Buying a Ryokan in Kyoto as a Foreign Investor: Licenses, Kyoto-Style Negotiation, Risks and Real Opportunities

Direct answer: can a foreigner really buy a ryokan in Kyoto?

Yes. As a foreigner you can buy a Kyoto ryokan and operate it as the owner. Under Japanese law, there are very few nationality restrictions on owning real estate or shares in a company, and the ryokan business license itself does not require a Japanese passport.

The hard part is less about the law in theory, and more about the on‑the‑ground realities:

• Whether the existing building and equipment meet today’s standards
• How to sort out the ryokan license, fire code, zoning and other rules
• How to rebuild a ryokan that has been losing money
• How to understand Kyoto’s culture and the way Kyoto owners actually communicate

Those are exactly the areas where a good intermediary, architect and other local specialists can stand in front for you. Your job as owner is to understand the big picture and make decisions; their job is to manage the friction with city offices and the paperwork.

This page walks through Kyoto’s market specifics and Kyoto‑style negotiation, then shows you where to focus so you can take calculated risk instead of flying blind.

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What does the Kyoto ryokan market really look like?

Before you fall in love with a machiya photo on a listing site, you need a basic feel for Kyoto as a market.

Market scale and neighborhood patterns

Kyoto City is one of Japan’s flagship inbound tourism destinations. Before COVID, there was a continuous boom in new hotel and ryokan openings. When borders closed, occupancy plunged and many smaller operators struggled with cash flow. Now inbound demand is recovering, but with clear differences by area:

• High‑inbound tourist zones like Higashiyama, Gion and around Kawaramachi
• Areas with more long‑stay and repeat guests like Nijo, Kitayama and Arashiyama
• More local, suburban districts with weaker tourist traffic

For small and mid‑sized ryokans, you commonly see combinations like:

• Great location and decent room count, but an ageing owner and almost no modern marketing
• Buildings with real character, but outdated bathrooms and tired infrastructure
• Heavy debt from the COVID period making the capital structure tight

From a foreign‑buyer perspective, those “wasted potential” properties are often where the opportunity sits.

Typical size and earnings profile of a Kyoto ryokan

Every deal is different, but a very common profile for a small Kyoto ryokan looks like this:

• Guest rooms: roughly 10–25
• Annual revenue: about ¥50 million to ¥200 million
• Occupancy: roughly 50–80% (with big seasonal swings)
• Profitability: heavily influenced by staffing, depreciation and interest burden

You do not want to judge these businesses just by a single year’s profit and loss. Instead, try to understand why the numbers look the way they do. For example:

• Almost no use of online travel agencies (OTAs) or weak OTA profiles
• Great guest reviews, but little English capability and no foreign‑language website
• Heavy depreciation on an older building, so accounting profit looks poor while cash flow is actually positive

Those gaps between potential and current performance are often much more important than this year’s net income figure.

If you’re also looking at regional Japan, it helps to compare Kyoto with a very different market. For example, Hokkaido’s climate, seasonality and inbound mix are quite different; if that’s on your radar, reading the guide on buying a hotel in Hokkaido as a foreign investor will give you a useful contrast.

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Licenses and legal points for foreigners running a Kyoto ryokan

Most foreign buyers worry first about ryokan licenses. That’s a healthy instinct: if a building cannot get or keep a license, it is not a ryokan business, it is just a difficult piece of real estate.

1. Ryokan Business Act: your core operating license

The basic license is the ryokan business license under Japan’s Ryokan Business Act. For an existing ryokan in Kyoto, you’ll usually see:

• A ryokan business license already issued in the current owner’s name
• The license category being either “ryokan/hotel business” or “simple lodging business” (kannai shukubo)
• A need to either change the license holder’s name or apply for a new license when you take over

The Act does not require the license holder to be Japanese. The authority (for Kyoto, usually the city’s health and welfare bureau) looks at disqualification criteria such as organized crime connections, and whether the facility itself meets their standards. A well‑structured foreign‑owned company is eligible in principle.

When you review a target, have your intermediary pull together at least:

• The current license certificate details (operator name, address, category)
• The original floor plans and application set from when the license was granted
• Any history of administrative action like improvement orders or suspensions

2. Zoning and building use: are you even allowed to run a ryokan there?

Before you get deep into licensing, step back and ask a more basic question: is a ryokan use even allowed on this site today?

