Todai Hopes to Expand Chain

Eddie Ortega, plate in hand, was approaching Todai’s 160-foot-long buffet table when a fellow diner cut in front to grab a California roll, stomping on his foot along the way. Moments later, another customer plowed into Ortega as he was filling his plate with tuna sushi, knocking him off balance.

“Eating here’s almost like driving on an L.A. freeway,” said the 32-year-old bill collector, who has become a regular at Todai restaurant in Orange. “It’s a full-contact sport.”

Customers such as Ortega don’t seem to mind the jostling that goes on during dinnertime at Todai--a growing chain of 17 buffets with ambitious expansion plans. Last year, Los Angeles-based Todai Franchising opened three new restaurants, which helped propel annual sales of its company-owned and franchised outlets to $70 million, the company said.

Despite a big falloff in business after Sept. 11, struggling outlets in Texas and the failure of a franchised restaurant last year at the Beverly Center in Los Angeles, the company is hoping to tap into American consumers’ increasing appetite for buffets--especially those serving ethnic foods. Hans Kim, a former engineer who is Todai’s chief executive, wants to open seven more Todai buffets this year.

“I’d like Todai to be a recognized brand name, like maybe the McDonald’s of the buffet business,” Kim said.

Todai operates in five Western states, with most of its 17 restaurants in California. About half are franchised, the remainder company-owned.

Buffets in general are attracting customers as never before, having upgraded their menus in an effort to shed a reputation for mediocre food, said Tim Carlin of Technomic Inc., a restaurant research and consulting firm near Chicago.

Sales at the nation’s all-you-can-eat chains jumped about 7% last year to about $3 billion, outpacing the industry’s 3.5% increase, as value-conscious diners increasingly deserted high-end restaurants in favor of eateries offering lower prices.

Todai, which has been around for 17 years, isn’t like most buffet restaurants. For one, it’s hardly cheap: Adults pay $12 to $14 for lunch, and $22 to $26 for dinner, depending on the location.

With a menu dominated by sushi--40 varieties--Todai also is banking on a dish that is considered a delicacy, a strategy that may limit the chain’s expansion options, industry experts say.

“Can you imagine putting one of them in Kansas City?” Carlsbad restaurant consultant Hal Sieling asked.

Indeed, two company-owned Texas outlets--in unpopular malls in the Houston and Dallas areas--have failed to draw big crowds, prompting Todai to boost its advertising budget by 25% there.

The company shuttered a franchised buffet last year in the Beverly Center after a string of losses and missed royalty payments. Todai executives say the quality of food and service had deteriorated.

Todai plans to open a company-owned restaurant at the same location in March, controller Andrew Chung said. The experience has reinforced the firm’s decision to open only company-owned buffets in the future to exert more control.

Generally, the company’s strategy is to operate in upscale areas with a sizable concentration of Asian Americans, General Manager Paul Lee said. Todai operates buffets in Cerritos and Arcadia, for example, and is planning to open restaurants this year in Daly City, Calif., Seattle and buffet mecca Las Vegas.

The chain plans to finance each new $2-million unit through cash flow and bank loans, but hopes to sell stock to the public within three years to fund future expansion, Chung said. If all goes as planned, the 1,400-employee chain will open as many as 30 restaurants in the next five years.

Japanese brothers Kaku and Toru Makino opened the first Todai in Santa Monica in 1985. The restaurant, one of the first all-you-can-eat sushi places, struck a chord with the public. Long lines often snaked around the corner. By the late 1990s, the brothers had opened 10 buffets in California.

One of Todai’s most enthusiastic customers was Hans Kim, a Korean engineer who dined at the Santa Monica outlet whenever he came to Southern California on business.

In 1988, Kim moved to the U.S. and soon founded a computer repair business. His wife, Un H. Kim, owned three thriving Teriyaki Tokyo fast food restaurants in Los Angeles. Itching to branch out, the Kims acquired a Todai restaurant in Studio City in 1995 for an undisclosed sum.

He assembled a group of Korean friends, family members and business associates to form an investment group, Meramia, that purchased a majority stake in the Todai chain in 1998. By that time, the Makinos had sold three restaurants. One, in Huntington Beach, still operates independently under the Todai name.

Kim and the new owners upgraded the menu, adding such items as Canadian lobster and crab. But the strategy has carried a hefty price.

Even though Todai buys in bulk and gets discounts, food costs consume 39% of the chain’s sales, compared with about a third of sales at other buffets. Every day, for example, Todai chefs cut up nearly 2,000 pounds of tuna and salmon for sushi. To minimize waste, restaurants scale back the amount of food offered near closing time.

Still, trays of sushi, salads and other items are thrown out daily, said Lee, Todai’s general manager and one of the Meramia investors. It’s “one of the costs of doing business,” he added.

The chain doesn’t make any pretensions about matching the tasty morsels offered at swanky sushi spots such as the three Sushi Roku restaurants, where the average check runs $45. But Todai restaurants, adorned with decorative goldfish and sea horses, appeal to diners who prize quantity as well as quality, said Janet Lowder, president of Restaurant Management Services in Rancho Palos Verdes.

Despite the slump after Sept. 11, the chain maintained a profit margin of 5% at year’s end, controller Chung said, exceeding the restaurant industry average of 3% to 4%.

Ultimately, the 51-year-old Kim hopes to blanket the East and West coasts with Todais.

“We’re like a snowball,” he said. “We started off slowly, but we’re going faster, faster and faster.”