Benihana Report

8/4/2019 Benihana Report

http://slidepdf.com/reader/full/benihana-report 1/33

ContentsExecutive Summary ................................................................................................................1

Service concept ......................................................................................................................2

What is a service concept? .......................................................................................................... 2

Service Concept at Benihana ....................................................................................................... 2

Benihana vs. Typical restaurant ..............................................................................................3

Operating focus ............................................................................................................................ 3

Sources of Competitive Advantage .............................................................................................. 5

Operating figures ......................................................................................................................... 7Benihana Production Process .................................................................................................8

Service Design .............................................................................................................................. 8

Analysis of the Service Design at Benihana ............................................................................. 9

Customer Processing Operations Framework ........................................................................... 11

Major design choices which generate operating efficiencies .................................................... 15

Long Term Expansion Strategy .............................................................................................. 20

Current Issues faced by Benihana .............................................................................................. 20

Future Options ........................................................................................................................... 21

Option Evaluation ...................................................................................................................... 22

Prioritization .............................................................................................................................. 24

Conclusion ........................................................................................................................... 26

Appendix A: Service map ........................................................................................................... 27

Appendix B: Summary of Benihana’s approach to Promotions................................................. 28

Summary of the Advertising policy ........................................................................................ 28

Summary of the common points in the Advertising Messages ............................................. 28Appendix C: Key Operating figures ............................................................................................ 30

Appendix D: Bar vs. Food sales .................................................................................................. 31

Appendix E: Process performance metrics ................................................................................ 32



1

Executive Summary

The origins of Benihana of Tokyo date back to 1935 when Yunosuke (Papasan) Aoki

opened the first of his chain of restaurants in Japan. However, the foundation for the

establishment of the restaurant in the United States (US) was laid in 1959 when the

current President and son of founder, Hiroaki (Rocky) Aoki came on a tour to the US

with his university wrestling team. A 03 year systematic analysis of the US restaurant

market convinced Rocky of potential opportunities in the US. Thus, the first unit was

opened in 1964 and since then the US operation has expanded to a chain of 15 restaurants

by 1972 – 09 company-owned, 05 franchised units and one Joint Venture.

Benihana of Tokyo is based on the unique restaurant concept known as the „ hibachi

table concept‟ (cooking on a grill located in the middle of the diner‟s table) . By adopting

this concept the restaurant was able to provide its customers with an unusual amount of

attentive service whilst keeping costs, especially labour, at a low level. Glen Simoes,

Director of Advertising and Public relations says, “We reassure folks that they will get

wholesome, familiar food, with unusual, unique and delicious preparation, served in a fun

atmosphere.” Well at Benihana of Tokyo – it‟s about having fun and enjoying the

experience.

The Mission of Rocky Aoki was expressed in a statement made by him as, “I‟ll consider

my mission accomplished when everyone in America has tried hibachi cooking at least

once.”

Looking into the future the restaurant is faced with the following constraints.

Limited success of franchise operation which is also less profitable

Own unit expansion limited to 05 per year

Staff – each new unit requires approx. 30 Oriental staff

Investment – each new unit costs a minimum of $ 300,000

Keeping the above in mind the restaurant is contemplating growth in 03 principal areas:

the US, overseas and Japan. A number of diversification plans are also being considered.



2

Service concept

What is a service concept?

The service concept plays a key role when designing and developing a service system.

It defines the „how’ ( How do we differentiate our service in the market?) and the „what ’

(What service package do we offer?) of service design, and helps mediate between

customer needs and an organization‟s strategic intent.

There are 03 critical elements to consider when developing a service concept.

Facilitating goods – raw materials and other tangibles

Explicit intangibles – what is directly apprehended by the human senses, but cannot

be touched such as taste, smell, staff attitudes

Implicit intangibles – such as status, security, comfort

Service Concept at Benihana

The service concept at Benihana as detailed out by both Glen Simoes and Rocky Aoki is

as follows.

