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Mar. 10, 2015 - Updated 04:16 UTC

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Rethinking 24-Hour Restaurants

Yuko Fukushima

Feb. 7, 2017

Japan's 24-hour food service industry has been expanding for decades but recently, major restaurant chains have started cutting back on over-night service.

Many restaurants in the country started to open 24 hours a day in the 1980s when the economy was taking off. There were plenty of customers looking for a meal long after dark, such people working the night shifts, so these restaurants could make money by staying open all night.

But demand for late-night service started to shrink in the mid-2000s and at McDonalds, 24-hour service peaked in 2012. The chain has since cut the number of outlets open all night by more than 50 percent. Royal Host, a chain that caters to families, dropped 24-hour operations this month.

Skylark Group, another major chain that operates Gusto and Jonathan's, offered 24-hour service at about 430 outlets. This month, the chain halted overnight operations in 70 percent of its restaurants.

"I think it's a significant turning point. It's one of the biggest decisions we have ever made," says Skylark President and CEO Makoto Tani.

Skylark entered the food service business in 1970 and a decade later, they extended hours as Japan's economy grew. But the restaurant industry has seen many changes in recent years.

At one diner that has stopped 24-hour service, they decided to open from 7am until 2am because late-night customer traffic has declined in recent years. The number of big groups visiting, in particular, has fallen off.

The company thinks one reason is the spread of smartphones because much more communication is done over the internet, so fewer people meet at restaurants late at night.

"Nowadays, people enjoy surfing the internet and get things done at home. It's a sign of the times," says Yuya Takahashi, a store manager at Gusto.

Another reason is Japan's labor shortage. One restaurant usually has one full-time worker and one part-timer for its late-night hours but it's now more difficult to find part-time workers.

Even the offer of higher hourly pay has failed to attract new employees and that means full-timers need to take up the slack. Store manager Takahashi works the late-night shifts 3 times a week.

"My sleeping hours are so irregular. If we stop opening 24 hours, I think I’ll be able to lead a healthier lifestyle in terms of sleep," Takahashi says.

Skylark is also reviewing its hours as part of its business strategy. One store suspended 24-hour service 2 years ago. When late-night operations stopped, the restaurant was able to bring on more staff for lunch and other busy times.

Workers now have more time to train part-timers to improve the quality of the service. As service improved, they began to see more customers.
When the restaurant abandoned its midnight hours, sales and profits increased.

"When we stopped opening all night... we were worried that we’d have fewer customers... but it turns out putting more effort into our lunch hours means we sell better, and we don’t keep our customers waiting, so we get more repeat visits," says Yuki Ogoro, a store manager at Jonathan's.

Company officials held a meeting to discuss the 24-hour business model.

"We want to clear up these problems as quickly as possible, and reduce opening hours at as many stores as possible," says Minoru Kanaya, managing director of the human resources division at Skylark.

"We're reviewing our late-night hours in the interests of growth. At the moment, we face the chance of losing profit. I believe we can find another way to increase our earnings," Tani says.

Reducing opening hours brought another unexpected advantage. At Skylark, 80 percent of full-timers used to work for the company part-time as students. More students are agreeing to join as regular employees after they graduate from university.

“The night shift is hard work. It makes a difference when you’re choosing a job,” says one young man.

"We’ve made our decision, based on the expectation of increased customer numbers resulting from better service, as well as an improvement in the employee retention rate," Kanaya says.

Seiichiro Samejima, an expert on the food-service industry, says restaurants will lose sales in the short-term by cutting opening hours.

"My estimate suggests the end of 24-hour business will reduce sales by several percent. But hiring workers for midnight hours means higher wages for them. I think the employers will no longer have any unprofitable timeframe. Shorter working hours will benefit companies eventually," Samejima says.

He thinks more industries will follow suit.

"I think supermarkets that are open around-the-clock will probably re-examine the service. They'll likely find it increasingly tough to secure manpower because their outlets are large. Retailers will probably streamline their operations if they find unprofitable hours or it's difficult to secure workers," Samejima says.

The number of seniors in Japan is rising quickly, and with fewer people who want to go out at night, the need for 24-hour service is declining. From the companies' perspective, ending all-night service means they can close during unprofitable hours and free up staff for the busiest times. How to best utilize limited human resources will be an important question for the industry.

It could bring greater efficiency to an industry known for low productivity. Having people working long hours for low pay presents 2 problems: not enough spare time to go shopping, and less money to spend when they do.

One of the biggest problems for the Japanese economy is weak spending, and the service industry, including restaurants, makes up almost 70 percent of the economy. Increasing efficiency in this sector is important for Japan's economic recovery.