This ties into Japanese urban planning law, the Building Standards Act, Kyoto’s city planning and local rules on uses in each district.

Roughly speaking in central Kyoto:

• Commercial zones and neighborhood commercial zones are generally more ryokan‑friendly
• Category I exclusively low‑rise residential zones are highly restrictive for hotel and ryokan uses

Complications arise because:

• A ryokan might have been licensable when it first opened, but new rules now make fresh licenses or major expansions in that district much harder
• The building may have been extended or altered, so the current layout no longer matches the original approved plans

In those scenarios, you might inherit a license but face real pain if you try to add rooms or make major changes.

You can and should check zoning and designated use early via Kyoto City’s online urban planning information, and have an architect or surveyor confirm the situation.

3. Fire safety, evacuation routes and seismic standards

Ryokans count as buildings with high human occupancy. That means tighter rules under the Fire Service Act and Building Standards Act. In practical terms, you’ll be looking at:

• Presence and condition of automatic fire alarm systems
• Number and clarity of evacuation routes and emergency exits
• Fire‑resistant interior materials where required
• Seismic performance, especially for older wooden structures

For traditional townhouses (machiya) converted to ryokans, you often face a trade‑off:

• How much to invest in seismic reinforcement
• How to install fire equipment without destroying the atmosphere

The good news: Japanese fire departments and building control sections are usually quite hands‑on and pragmatic. If you or your architect go in early and ask, “What do we need to do to make this work?”, they’ll normally give very concrete guidance. You do not have to understand all of this yourself; an experienced intermediary and architect will front these conversations.

4. Food service, hygiene and kitchen licenses

If the ryokan serves breakfast or dinner, the Food Sanitation Act comes into play.

You’ll need to understand:

• Whether there is already a food service (restaurant) license
• Whether the existing kitchen layout and equipment meet current standards
• How much of the food offering you want to run in‑house versus partnering with outside restaurants or caterers

Your concept matters. A high‑touch kaiseki dinner experience demands a different kitchen and staffing model from a simple breakfast‑only or room‑only ryokan.

5. Simple lodging and minpaku: what’s the difference?

Kyoto locals are very familiar with simple lodging licenses and minpaku (short‑term residential accommodation under the Private Lodging Business Act). These models can require lower initial investment, but:

• Minpaku has limitations on operating days and other constraints
• Simple lodging has its own floor‑area and structural rules and is treated differently from a “full” ryokan/hotel

If your goal is a sustainable, long‑term ryokan business, in most cases you’ll want a property with a proper ryokan/hotel business license, not just a minpaku registration. The operational flexibility is usually worth the extra effort.

For buyers from the US, EU, Singapore, Hong Kong and Australia

In your home markets, hotel licenses often sit inside a broader planning and building consent framework, with relatively standardized national rules. Kyoto layers national law with very specific local zoning, machiya preservation, and landscape controls. Do not assume that “commercial use” on a listing automatically means “hotel/ryokan is fine.”

Also, Japanese authorities are more accessible in practice than many foreign buyers expect. Walking into the local fire station or health office with your architect is normal, and they will often sketch out a practical compliance path. Use that: have your Japanese team take the lead, rather than trying to interpret every code article yourself.

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Kyoto‑style risks in small ryokans: what’s normal and what’s a red flag?

When you start visiting small ryokans, you’ll quickly discover that perfectly organized targets are rare. A bit of roughness is the norm, not the exception.

1. Loose paperwork, scattered records and informal contracts

A very common pattern in small Kyoto ryokans:

• Contracts only exist on paper, in multiple versions, with some missing
• Old renovation drawings cannot be found
• Staff “contracts” are closer to long‑standing verbal understandings than formal documents

Japan is famous for detailed record‑keeping, but at the small‑business level day‑to‑day operations often trump formal documentation.

If this sounds familiar from small deals in your own country, you’re not wrong.

In practice, a workable approach is often to:

• Use due diligence to map the messy areas and then formalize just the critical items before closing
• Clean up the rest gradually in the first 6–12 months post‑acquisition

Trying to make every document perfect before you sign is a good way to end up with no deals at all.