Wholesome, familiar food (“No icky, sticky, slimy stuff ”)

Unusual and unique preparation style (Hibachi cooking)

Served in an authentic Japanese environment – themed restaurant

Atmosphere of fun

Providing all Americans with a unique dining experience

Thus, the core differentiators are;

American food served in a Japanese environment

Diners have the opportunity to observe the chef preparing their food orders



3

Benihana vs. Typical restaurant

The service strategy begins by selecting the operating focus – the performance priorities

– by which the service firm will compete.

Operating focus

The performance priorities which a service organization such as Benihana could assume

include;

Treatment of the customer

Speed and the convenience of service delivery

Price of the service

Variety of services

Quality of the tangible goods which accompany the service

The unique skill that constitute the service offering

Benihana‟s marketing and promotions attempt to highlight the experience which the

customers get with the hibachi cooking which differentiates it from an American steak

house which also offers similar food.

Operating focus Benihana Typical restaurant

Treatment of customer

Speed

Convenience

PriceVariety

Quality of tangible goods

Unique skills

Table 1: Operating focus – Benihana vs. Typical restaurant



4

Benihana is a „themed‟ restaurant and thus its competitive priorities include;

Treatment of the customer – By ensuring a high level of contact between the

customer and the chef Benihana itself provides a unique dining experience. The

hibachi table arrangement has facilitated a great deal of attentive service to their

customers with a minimum number of resources. By having the chef prepare food at

the customer‟s table, it enables the customer to communicate exactly what they want,

whilst providing entertainment.

Unique skills – The hibachi style of cooking is an art in itself. Thus, mastering it

requires considerable training and effort. Thereby, the chefs are recruited from Japan,

who has to go through a three year formal apprenticeship. Further they need to attend

the Benihana College of Chefs in Tokyo, where the master chef would graduate them

once the chefs are fluent with the Benihana style of cooking. After the Chefs are

allocated to Benihana restaurants in U.S. they still have a continuous process of

training.

On the other hand a typical American restaurant would focus on;

Variety – A typical American restaurant offers a wider menu and the customers

would have a greater choice. Benihana of course limits the menu to 03 simple entrees

and one appetizer.

Convenience – Another factor which a typical restaurant focuses on is creating a

comfortable, noice-free environment. In that sense Benihana presents more of a busy

atmosphere where unknown parties sit in batches of 08 at the teppanyaki table –

which some people may not be comfortable with.



5

Some of the common factors amongst the 02 types of restaurants include;

Quality – Being in the restaurant business means that the quality of the meals and

beverages is critical whatever the restaurant concept. In otherwords, it‟s a pre-

requisite or „Order Qualifier‟.

Speed – It should be noted that speed remains a competitive priority in the case of

Quick service or Fast food restaurants. Basically both Benihana and the typical

restaurant does not emphasize on speed. However, a reasonable speed of service

needs to be maintained.

Price – Yet again price would be more of a decisive factor when it comes to fast food

restaurants. As far as Benihana and a typical American restaurant is concerned it‟s the

same food that is served, but with a significantly lower variety at Benihana. Hence,

price is not a competitive priority.

Appendix A shows the service process for a Benihana restaurant and that of a typical

American restaurant. This would be elaborately examined in the next section of the report – Service Design at Benihana.

Sources of Competitive Advantage

An overview of the production process at Benihana revealed the following Critical

Competitive Advantages in terms of its operations.

Hibachi table arrangement – reduces the need for a conventional kitchen and also

helps to provide customers with an unusual amount of attentive service.



6

Significantly lower labour cost – 10% to 12% of gross sales as opposed to the 30%-

35% incurred by a typical American restaurant, due to elimination of the need for a

conventional kitchen.

Increased proportion of floor area devoted to dining – Only 22% of space devoted to

„back of the house‟ operations compared to 30% in a typical restaurant.

Virtually no waste and lower food costs – This is because Benihana provides limited

variety, i.e. steak, filet mignon, chicken and shrimp. As such less storage and thereby

less wastage since food is a perishable good. Food costs are 30%-35% of food sales,

whereas a typical restaurant bears a cost of 38%-48%.

Historical authenticity – Familiar food offered in an exotic environment.

"Show" of hibachi – It‟s an experience and creates an atmosphere of fun. Also,

Americans are able to enjoy their food being cooked, which also removes the mistrust

over exotic foods/ restaurants.

