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Meet the New Boss, Same as the Old Boss

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.

Comments

Shawn, help me out here:

G.comm was its own private juku business, set up by Inayoshi sometime back.

They played the white knight in the Nova liquidation of 2007.

You mentioned that news reports had Inayoshi running into some tax trouble during 2009.

Earlier this year, G.comm bought GEOS.

Now, somewhere along the line, "Foodys" went in for about 51% of G.comm. (It's not clear who had the other 49%.)

Foodys ran into trouble because of the loan they used to acquire the stake in G.comm, and so now it's owned by a new owner. Inayoshi is out.

Three years ago, I had the feeling that Inayoshi was a useful tool to for the Japanese bureaucracy to get Nova out of the international press and local embassy to-do lists. Same went for the GEOS bankruptcy in April.

Now apparently Inayoshi has made a quick exit from the industry. Hew was supposed to be the businessman-innovator who would make everything right.

Do you think the new acquirer is buying the language operations, or the food business part of old G.comm?

Wasn't G.comm just used by the bankruptcy trustees as an intermediate step to shut down an embarrassing business model? Now it looks like G.comm's inability, and not the fact that the business model doesn't work?

Great analysis above. Very refreshing to see someone in the know on here.

The other connection that must be sleuthed is the GEOS Canada/ U.S. link to Gcomm. Who is financing the bottom line? There is a mystery financier involved, especially given all the other closures around the world. What is Gcomm/ mystery person(s) end goal for GEOS NA? That is the question and answer that will eventually lead to truly understanding what is going on behind the facade.

Stop referring to Eikaiwa as a McJob. It undermines the respect that workers in fast food restaurants are entitled to by comparing them with real losers.

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.

Eikaiwa's links to the catering business are hardly news, G.communication is well known for its ownership of various restaurants and takeaway shops. The people running these schools don't really know anything about English teaching and don't really want to - as far as they're concerned it's just a product to be sold, and at G.communication they don't care if their school managers, sales staff and teachers don't know anything about English teaching either.

The other connection that must be sleuthed is the GEOS Canada/ U.S. link to Gcomm. Who is financing the bottom line? There is a mystery financier involved, especially given all the other closures around the world. What is Gcomm/ mystery person(s) end goal for GEOS NA? That is the question and answer that will eventually lead to truly understanding what is going on behind the facade.

I suspect you'll find that this new lot, whoever they are, will be keen to wash their hands of GEOS North American schools as quickly as they possibly can.

I'm not so sure about the government wanting to shut down an embarrassing business model argument. That embarrassing model still exists in eikaiwa and is used in other businesses such as esthetic salons. Don't know about Inayoshi being some innovator, either. EC in Hokkaido has a reputation (at least here) as not being a very good place to work at. His track record with Nova hasn't been stellar, either.

There probably is something to Hashin Shuhan (they own Gyukaku, btw) wanting a piece of G.communication's restaurants. However, a brief blurb in the Mainichi says that they intend on continuing with the eikaiwa schools. Don't know what they see in it. Maybe they use the business as a way to move money around in their shady deals? As you say, Inayoshi has been guilty of that before.

Edit to add: Found this that says G.communication restaurants G.taste, G.networks, and Sakai will become "grandchild companies" (indirect subsidiary?) of Hanshin Shuhan. So there's some evidence that supports they want part G.com's restaurant business.

Shawn
Let's Japan.org::Blog

Not that I've spent a whole lot of time thinking this through. But why else would a restaurant/franchisor want an Eikaiwa chain?

Eikaiwa seems like a good extension off of cram schooling. This is Benesse's model. But it just doesn't seem to go with Yakitori, unless you are going to give your English teaching staff free meals and subsidized housing above the restaurant.

The thing with Inayoshi and taxes actually comes from you: http://www.letsjapan.org/g-communication-fails-to-report-income.html

All just sounds like different shades of the same shit

Eikaiwa's links to the catering business are hardly news, G.communication is well known for its ownership of various restaurants and takeaway shops. The people running these schools don't really know anything about English teaching and don't really want to - as far as they're concerned it's just a product to be sold

That's why restaurant and fast-food chain owners make ideal managers of eikaiwa. Like fast-food, eikaiwa is just a product to be sold. Teaching and education don't come into it. As long as they cook up a cheap, quick product, whether it's yakitori or eikaiwa lessons, and get customers handing over as much cash as possible, then they'll be a success. It's as simple as that.

