Let's Japan.org Debunking Eikaiwa and Ramblings in Japan

Citing a tough financial situation, Hiroshima-based David English House has closed its doors as of September 1 and filed for bankruptcy.

While some of its schools will close, a number of its teachers will go independent and take over existing contracts and keep other schools open. For the most part, it sounds it will be business as usual for its students.

Apart from its English schools, DEH was also known for its distance learning courses through the University of Birmingham (MA in TEFL) and the University of Sheffield (MA in Advanced Japanese [no longer offered]). I did a Master's in Advanced Japanese at the University of Sheffield through DEH a few years ago and have nothing but good things to say. It was well-organized and a lot of hard work, but a lot of fun, too.

Like many readers here, zakzak wonders about the odd combination of restaurant companies and English conversation schools.

As you know by now, G.communication, which operates Nova and GEOS, which in turn was owned by Foodys, is now owned by Hanshin Shuhan after it acquired Foodys' 50.9% share of the company. Foodys sold its shares in G.communication in order raise money when its main bank, the Incubator Bank of Japan, was shut down by the Financial Services Agency on suspicion of obstructing an FSA audit. According a source that spoke with zakzak, Foodys sold its shares on the condition that Hanshin Shuhan assumed the loan that Foodys used to buy its stake in g.communication.

Zakzak then delves into the histories of the companies involved.

• G.communication started out as a juku and branched off into the restaurant business in 2000. It started growing and acquiring more restaurants around 2005 through a series of mergers and acquisitions.
• In October 2007, it took over Nova.
• However, G.communication's mergers and acquisitions left it short of cash and its president, Masaki Inayoshi, sold his shares in October 2009.
• The shares were sold to Foodys and Venture Link. Both companies are members of the Incubator bank of Japan's network for SMEs.
• Foody's, being the largest shareholder in g.communication with a 50.9% share, jumped on the M&A bandwagon with G.communication only to have its plans go off the rails when the Icubator Bank was shut down.
• Now that Hanshin Shuhan owns G.communication, it says it will continue to operate the eikaiwa business as usual.
• Hanshin Shuhan is a liquor distributor started by its 34-year old president, Higaki Shuusaku, in 2001.
• Hanshin Shuhan was new to the distribution business but quickly made an impact by leaving free refrigerators stuffed with drinks in offices, and then making the rounds collecting money for the drinks that had been consumed. The company raked in the money by taking a page out of the Toyama okigusuri method where medicine kits were distributed to homes and customers paid for what they used. From 2009, Hanshin Shuhan also got on the M&A bandwagon.
• In May 2009, it acquired Gyukaku through a take over of Asrapport Dining. In April of this year, it acquired liquor distributor Daishuhan from the Japan Asia Group. It's latest acquisition is G.communication.

Zakzak asks, "Where is the money for these M&As coming from?" One of Hanshin Shuhan's major shareholders are limited investment partnerships with investment enterprise Orix #10 being mentioned. An executive in a business research firms tells zakzak that Hanshin Shuhan is more an investment company than anything else. If true, izakayas and eikaiwa make for strange bedfellows in the world of mergers and acquisitions.

Comment: When I was a kid I was really into trading hockey cards and playing games like "knock down," farthies" and "scramble." I get the sense that the same thing is being done with GEOS and Nova, except that they aren't particularly valuable--kind of like picking up some 4th-liner pylon in a game of "scramble." They are minor players in larger deals and will eventually find themselves discarded and clothes-pegged in the spokes of some unlucky investor's bicycle.

With Rakuten and Fast Retailing making English the first language in their offices, the Daily Yomiuri Online says that it has given English conversation schools a much needed boost:

During the April-June period, Berlitz Japan, Inc., an operator of foreign language schools, saw the number of its corporate customers and individual regular students who are company employees jump 50 percent from a year earlier. Its summer short program also has attracted about 2-1/2 times as many students as in the previous year.

Another English school operator, Gaba Corp., enjoyed a similar boost, with corporate contracts up 12 percent year on year in the first half of 2010.

Well, that's good news for two schools, but what about the rest? The article notes that Fast Retailing plans on hiring non-Japanese staff. If they can already speak English, then it won't translate into new business for the eikaiwas. So, are things looking good in eikaiwa or is this article seeing things through rose-colored glasses?

Nova and GEOS are under new management. The new boss is Kobe-based food and beverage importer and distributor Hanshin Shuhan. According to the Yomiuri shimbun, Foodys, the current parent company of Nova and GEOS, is to hand over its 50.98% share in the eikaiwa schools to Hanshin Shuhan by the end of August.