Highly trained and certified chefs from Japan – perfected the art of „hibachi‟

Located in predominantly business districts – This is where the majority of the

earners, who also have a need/desire to eat-out, are prevalent.

High level of commitment amongst Chefs and other personnel – due to the rapidity

with which they could rise in the American Benihana operation and also the paternal

attitude towards all its employees.

Creative advertising – Appendix B summarizes the jist of Benihana‟s Marketing

philosophy. Based on this it could be concluded that it offers an experience, as some

of its recent advertisements did not contain the word „restaurant ‟.



7

Operating figures

A summary of the key operating figures for the Benihana Chicago operation, the

company‟s largest money-maker, has been compared with that of a typical American

restaurant in Appendix C . Due to the aforesaid competitive advantages Benihana enjoys a

minimum 16% higher margin over the typical American restaurant, all other costs

remaining same. It could also be noted that the wider variety of menu items in a typical

restaurant has resulted in a greater variability in the operating results.



8

Benihana Production Process

Service DesignThree contrasting approaches to delivering on-site services are:

Production Line Approach

The Production line approach has been beneficially used in manufacturing companies

to yield consistent-quality standard products at relatively low cost. For this reason,

service firms have also employed this approach, which embodies a division of labor,

sequential flow processes, and standardization of services. It treats the service

operation as a manufacturing process rather than as a service process. Today's

customers, however, are demanding customized services and shorter cycle times –

outcomes that the production line approach finds difficult to achieve.

Degree of customer contact: face-to-face tight specs

Self Service Approach

Self-service enables customers to take back some of the responsibility for the

management of their affairs. This has a number of potential benefits. It enhances

customer satisfaction through a sense of real control, a feeling that their opinions and

requirements actually do make a difference. And almost as a side product, call centre

and service centre traffic is significantly reduced. By relaxing this pressure on the

existing customer care environment, self-service can provide an opportunity to re-

direct resources to managing customer issues that demand human input, such as

disputes or business critical service down time--or whatever the customer highlights

as the issues they want to be handled by an expert.

Degree of customer contact: Internet and on-site technology



9

The Personal Attention Approach

Personal attention approach is where the customer gets a customized product or

service, in order to suite his or her needs. This approach deals with the different

variations that a customer would require when using a product or service. Eg: -

Nordstrom Dept Stores and Ritz Carlton.

Degree of customer contact:

Nordstrom – face-to-face total customization (relationship between salesperson

and customer)

Ritz Carlton – face-to-face loose specs (process virtually scripted – „IS‟ keepstrack of guest rather than the employee)

Analysis of the Service Design at Benihana

Based on the above definitions Benihana seems to adopt a Product Line approach to

service. The following are 03 important features of such an approach.

Division of Labour

Sequential flow Processes

Standardization of Services

Let us analyze Benihana based on the above 3 characteristics in order to assess whether

the restaurant has these features.



10

Division of Labour at Benihana

The service of the Restaurant is such that there is One Chef and One Waitress

operating Two tables. In general practice at a Teppanyaki Restaurant the waitress will

first take the order for Beverages, Soup and Salad. On average a diner takes 45

minutes to dine at the restaurant and this process (Beverages, Soup and Salad) could

be assumed to take 20 minutes in total, leaving the balance 25 minutes for the chef to

put on a show and do his/her cooking.

This process works well for the restaurant because while the table of customer is

being served their initial menu (Beverages, Soup and Salad) the other table is alreadybeing served their hot meal.

Sequential flow processes at Benihana

Any customer that enters the Benihana restaurant goes through the below process.

Enter to the restaurant

Bar/Lounge – waiting area

Food ordering – Initial Menu & Main Menu

Food arriving

Live Cooking

Payment

Exit

Hence, it could said that said that the customer is fine tuned to a sequential flow

within the restaurant and it is highly streamlined so that there will not be any delays

in between the process.



11

Selection Point of EntryResponse

Time

Point of

impact

Follow upPoint of

DepartureDelivery

Standardization of Services at Benihana

Benihana offers a standardized limited menu for both lunch and dinner. This allows

the restaurant to reduce storage costs and cut on wastage, whilst ensuring a faster

turnaround time for customers.

