Riraku Co., Ltd.

Riraku Co., Ltd.

Japan Buyout

Background of transaction

To create a platform that can support the company’s growth into the No. 1 player in the relaxation services industry

  • Although the company was established, its footprint grew rapidly to over 200 store locations, and management began having difficulty ensuring service quality due to a majority of operations being conducted manually without clear standardization.
  • It became increasingly difficult for management to grasp the actual status of the business since only a small amount of information was directly reported from the store locations to headquarters.
  • As a result of the company’s rapid expansion, operations became increasing more complex, eventually to a level that management was unable to effectively control.

Background of investment

The company was providing high-quality services at the lowest prices in the industry, with projected stable growth in the future.

Pricing for an hour of relaxation services (non-medical massage) in Japan has traditionally been approximately 6,000 yen. At the turn of the century however, several firms began providing service offerings at approximately half of this rate. In addition to offering this radical new low pricing, Riraku also established a unique business model of matching customers with therapists. In only three years, the company grew to over 200 stores with significant potential to further expand its footprint.

The company’s talented new store development team was well suited to help the company rapidly open new stores.

The company pioneered a low-cost, simple and clean store format enabling them to offer services at the lowest price point in the industry. Together with a nationwide network of real estate brokers who enabled them to access potential new store locations, the company had established a workflow to open new stores only two to three months after signing a leasing agreement.

Ability to train large volumes of highly skilled therapists in a short period of time

The company had a unique therapist training program that enabled them to transform new therapists with no previous experience into highly-skilled professionals in a short period of time. The company had as many as 30 therapist training centers at easy-to-access locations across Japan quickly producing work-ready therapists.

Dimensions of management support

Transformation from a founder-dependent organization into an independently discipled firm

Prior to AP Funds’ investment, the company’s founder had been solely responsible for a wide various of high-importance tasks including formulation of the company’s business model and budget, as well as overall implementation of numerous initiatives. Advantage Partners supported the company in creating a formal corporate vision, introducing a formal personnel evaluation system, implementing comprehensive data tracking systems, and designing a corporate structure that encouraged data-driven decision making. As a result of these initiatives, the company’s formerly passive management members actively discussed important issues at newly established committee meetings and were able to shift to a system of data-based corporate management.

Enhance the business’ scalability

Prior to investment, the majority of the company’s operations heavily depended on the skill of individual employees. With Advantage Partners’ support, the company’s evaluation criteria for new store openings were clearly defined by using a quantitative analytical model. At the same time, support staff and supervisory functions were enhanced to ensure service quality across all of the company’s store locations. These reforms helped the company recognize the latest status of operations, implement effective measures to solve problems, and improve financial performance.

Establish IT infrastructure to better utilize the data recorded form the industry’s largest provider of relaxation services.

In order to convert the data accumulated providing services to tens of thousands of people every day into real value to customers, a company-wide IT system was built into the company’s core enterprise system. The upgraded IT system captured the data of the customers and therapists and visualized it real-time – improving the accuracy of the marketing activities and enhancing the quality of services provided.