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Japanese chain using California as launching platform

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WEST HOLLYWOOD, Calif. — A huge plate glass window provides a view of tony Santa Monica Boulevard from inside Famima, an upscale convenience store from Japan.

Clear plastic trays of sushi, pasta and steamed dumplings sit on refrigerated shelves that might hold microwave burritos in other convenience stores. Seaweed-wrapped rice crackers edge out potato chips along the snack aisle.

"They have a pretty decent selection," personal trainer Tom Kunze, 48, said as he sorted through rows of panini. "It's sort of like an upgraded 7-Eleven."

Famima is short for Family Mart, a Japanese chain that has more than 6,000 outlets in that country and another 5,500 branches throughout Asia.

The company is exporting a classed-up version of its stores to the United States, using Southern California as a beachhead. A Santa Monica branch is set to open Tuesday, joining stores that opened in December in Westwood and last summer in West Hollywood.

The firm eventually hopes to roll out stores in New York and other parts of the country.

But Famima faces a marketing challenge as it tries to carve out a niche with its difficult-to-define format in a highly competitive sector.

Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said Famima will fight for customers on several fronts.

It will get squeezed by an increasingly competitive convenience store industry that includes players like 7-Eleven, which has been owned by parent 7-Eleven Japan since last year. Britain's dominant supermarket chain, Tesco PLC, announced this month that it's entering the U.S. market with a string of mini-marts it plans to start opening on the West Coast in 2007.

Meanwhile, the $142.4 billion fast-food industry, dominated by McDonald's Corp., is trying to offer healthier, more sophisticated menu items. The $457.4 billion supermarket sector is also selling more prepared foods to differentiate itself from huge retailers like Wal-Mart. And a growing number of gas stations are offering food marts.

"Stores are figuring out you make more selling a 12-oz. cup of coffee or a 12-oz. bottle of water than you can selling a gallon of gas," said Jeff Lenard of the National Association of Convenience Stores in Alexandria, Va.

Famima is reluctant to call its shops convenience stores because of the low-rent, hot-dog-and-soda association.

It's also wary of identifying its stores as Japanese imports because sushi and rice bowls only make up part of the menu. It doesn't want to ward off customers looking to lunch on a sandwich or salad, said Hidenari Sato, the Famima executive overseeing the U.S. expansion.

In a prospectus for potential franchise owners, Famima dubs itself a "sophisticated store concept . . . enhanced with upscale delicatessen and premium foods tailored for the savvy American customer."

"We're trying to be somewhere in the middle of a premium grocer and a quick-service restaurant and a convenience store," Sato said. "If you can find a really good word for what kind of industry that is, I think we would be very eager to pay for it."

The chain is mindful of this country's ongoing fascination with the popular culture of Japan and doesn't want to squander that advantage, Sato said.

"In the beginning, we didn't have as many Japanese products, but there were so many requests from non-Japanese customers saying they wanted more Japanese items" such as sweets, stationery and comic books, he said.

The Family Mart chain is part of Itochu, a huge conglomerate with interests ranging from retail to natural resources and banking.

The company won't release sales figures for its U.S. stores but does say sales at its first branch in West Hollywood have increased by about 20 percent since it opened last summer.

Famima hopes entrees such as pork medallions with steamed vegetables and salmon eggs over rice will attract busy, affluent customers who don't have time to prepare meals and want something healthier and more sophisticated than fast food.

"It's great," customer Donald Driver, 40, said as he read the print on a small tin of green-tea flavored breath mints. "They have really high-quality things. Things you don't see anywhere else."