Japanese-style pub operator Watami has announced the acquisition of Subway Japan in a strategic move to diversify its portfolio.  

The Tokyo-based izakaya [a traditional Japanese bar where alcoholic drinks are served with snacks] chain has secured a ten-year franchise contract with Subway International to operate Subway stores in the country, aiming to significantly increase the number of outlets. 

Subway Japan is now a wholly owned subsidiary of Watami. 

Subway Japan GK reported revenue of Y536m ($4.8m) in 2023, and plans to expand the country's 178 Subway stores to more than 3,000.  

The foodservice industry, particularly izakaya operators like Watami, has been compelled to seek alternative revenue streams following the Covid-19 pandemic, JAPANTODAY has reported.  

Government advisories and restrictions led to reduced business hours and a ban on alcohol sales in many establishments, prompting a need for diversification. 

Despite a 34.9% increase in sales at bars and izakayas in 2023 compared to 2022, the industry is still operating at just 66.5% of its pre-pandemic levels, according to the Japan Foodservice Association.  

In contrast, fast-food outlets saw a 10.4% growth in 2023 and are now performing at a 20.1% higher rate than in 2019, highlighting a consumer shift towards takeout and delivery services. 

Watami's response to these changing market dynamics includes the launch of new barbecue restaurants and an enhanced focus on its food delivery service.  

The acquisition of Subway Japan represents a significant step in Watami's broader strategy to adapt and thrive in the post-pandemic landscape. 

The companies have not disclosed the deal's value.