Foodys was forced to give up its shares in G.communication after running into cash problems when its main bank, the Incubator Bank of Japan, was shut down by the Financial Services Agency on suspicion of obstructing an FSA audit. Hanshin Shuhan has agreed to assume the loan Foodys used to acquire G.communication along with shares in the company. The brief blurb ends with Masaki Inayoshi, the Chairman and President of G-Communication group, resigning effective August 10.

If eikaiwa ever was a McJob, Hanshin Shuhan is helping to reinforce that image by marketing themselves as a "fast food and fast beverage company." What does it say about the state of eikaiwa when it has stronger links to the restaurant business than it does with language learning? Moreover, it's not reassuring that G.communication's masters were connected to a bank engaged in shady business practices, although "eikaiwa" and "shady business practices" do seem to go hand in hand in recent years.

UPDATE 8/19: Many comments have been about what would a food & beverage company find attractive about owning an English conversation school. As noted in the comments, one reason may have to do Hanshin Shuhan wanting part of G.communication's restaurant business. A short article on Searchina says that G.communication restaurants G.taste, G.networks, and Sakai will become "grandchild companies" (indirect subsidiaries) of Hanshin Shuhan. An article in the Kobe Shimbun says that in Hanshin Shuhan hopes to beef up its restaurant biz with the inclusion of G.communication's stores.

As for the English conversation schools, the article simply states that Hanshin Shuhan will continue operating them as usual. It doesn't sound like they have any big plans for Nova and GEOS, does it? It makes me wonder if the schools will get lost in the shuffle as the company focuses on merging its restaurant operations instead.

Help Douglas out by taking part in his survey:

Dear colleagues,

My name is Douglas Meyer, and I am organizing a nation-wide survey on our EFL profession. I am interested in the various working conditions, opinions and thoughts on language education in Japan, and have made an easy-to-complete (5-6 minute) anonymous online survey to gather your input. Please forward this message to friends if you have already completed the survey.

In order for this survey to be successful, we need responses from a few hundred language teachers from across Japan. Can you do your part by helping to spread this survey (and the job survey links) to 3 or 4 of your teaching colleagues?

The only way we can make any positive changes in our profession will be to add hundreds of voices to this call. The more responses we can get, the harder it will be for educational institutions to ignore the results of this national survey.

Here are the links:
For elementary, junior, and high school teachers
http://www.surveymonkey.com/s/D5LM52D

For college and university teachers
http://www.surveymonkey.com/s/NZZ85RV

Please note that this is a personal research project, and not connected to JALT in any way. I am hoping to use this data in a report on our EFL profession in Japan. Should a large number of teachers reply, the Ministry of Education may be interested in the results. If you are also interested in the results, please complete the survey (if you haven't already) and pass it on to your teaching colleagues. Thank you for your time!

Sincerely yours,
Douglas Meyer
National EFL Job Survey Organizer
Osaka, Japan.

Comedy gold!

Page launched an unfair dismissal claim against GEOS, which comes under the umbrella of the GEOS Corporation founded by Japanese businessman Tsuneo Kusunoki.

But the company responded by claiming that Page "accepted understanding of the 'Japanese way' of doing business". They went on to say he was used to Kusunoki "ranting", "berating" and "humiliating" people "so this was nothing new".

But the Employment Relations Authority said the company's failings were "fundamental and profound".

"Ranting," "berating," "humiliating," "nothing new." Man loses job because he didn't make enough money for the company, so GEOS counters with he was used to abusive behavior so that makes it OK. That's so pathetic it's laughable. One of the biggest failures of the large schools is their inability to properly educate, inform, and train their employees. Orientation generally consists of lots of don'ts--don't bother the manager, don't be late, don't cause trouble. Just show up and teach. Despite the instructors being the product the schools are selling, they are treated with contempt and expected to obey without question orders from head office. Instructors may be employees, but they are transient ones, whose only use to help line the pockets of the school they work for.

This dispute in New Zealand gets to the heart of the shake up in eikaiwa: the rot in management. There are two things that have characterized eikaiwa for a long time. One is the bicycle business model where the company must keep pedaling (collecting revenue) or else it will fall over. It worked for Nova and GEOS, but the moment that cash flow is interrupted, things go downhill very quickly. Then there are the autocratic owner/presidents. With Nozomu Sahashi, there was his plush penthouse-cum-office that would make Hugh Heffner jealous, plus his continued assertions that he did nothing wrong when he pilfered an employee. Kusunoki was more of the same, constantly demanding more and more from his staff and berating them for not meeting their monthly targets. When GEOS' Australia schools closed, he issued a half-assed apology that the closures there wouldn't affect operations in Japan. GEOS went bankrupt shortly after that announcement.