The Gcom restaurant angle is interesting and very odd. Shawn, I think it would be great if you can do some investigating journalism in regards to this, and as others have said, the mysterious GEOS NA financing link. You might find something of great interest. ;-)

A quick two cents on this topic.

First, while fast food and eikaiwa may seem like strange bedfellows to some, to a business person, particularly one in Japan, it is not so difficult to comprehend. That fast food franchise and the eikaiwa school both negotiate in the same currency. Japanese companies, by Western standards, are uncommon advocates of diversification. For example, the Yamaha brand name appears on pianos, motorcycles and outboard motors. The products are guided through the marketplace by different divisions to be sure, but it is all Yamaha. During the video game craze of the 1980's, many Japanese companies jumped into the market to make a quick yen. Fuji, Mitsubishi, Nippon Steel, Tokai Gas, Sammy (a pachinko company), and Japan Victor were all prominent players in the US video game scene at one time.

Second, if you own a business, there should be no "just" in the expression "just selling a product". If that is part of your MO, you'll be out on your posterior faster than you can say "taberareru". Micky Dees was in a downward cycle in recent years, but in the past two or three years, the Great Ship Big Mac has righted its course. Expanding into foreign markets, including China, McDonald's has localized its product for maximum effect and profit.
You may call it junk food, but the McDonald's empire spends a lot of time and money on research to ensure that it has a product that will sell.

Not sure I agree with your assessment. Yamaha makes quality products and the video game craze you cite is an example of people jumping on the bandwagon of a growing industry. In all of your examples, the companies are selling something tangible. Eikaiwa, on the other hand, offers nothing tangible and is in decline. It sells language studies, but even after the completion of a contract, it's not clear what you're supposed to have accomplished.

This is what makes its continued ownership by a food and beverage company interesting. Do they intend to boost the fortunes of Nova and GEOS and turn things around? If so, how? Are they gong to invest loads of money in rebuilding the Nova and GEOS brands? That remains to be seen. G.communication didn't do much for Nova other than keep the zombie company alive.

Shawn
Let's Japan.org::Blog

Eikaiwa's been in decline for quite some time. When I worked at Nova, back in 2002, you could see the start of the decline happening then (I think they actually posted their first loss that year).

There was an initial boom and craze for eikaiwa back in the 90s which had burned itself out by then. Perhaps the beast would have soldiered on in better shape for longer had it not been for NOVA's shady business practices finally getting exposed (or indeed, had they engaged in unshady business practices from the start). NOVA was synonymous with the boom in "mass-eikaiwa", and now that they've been disgraced, that's blighted the reputation of the whole business.

Add the recession on top of that - people having to tighten their monthly budgets and focus their resources on things that really matter - and eikaiwa classes are going to be one of the first things to be trimmed. It's non-essential entertainment basically, and I reckon more and more people have finally realized that it's an unnecessary extra that isn't worth wasting their money on.

Food Business did not ruin Eikaiwa. When you buy a hamburger, you get a hamburger. When you buy an Eikaiwa Union membership, you get what? Nothing to take home. Nothing to consume. Nothing that is clear cut. Beware of Unions.

In all of your examples, the companies are selling something tangible. Eikaiwa, on the other hand, offers nothing tangible and is in decline. It sells language studies, but even after the completion of a contract, it's not clear what you're supposed to have accomplished.

Exactly, and especially in the case of people who will never really use English very much in their lives and thus retain whatever they've learned. Eikaiwa lessons aren't even any use for getting jobs or entering college because the level systems are totally meaningless outside the schools. If you ask me the only way to get something useful out of an eikaiwa school is to find one that offers TOEIC, TOEFL or Eiken courses, sign up for one of those and not bother at all with their conversation classes.