2. Ageing buildings and repair bills

Old wooden ryokans and machiya‑style inns nearly always have some degree of:

• Ageing plumbing and electrical systems
• Waterproofing and exterior wear
• Outdated room interiors and bathrooms

The key is to separate:

• Safety and legal‑compliance items (seismic, fire, serious leaks, electrical hazards) – you budget for these first
• Nice‑to‑have upgrades (design refresh, higher‑end finishes) – you phase these in as cash flow allows

If you try to “fix everything beautifully” in year one, you’ll likely over‑capitalize and stress your working capital.

A good local construction firm or design office can help you split the scope into:

• Minimum work to keep the business safe and licensable
• Upgrades that actually move the needle on rate and occupancy

A broker who does a lot of ryokan work will often coordinate this scoping and quoting process for you.

3. Staff, owners and day‑to‑day operations

Operationally, many Kyoto ryokans look like this:

• Owner‑operator couples running front desk, guest relations and often cleaning
• Veteran staff who have “run the place” for decades with a very personal style

For foreign buyers, the biggest anxiety is usually, “What happens when that owner or key person steps back?”

Points to pin down during discussions:

• Which core people are willing to stay on after the sale, and under what conditions
• Whether the current owner can remain involved for a period on an advisory or part‑time basis
• How much of the workflow is already written down versus sitting in people’s heads

On the buyer side, it usually works best to:

• Keep the existing operating team as intact as possible for the first 6–12 months
• In parallel, document processes and gradually rebuild the team structure, adding new hires or outside service providers where needed

4. Seasonality and the “Kyoto wave”

Kyoto is highly seasonal:

• Cherry blossom and autumn foliage: high occupancy and strong rates
• Mid‑summer and deep winter: much softer demand

A common mistake is mentally extrapolating peak‑season performance across the whole year.

When you model the future, insist on seeing:

• 3–5 years of monthly revenue, occupancy and ADR data
• Review history and ranking trends on major OTAs

Use those to think concretely about your off‑season plan: domestic campaigns, long‑stay offers, group business, or using some rooms for alternative uses.

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Why Kyoto communication can make or break your deal

If you buy in Kyoto, law and numbers are only half the game. The other half is whether you can actually build trust with Kyoto people. Misunderstanding this is one of the fastest ways to kill a good deal.

Don’t take Kyoto phrases at face value

You will hear Kyoto owners say things like:

• “Real Kyoto is only over there.”
• “There’s no real history in that part of town.”
• “Our place is just a newcomer.”
• “We’re finished; this ryokan is done for.”

To a foreign buyer, that sounds brutally negative. It’s natural to think, “If it’s that bad, maybe we should walk away.”

But within Japan, Kyoto people are famous for extreme verbal modesty. They talk down their own value while holding very strong pride inside. If you don’t see that split, you’ll misread every meeting.

Humility on the surface, pride underneath: “Kyoto mode”

In simplified form, two things happen at once in Kyoto:

• On the surface, people talk about themselves and their businesses in very self‑deprecating terms
• Underneath, they have deep pride in their craft, history and guests

Trouble starts when you agree too quickly with the self‑deprecation.

Example:

• Owner: “We’re not a historical ryokan at all.”
• Buyer: “I see. So the property doesn’t really have much heritage value.”

The owner will keep smiling, but internally they may shut down: “This person doesn’t get what my place really is.” They may keep the process going politely, while mentally deciding not to sell to you.

Practical communication habits that work with Kyoto owners

A few simple habits go a long way in Kyoto:

• When you hear negative language, don’t immediately agree that the asset is low‑value
  Instead, ask: “Even so, why do you think guests keep coming back?” or “What kind of people have loved staying here?”
• Avoid posturing as someone who “already understands Kyoto”
  Try: “From a visitor’s perspective this location feels excellent. How do local people see it?” and let the owner educate you.
• When you notice a point of pride, acknowledge it properly
  Listen carefully to stories about long‑term guests, the founder, or signature services, and reflect back what you heard.

You don’t have to speak perfect Japanese. What matters more is respect and an open, questioning style. If you work through an interpreter, brief them on this stance—how they frame your questions and responses can change the whole tone of the deal.