To use "the Japanese way" as an excuse just discredits eikaiwa even more. Dishonesty and bullying are the Japanese way? No wonder the major schools are in trouble. They can't fail fast enough. The major eikaiwas have never been about learning a language; they've always been about making money for their owners.

An update on former Nova president, Nozomu Sahashi's, appeal. You may recall that he was sentenced to three and half years for embezzlement last August. He quickly appealed his sentence, maintaining that he was innocent.

Kyodo News, via the Nikkei keizai shimbun reported last week that Sahashi maintained his innocence again at his appeal, saying that he took money from the employee's fund to help the company, not to line his pockets. The prosecutors, of course, are trying to have the appeal dismissed.

That's all the article says. Don't know where the appeal goes from here. I take it that for now, Sahashi avoids going to jail.

Novawhiz in the forums finds a website called jiosu.com:

ジオス.com A website for GEOS student, GEOS staff and GEOS teacher support.

ジオス.com (jiosu.com) aims to provide information, links and support for GEOS students, staff and teachers by providing an online forum where you can discuss the latest GEOS related information and events.

Another aim of ジオス.com is to help you find your old GEOS friends, students and teachers through the online forum. Once you find them, you can contact them privately via the websites internal messaging system. If you have a mixi, facebook, twitter, openID, Google, yahoo or windows live account, you may use that to log in and use the forum and online messaging system. The forum and messaging service are free of charge.

For those of you who aren’t aware of the situation, GEOS was one of the top 4 private eikaiwa, or English conversation teaching companies, in Japan. Language tuition in French, Spanish, Italian, German, Chinese and Korean was also offered at some schools. GEOS offered many opportunities for students to study abroad through homestay programs at its international branches. After GEOS Australia filed for bankruptcy (leaving many homestay students stranded without accommodation), the Japanese based GEOS also found itself in financial trouble. On the 22nd of April 2010, GEOS Corporation officially filed for bankruptcy leaving thousands of staff without jobs and without paying their salaries. Students weren't much better off, with some students thousands of dollars out of pocket.

Fortunately for many students and teachers in Japan, G.communications will be taking over many of the old GEOS schools (as they did with the old NOVA schools). What that entails we don’t exactly know yet, but we are hopeful that some good will come of it. On that note, we hope that you find ジオス.com useful and that you find the information you were looking for! Good luck!

The forum there is a bit sparse, but maybe that's because it's new. Have a look.

As I wrote previously, Oh to have been a fly on the wall at GEOS. You already know the obituary:

The failure of major language-school operator Geos Corp. occurred because the company didn't trim unprofitable branches fast enough at a time when the industry was facing a drastic drop in students, people in the industry said.

Although the bankruptcy of industry leader Nova Corp. in October 2007 damaged the image of the commercial language school industry, the impact this time is likely to be contained somewhat by the swift response of G.communication Co., another language chain that has offered to take over about two-thirds of Geos' branches.

"I think the biggest factor was the decline in students," said Masami Sakurabayashi, director of the Japan Association for the Promotion of Foreign Language Education, a Tokyo-based organization that promotes sound management of foreign-language schools. Geos, the second major language school to fail in the past three years, is not a member of the group.

And you know that the executives filed for bankruptcy because the board members couldn't agree on whether to keep GEOS alive or not. Now there's this:

The decision to file for bankruptcy was not his, the president of language-school chain Geos Corp., Tsuneo Kusunoki, implied in an unusual statement released Thursday.

"The company's board of directors did not reach a consensus on filing for bankruptcy, and the action was taken by one director and some employees," Kusunoki said in the statement. "Although it has given the impression that the company filed for bankruptcy, it is actually not the company's will."

And this:

The founder and president of Geos Corp said Thursday he will ask the Tokyo District Court to avert bankruptcy proceedings for the major language school operator.

Tsuneo Kusunoki expressed his intention a day after Geos filed for such proceedings with the court, which ordered the protection of the company’s assets from creditors. ‘‘A company has come forward to extend financial support to Geos, so it does not have to go bankrupt,’’ Kusunoki, 62, said.

An executive in charge of financial affairs, who is one of the three board members at Geos including Kusunoki, decided to file for bankruptcy protection, according to Kusunoki.

The Geos president said he is considering taking countermeasures as he did not agree with the executive’s decision.

Shades of Sahashi? He claims to be acting in the interests of the students (who gives a damn about the teachers, eh?), but a power struggle like this strikes me as exactly the worst thing to do if you want to protect your students.

Kusunoki needs face up to reality and accept that it's all over. If anything, fighting for control of GEOS would further damage his credibility. How can he be trusted now when he said not long ago that the closure of GEOS Australia wouldn't affect operations in Japan? More importantly, GEOS teachers may not be paid for April. If the teachers won't get paid, then it's game over for sure.