Can't agree with that Mr X. If you want to get a good TOEIC, TOEFL EIKEN etc. score then the first thing you have to do is learn some English. Then, having learned some English, if you feel it may be of some use, you can prepare for the exam yourself no problem using a wealth of books, internet materials etc.

The last place you want to go is one of those rip off schools who will take your money for their bullshit courses whether you are actually ready for them or no. Not saying there are no good ones out there who will give you good value prep if you are ready for it or simply tell you to your face: sorry you're not ready - hit the books. Knowing who the good and honest ones are is another matter though, much the same as with eikaiwa schools really.

Not that I've spent a whole lot of time thinking this through. But why else would a restaurant/franchisor want an Eikaiwa chain?

Exactly what I have always thought.
Anyone got any insight on this???!!!

Sean,

Just recently got wind of the change of ownership of Gcomm, and wanted to ask you if Hanshin Shuhan actually took over Gcomm or Geducation? I heard that it took over Nova and Geos, ie Geducation but not the rest of Gcomm. Can you provide any insight?

Thanks.

Can't agree with that Mr X. If you want to get a good TOEIC, TOEFL EIKEN etc. score then the first thing you have to do is learn some English. Then, having learned some English, if you feel it may be of some use, you can prepare for the exam yourself no problem using a wealth of books, internet materials etc.

The last place you want to go is one of those rip off schools who will take your money for their bullshit courses whether you are actually ready for them or no. Not saying there are no good ones out there who will give you good value prep if you are ready for it or simply tell you to your face: sorry you're not ready - hit the books. Knowing who the good and honest ones are is another matter though, much the same as with eikaiwa schools really.

I never claimed that the test prep lessons offered by eikaiwa schools are necessarily going to be good, but they are at least geared towards a tangible end result. The same cannot be said of the conversation classes, which in almost all cases really are just a total waste of time.

23:06 What was your source?

This could get very interesting if true.

Just a couple of points:

-By taking on the eikaiwa side of things, as well as the cram schools and food service, it’s automatic diversification. Not in the vein of guaranteed income, but rather in the vein of financial hide &seek. The more diverse the holdings are, the easier it is to hide money, i.e.: tax evasion, slush funds, etc. Moving funds from one holding to another is an old and proven method of masking profits and avoiding severe capital gains taxes.

-It seems as if Nova/G.com (whatever it’s called this week) has something of value to always have a buyer. Remember, “Monkey Bridge“, for all of his trouble, has not claimed to have lost any money. Inayoshi is also not claiming any personal loss from his resignation. Nova.com’s value may not be in assets, but rather it may have great potential to be a fast, dirty way to make some quick cash. Kind of like a junk bond. I wouldn’t be surprised if Nova.com changes hands yet again after this.

I never claimed that the test prep lessons offered by eikaiwa schools are necessarily going to be good, but they are at least geared towards a tangible end result. The same cannot be said of the conversation classes, which in almost all cases really are just a total waste of time.

I agree, the regular conversation classes do nothing for your English, unless you're doing some study by yourself and use the classes to do speaking and conversation practice on what you've been studying.

Having said that, there's people out there who don't want to study and learn English, they just do it as a casual hobby, or something to do because it is/was a fashionable fad. That's what regular conversation classes cater for.

All-staff meeting ordered at one Canadian school. Seems important and urgent. Will update as soon as I know anything.

The little man is in Miami today. Yup, the little guy from Canada. Anyone guess the meeting down there?

While he is gone, the gossip flies around the office...The jokes too. He has no clue what goes on behind his back when he is gone.

Pay attention to the Ottawa poster. You should. But they, the staff of Ottawa, are also on to her/ him. Hope he is careful.

Not for long. Probably transferring some money to Japan via an e-account, like GEOS Ottawa. Can't let Revenue Canada see everything.

The gossip must be flying at GEOS Montreal with him gone. I can only imagine.

Spoil it not. Save for biggies. KWIM?

GEOS would have been fine, if it were not for Unions. You all know it. Beware of Unions.

I despise unions like most do, but unions had absolutely nothing to do with GEOS failure, incompetence, etc. The reverse psychology trick isn't working, buddy. So obvious.

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