The ONE Group's Strategic Shift Toward Capital-Efficient Growth and Asset-Light Expansion

In an era where capital efficiency and scalable expansion define competitive advantage in the hospitality sector, The ONE Group Hospitality, Inc. has emerged as a case study in strategic reinvention. The company's 2025 pivot toward asset-light and joint venture-driven growth reflects a calculated response to market dynamics, aiming to balance aggressive expansion with financial prudence. By leveraging franchise agreements, joint ventures, and conversions of existing locations, The ONE Group is positioning itself to maximize long-term value creation while mitigating the risks associated with heavy capital outlays.

Strategic Shift: From Capital-Intensive to Asset-Light

The ONE Group's 2025 strategic shift centers on reducing its reliance on company-owned locations, which traditionally require significant upfront investment and operational overhead. A landmark example of this approach is the company's largest asset-light development agreement to date, inked in the fourth quarter of 2025. This deal secured rights to open ten new restaurant locations in the Greater San Francisco Bay Area, including three Benihana franchise units, two Benihana joint ventures, and five Benihana Express licensed locations. These joint ventures, slated to open in 2026, underscore the company's focus on shared risk and reward, with external operators handling day-to-day management while The ONE Group retains brand control and royalty streams.

CEO Emanuel "Manny" Hilario has emphasized that this strategy aligns with "strong demand for the Benihana brand" and reflects a disciplined approach to capital allocation. The asset-light model also extends to the company's pipeline of existing leases, with The ONE Group prioritizing locations requiring $1.5 million or less in development costs and leveraging its current portfolio of 12 leases to avoid new real estate commitments. This approach not only reduces financial exposure but also accelerates time-to-market, a critical factor in capitalizing on brand momentum.

Financial Performance: EBITDA Growth and Unit Economics

The ONE Group's strategic pivot is already translating into tangible financial results. In Q2 2025, GAAP revenue rose 20.2% year-over-year to $207.4 million, driven largely by the integration of the Benihana acquisition. While consolidated comparable sales dipped 4.1%, restaurant EBITDA increased by 8.0% to $31.9 million, and Adjusted EBITDA improved by 7.3% to $23.4 million. These figures highlight the company's ability to offset sales volatility through cost discipline and higher-margin revenue streams, such as franchise royalties.

Unit economics further reinforce the viability of the asset-light model. The new Benihana prototype in San Mateo, for instance, exceeded performance expectations, demonstrating strong throughput and customer satisfaction. Such successes are being replicated across the portfolio, with The ONE Group planning to apply lessons from this location to enhance operations at existing units. Additionally, the company's focus on converting up to nine Kona Grill and RA Sushi locations to Benihana or STK formats by year-end 2026 is expected to be accretive to EBITDA. These conversions minimize capital expenditure while leveraging existing infrastructure, a hallmark of capital-efficient growth.

Expert Analysis: Industry Trends and Risk Mitigation

The ONE Group's asset-light strategy aligns with broader industry trends in hospitality and lodging, where companies increasingly adopt joint ventures and franchising to reduce real estate risk and stabilize cash flows. According to a report by ScienceDirect, asset-light models are particularly effective in volatile markets, as they allow firms to scale without overextending balance sheets. For The ONE Group, this approach also provides flexibility to adapt to shifting consumer preferences and economic conditions.

Moreover, the company's emphasis on high-margin royalty streams-such as its three-year concession agreements at the Mortgage Matchup Center in Phoenix and UBS Arena in New York-further diversifies revenue sources. These partnerships generate predictable income with minimal operational burden, a critical advantage in an industry prone to cyclical downturns. Analysts have noted that such strategies could insulate The ONE Group from macroeconomic headwinds while maintaining growth trajectories.

Long-Term Value Creation: A Franchise-Driven Future

The ONE Group's long-term vision hinges on a franchise and joint venture footprint representing over 60% of its total locations. This target positions the company to scale rapidly without diluting equity or incurring debt, a key consideration for investors prioritizing capital preservation. The recent opening of the second franchised Benihana Express in Miami, Florida, exemplifies the scalability of this model. By reducing discretionary capital expenditures, The ONE Group is optimizing its asset base to generate higher returns per dollar invested. This focus on efficiency is particularly relevant in a post-pandemic landscape where investors demand rigorous capital allocation.

Conclusion

The ONE Group's strategic shift toward capital-efficient growth and asset-light expansion represents a forward-thinking response to the challenges and opportunities in the hospitality sector. By prioritizing joint ventures, franchising, and conversions, the company is not only mitigating financial risk but also unlocking new avenues for EBITDA growth and shareholder value. As the San Francisco Bay Area and other markets witness the rollout of Benihana and Benihana Express locations, the success of these initiatives will serve as a litmus test for the broader viability of The ONE Group's model. For investors, the company's disciplined approach to capital allocation and its ability to adapt to market dynamics make it a compelling case study in long-term value creation.