Kyoto communication turns into an asset with practice

At first, talking with Kyoto owners can feel like walking through fog. The words sound pessimistic; you can’t tell what is real risk and what is ritual modesty.

Give it time. Once you’ve had a few cycles, you start to see:

• The seriousness behind their craft and hospitality
• A layer of local knowledge you’d never get as a tourist
• Partnerships where, once trust is built, people go the extra mile and keep their word carefully

The same dynamic applies inside an M&A negotiation. If you listen for the values behind the words, you’ll have far more room to structure win‑win terms instead of getting stuck on face‑value comments.

For buyers from the US, EU, Singapore, Hong Kong and Australia

If you are used to US or European mid‑market M&A, you probably expect direct talk: if a seller says “this is a bad business,” you assume they really mean it. Kyoto doesn’t work that way.

You need to decouple linguistic style from actual business quality. Use the numbers, third‑party feedback and your own site visits to judge the asset, not just the owner’s modest language. Lean on a local intermediary who can quietly tell you, “When he says that, here is what he really means.”

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Kyoto ryokan licenses and permits: a practical checklist

Let’s gather the main licenses and notifications in one place. You do not need to memorize each law; your goal is to know the headings so you can ask the right questions.

Category	License / Notification	Key points
Lodging	Ryokan business license (ryokan/hotel business, simple lodging business)	Check facility standards, room size, ventilation and light, toilet/bath counts. Confirm that the license category matches the way the property is actually operating.
Fire safety	Fire Service Act notifications, automatic fire alarm system, etc.	Evacuation routes, emergency exit signage, appointment of a fire prevention manager. Review fire inspections and any outstanding improvement notices.
Building	Building Standards Act, zoning and use district rules	History of use changes, extensions and renovations. Verify there are no illegal extensions and understand any structural limitations.
Food hygiene	Restaurant business license, catering permissions	Depends on whether you serve meals and in what format. Kitchen layout and equipment must meet hygiene standards.
Landscape and signage	Kyoto landscape ordinances, outdoor advertising controls	Unique to Kyoto. Check these before exterior renovations or installing new signs; color, size and lighting can all be regulated.

In a typical deal, the sequence looks like this:

1. The intermediary, lawyer and administrative scrivener compile a snapshot of current licenses and obvious risks
2. Your team and the Kyoto city/prefectural officers agree on the path for license transfer or re‑application
3. Required works and corrective actions are quantified and pulled into your pricing and conditions

As a foreign owner, you should understand the structure and the cost implications, but you do not need to personally manage each government filing. That’s exactly what local professionals are there for.

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Pre‑acquisition checklist: what a foreign owner must at least see

Before you let yourself get lost in design ideas and Instagram shots, run through this basic checklist.

Legal and licensing

• Have you confirmed the category and validity of the current ryokan license?
• Is there any obvious structural or zoning reason the property cannot legally be used as a ryokan going forward?
• Have you checked for past instructions or penalties from the fire department or health office?
• Do you understand whether food is being served and, if so, whether the right food and hygiene licenses are in place?

Building and equipment

• Has a qualified architect or contractor inspected seismic risk and general ageing?
• Do you know the upgrade history for plumbing, electrical and HVAC systems?
• Can you roughly separate what must be renovated (for safety and licensing) from what you’d like to renovate (for branding and guest experience)?

Financials and demand

• Have you seen at least 3–5 years of monthly revenue, occupancy and room rates?
• Have you read OTA reviews and looked at rating trends and common complaints?
• Do you know the amount and terms of any COVID‑era or restructured borrowings?

People and operations

• Do you know who the key people are, and whether they will stay post‑sale?
• Do you have a picture of how Japanese and English front‑desk coverage will work?
• Have you thought through the mix of in‑house versus outsourced cleaning, linen and laundry?

Your own constraints

• How much time can you realistically spend in Japan (full‑time, frequent trips, mostly remote)?
• Have you at least had a high‑level discussion with a Japanese immigration and tax professional about visas and tax structure?
• Can you articulate your investment size, target payback period and what kinds of risk you are or are not willing to accept?

