan three years ago. There are 122 company-owned locations, including 60 in Japan, 36 in Singapore and 32 in Hong Kong. There are about 30 primary franchisees, with roughly 30 sub-franchisees in some markets. “So there are really only 60 owners that own just under 400 stores,” he said.

The operating model at Pepper Lunch is very simple. There’s no need for gas hookup. The concept uses electric (induction) heat and they can go into any space where they can vent a hood, he said. All five in the U.S. are second-generation buildouts, for example, operated by an Australia-based franchisee.

At press time, full financial disclosures had not yet been revealed, but Hooper said Pepper Lunch had units in the U.S. grossing up to $2.9 million with EBITDA up to 34%.

Some of the U.S. units are scheduled for a refresh to update the décor to newer brand assets and add upgraded kiosks for guests who prefer to order without human interaction.

Pepper Lunch exterior

Pepper Lunch is a familiar brand across Asia./Photo courtesy of Pepper Lunch.

The big question mark is how the brand will translate for those who want to take it to-go. “Universities are a very significant opportunity for us,” said Hooper, but a key factor will be how well the food travels.

“We are developing a better process for takeout and delivery,” said Hooper. For to-go orders, the company is planning to test a back-line system using a rotating kettle wok, using induction heat, that can be programmed to cook each dish and dispense into a bowl.

Guests will lose the experiential sizzle presentation, but they will still have the tasty result of a customized rice bowl with authentic flavors, he said.

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