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Buena Park’s Yoshiharu Ramen Serves Up IPO

The parent company of Yoshiharu Ramen, a Buena Park-based ramen restaurant chain with only a half dozen locations in operation but ambitious expansion plans, is the latest local food-related venture looking to test investors’ appetites for a public listing.

The 6-year-old company, which operates under the corporate name Yoshiharu Global Co., filed plans for an initial public offering on Jan. 25.

It’s looking to raise upward of $20 million in its modestly sized offering, not factoring in warrants, according to the company’ prospectus.

It will use the money raised from the IPO to fund expansion plans—it’s aiming to have 17 company-owned spots open by the end of the year—improve distribution, and develop a franchise program, filings indicate.

The restaurant chain plans to list its common stock under the symbol “YOSH” on the Nasdaq. It would be the first ramen-focused chain to go public in the U.S., not counting penny stocks.

The last Orange County restaurant chain to go public was Kura Sushi USA (Nasdaq: KRUS). The Irvine-based revolving sushi chain raised nearly $47 million in its 2019 IPO, and is currently valued around $500 million.

Local Hub

Yoshiharu, best known for its Tonkotsu Black ramen—made from slow-cooked pork bone broth and topped with chashu, also known as braised pork belly—currently counts spots in Buena Park, Orange and Irvine among its six existing locations.

It’s latest location to open was at Irvine’s Orchard Hills Shopping Center. At the outset of the lease at that Irvine Co.-owned spot, which opened late last year, it was paying rent of about $4.30 per square foot on a monthly basis, according to regulatory filings. Its restaurants average about 1,500 square feet.

Additional Orange County locations will be in Garden Grove, Laguna Niguel and San Clemente, it said. Specific locations in those cities haven’t been disclosed. This quarter, it plans to open locations outside OC in La Mirada, Cerritos and Corona.

That’s just the start, it said in the IPO prospectus.

“We believe that over the long term we have the potential to grow … to at least 250 restaurants domestically and at least 750 restaurants internationally by opening corporate-owned restaurants in new and existing markets,” Yoshiharu Ramen said in its filings.

The company did not specify a time frame for such an aggressive expansion push.

Yoshiharu Ramen expects to complete registration for a franchise program by the end of the year. With franchisee partners, the company could to open 20 additional stores per year, filings indicate.

Online Growth

Yoshiharu was founded by James Chae, 58, who also serves as chairman and CEO. He counts “over two decades leading a wide array of industries including both the financial services and retail services segments,” the IPO prospectus says.

As of Sept. 30 of last year, the company had about 120 employees.

Its revenue for the nine-month period ending in Sept. 30 was $4.4 million, up from $1.9 million for the nine-month period ending in Sept. 30, 2020.

Despite ramen’s dine-in appeal, Yoshiharu managed to adapt to the pandemic by pivoting to online sales and delivery, it said. The restaurant grew its out-of-store sales about 40% year-over-year, with $1.2 million in out-of-store sales for the nine-month period ending on Sept. 30, 2021.

Beyond ramen, the restaurant also serves sushi, rice bowls, bento boxes, and karaage chicken, also known as Japanese fried chicken.

Yoshiharu Ramen reported an accumulated deficit of nearly $3 million as of Sept. 30 of last year. Auditors have raised doubts about the company continuing as a going concern without additional funding, according to SEC filings.

Coffee Ties

The ramen company is the second smaller-sized food company in OC to attempt an IPO in recent months.

Also in queue: Reborn Coffee Inc., a Brea-based coffee roaster and retailer which counted seven company-operated locations, six in Southern California, as of late last year.

It’s aiming to raise some $21.5 million, not factoring in warrants, in its IPO. Reborn Coffee counts the same legal teams from K&L; Gates in New York and Mitchell Silberberg & Knupp LLP in Los Angeles as does the Yoshiharu offering. Both IPOs are being underwritten by EF Hutton.

Another tie between the two firms: Reborn’s CEO, Jay Kim, is a director for Yoshiharu.

Warrant Trend

The two local firms’ proposed listings are part of a recent trend involving smaller-sized businesses, and the inclusion of warrants—which give investors the right to purchase a company’s stock at a specific price within a set time frame—in their offerings.

Last month, eight issuers filed for IPOs with warrants, and another six added warrants to their offerings in amendments, notes a recent report from IPO industry tracker Renaissance Capital. All are micro-caps, from a variety of industries, the report said.

Warrants “allow new issuers to both sweeten the pot for investors, and provide an additional source of capital for themselves,” said the Jan. 31 Renaissance Capital report, which noted that “challenging market conditions have all but sealed the IPO window shut.”

Small issuers like Yoshiharu and Reborn Coffee “are finding a way to squeeze through: by offering warrants,” the report said.

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