You don’t need every box ticked before negotiation, but you do want explicit answers for anything that would change your “go/no‑go.” A competent intermediary should help you surface and organize these points.

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The deal process in Kyoto—and where foreign buyers stumble

The process to buy a Kyoto ryokan is broadly similar to any Japanese SME acquisition, but there are a few extra trip‑points for foreign buyers.

1. Sourcing and initial screening

• You receive deal flow through M&A brokers, banks and professional firms
• You screen by revenue, location, room count and price band

At this stage, it’s tempting to shortlist based mainly on photos and top‑line revenue. Try to also filter early on:

• License status and category
• Building age and structure type

That alone will save you from spending time on non‑starters.

2. Site visit and first meeting with the seller

On site you will quickly see things the IM never mentioned:

• The building may look older than the photos—but the atmosphere might be fantastic
• The walk from the nearest station may feel longer than you expected
• You get a feel for the owner’s personality and values

Use the visit to also check:

• Whether the current layout and extensions match the original plans (obvious DIY additions, enclosed balconies, etc.)
• The feel of the neighborhood: noise, nighttime safety, and relationships with neighbors

In Kyoto, the communication “training” starts here. Expect the owner to talk down their own business. Don’t panic, and don’t immediately take their words as an objective business judgement.

3. Letter of intent and due diligence

Once you are broadly aligned on price and structure, you sign a basic agreement (or LOI) and begin full due diligence across:

• Legal: licenses, contracts, compliance
• Financial and tax: financial statements, tax filings, debt
• Commercial: customer mix, competition, marketing, operations
• Technical: building and equipment condition

In Japanese small‑business deals, this phase often uncovers:

• Minor building or fire safety non‑conformities
• Tax issues such as small under‑declarations or sloppy expense categorization

Japan’s rules are detailed and records are well kept, so small imperfections are visible. Most of these are addressable by:

• Having the seller fix them before closing, or
• Adjusting price and protections (for example, via representations and warranties or insurance)

Expect to find “something.” The presence of small, fixable issues is not in itself a red flag.

4. Signing, closing and license transfer

You firm up the deal structure—share deal (buying the company) or asset deal (buying just the business and assets)—and sign the definitive agreement. From there you move into implementation:

• Name change or new application for the ryokan license
• Assignment or re‑signing of key contracts (leases, vendor agreements, systems)
• Transition of staff employment contracts

This is where the paperwork peaks, but most foreign owners barely touch it. Your Japanese lawyer and administrative scrivener will handle the drafting and filings.

5. Handover and the first 6–12 months

The first year post‑closing is where you either lock in a smooth transition or lose the plot.

Focus on:

• Deeply learning the day‑to‑day operation—from night checks to laundry
• Building credibility with the existing team before you push big changes
• Picking a few early wins (e.g., English‑language OTA optimization, online payment options) that play to your strengths without stressing the staff

If you’d like to see how this compares to buying in a non‑hospitality sector, have a look at our guide to acquiring a Japanese manufacturing SME. The core M&A skeleton is the same; that contrast helps highlight what’s unique about ryokan deals.

For buyers from the US, EU, Singapore, Hong Kong and Australia

Compared with your home markets, expect:

• Lighter documentation: Japanese SME deals often have thinner contracts and fewer schedules than US‑style deals
• Different rep & warranty practice: you may see less aggressive seller reps, fewer indemnities and less use of escrow
• More trust in the relationship: small‑business sellers in Japan often view the deal as a succession, not just a sale, and care deeply about who is taking over

You can and should push for protections where they matter, but if you try to impose a full US‑style private equity SPA on a Kyoto ryokan owner, you may simply scare them off. A good bilingual lawyer can help you find the line between “protected” and “over‑lawyered for this context.”

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Foreign‑owner specifics: visas, tax and financing

Beyond the ryokan itself, foreign buyers face three structural questions: how to stay in Japan, how to structure tax, and how to fund the deal.

Staying in Japan: the Business Manager visa and alternatives

If you plan to be based in Japan and actively run the ryokan, you will usually look at the Business Manager visa category or rely on another status (for example, “spouse of Japanese national,” where applicable).

The Business Manager status has specific requirements built into immigration law—around company setup, capital, office and ongoing business activity. Immigration offices also look at each case on its own facts.

You do not need a Business Manager visa if you remain abroad and manage through local staff and partners, but your level of involvement and travel pattern will influence what makes sense.

Given the case‑by‑case nature of immigration decisions, your safest path is to engage an administrative scrivener who handles Business Manager applications regularly and walk through your situation in detail.

Tax: corporate and personal layers

If you operate through a Japanese company, you’ll face:

• Japanese corporate income tax and, depending on your size, local enterprise taxes
• Japanese consumption tax (similar to VAT/GST) on most goods and services
• Taxation of dividends and director compensation at the shareholder/individual level

Your country of residence and any applicable double tax treaty will shape how cross‑border flows are taxed and what credits you can claim.

This is not an area to DIY. Work with a Japanese tax accountant who understands international clients; give them a clear picture of your personal tax residence and global structure, and have them design a straightforward setup that you can explain to tax authorities on both sides.

Financing: Japanese banks and capital structure

Japanese bank financing typically hinges on three things:

• The presence of a Japanese borrowing entity
• Available collateral, especially real estate
• The track record and perceived strength of the owner and company

Being foreign is not an automatic “no,” but being a brand‑new company with no track record and weak collateral often is.

A common pattern for foreign buyers is therefore to:

• Use more equity for the first deal and secure the property, possibly with limited Japanese bank leverage
• Build 2–3 years of operating history and relationship with a local bank
• Refinance or leverage up later once you have that track record

Another path is to partner with a Japanese co‑investor or use an existing Japanese vehicle that already has banking relationships.

For buyers from the US, EU, Singapore, Hong Kong and Australia

Compared to your home markets, note a few differences:

• Japan’s consumption tax combines features of VAT and sales tax. The current standard rate and thresholds for registration and filing are set centrally; you’ll want a local accountant to walk you through how it applies to lodging revenue.
• Japanese GAAP is different from US GAAP and IFRS on certain points, and SME accounting can be conservative and tax‑driven. When you see low profit on paper, don’t assume the economics are terrible without looking at cash flow and non‑cash charges.
• Local banks are relationship‑driven. A good intermediary or accountant who already has credibility with a regional bank can make a big difference in how your proposal is received.

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Turning a “rough” Kyoto ryokan into your opportunity

Let’s flip perspective. The Kyoto ryokans that end up being real gems for foreign buyers usually look something like this at first glance:

• Great or at least defendable location, but old interiors and weak online presence
• An ageing owner with no clear successor
• Under‑investment since COVID, with the business running in “maintenance mode”

They can look risky. But if:

• There is no structural or legal reason you cannot keep the ryokan licensed
• Licensing and tax issues are messy but realistically clean‑up‑able
• Guest reviews and the existing customer base are reasonably solid

then you may have a classic “fixable” asset.

The levers you can often pull over 2–5 years include:

• Stronger inbound marketing and clearer positioning on selected OTAs
• Better language coverage, payments and guest communication flows
• Staged refreshes of rooms and common areas, focusing on revenue‑impact first

Not every deal will work out. But one real advantage in Japan is that government offices, banks and local professionals are generally happy to support owners who are clearly trying to keep a business alive and improve it. What looks like a headache on day one often becomes manageable once you sit down with the right people at city hall or the fire station and say, “Here is what we’d like to do; what would you recommend?”

Owning a Kyoto ryokan is not just an asset play. You are stepping into a piece of the city’s fabric. That brings more moving parts, but you don’t have to carry them alone. Let your Japanese intermediary and specialists handle the messy side so you can stay focused on two questions: what kind of stay you want to offer, and how you want to show up in conversation with Kyoto’s people.

If you’re at the stage where Kyoto ryokans are more than a daydream, take half an hour and write down your target ticket size, location preferences, operating involvement, and any fears you have about the process. Bringing that list to a first call with a Japan‑based broker or advisor will make the conversation far more concrete, and will quickly clarify which concerns are easy to resolve and which deserve deeper work.

If you’d like help matching that wish‑list to real Kyoto deals and having a local team front the licenses and government discussions, you can start by submitting a short buyer profile through our application form. We’ll use it to assess fit and suggest next steps.