Another important point is that the food items are standardized to a high level so that

the customers get the same experience time after time. Eg: - The meat used at the

restaurant was Prime Grade, tightly specified Tenderloin and boneless strip lions.

This meat was then further trimmed leaving a piece of fat for the chef to chop off,

during his show cooking time.

Based on the above analysis it could be said that Benihana posses the characteristics of

Division of Labor, Sequential flow processes and Standardization of services. Hence, it

could be concluded that the Benihana restaurant adopts a Production Line Approach.

Customer Processing Operations Framework

The Customer Processing Operations Framework is a useful tool when it comes to

examining the Benihana production process in detail.



12

Selection

Matching image to Operations abilities

The restaurants were designed with a sense of Showmanship and Interaction,

especially to suite the American palate of eating in exotic surroundings and enjoy

watching their Food being prepared.

The whole concept of Benihana Restaurants is based on the Hibachi Table Concept

(where the food is been prepared / cooked in front of Customers). A Benihana Chef

is an Artist who Acts for the theatre of Stomach . The Chef walks right up to the

Hibachi Table and lets the Customer choose the stage which they need the steak to be

cooked (rare, medium or well done). Then he cuts the steak begins a Snappy rhythmic

attack on the onions, slams the paper shaker against the grill…etc. and the cooking

continues.

The main focus in selecting Hibachi is to cope up with rising costs and increased

competition in Restaurant operations. Since the cooking of food takes place in front

of Customers, this saves the space of a Conventional Kitchen which needs a larger

area allocation.

To facilitate the operation of Restaurant without tarnishing Benihana image, it has

allocated around 22% of the total space as the back of the house (which includes food

preparation area, dry / refrigerated storage, employee dressing rooms & office area)

but in contrast a standard Restaurant requires around 30% of its total space as back of

the house.

Point of Entry

Benihana Restaurants are located in predominant business districts where it gives

easy access to businessmen. Some of the Benihana Restaurants even had easy access

to residential areas.



13

As derived from the Questionnaire (Exhibit 4 – Case study) 81% of customers who

patronize the Restaurant actually work in that area, which clearly indicates that

Location is a prime concern for the majority of the Customers. Although they have a

considerable amount of repeat clientele (65.7% of Customers said that this is not their

first visit to the restaurant – Qs. 6) the frequency of visiting is low (Qs. 13. How

frequently do you come to Benihana? The majority stated that they come once a year

or more – 55.6%). From an Operations Management point of view, this has to be

changed as the frequency of visits should increase in order to enhance the Operations

effectiveness which will result in improved profitability at the end.

Response Time

Normally a customer would spend approx. 45 minutes (excluding the time spent in

the bar) dining at the restaurant. This would be the Service time.

The average turnover at the teppanyaki table was an hour and 1 ½ hours in slow

periods. This would be the Rate of Arrival for each batch of 08 customers.

Point of Impact

As stated earlier the image of Benihana Restaurants is “The Chef” and it is their key

to Success. All these Chefs are young, single, and Native Japanese.

To present / cook in front of a Hibachi Table, a Chef has to go through an Intensive

Training which includes,

2 years apprenticeship in Japan

Entering to Benihana Collage of Chefs and undergo a 15 grueling weeks of

training under Master Chef Shinji Fujisaku.



14

Getting graduated finally once the Chefs are able to show the Master Chef that

they have become an absolute whiz at Benihana‟s special style of Hibachi

Cooking.

Once they become Masters of Hibachi Cooking, they have to undergo an English

language programme which goes up to Three of Six months. Once they arrive in US,

training process will continue to keep up the required standards. A Travelling chef

inspects each unit periodically while other Chefs compete among themselves to

become the Chief Chef.

The main concerns of any customer who visit a Restaurant will be the Quality of Food, Cleanliness of Food preparation and Quality of Service. As per the

questionnaire, the Food (38.2%), Preparation (24.6%) and the Service (16.3%) have

been ranked top as most highlighting aspects of the Restaurant which shows the

recognition of Customer requirements and concerns.

Delivery

One of the Competitive Advantages that Benihana has over other Restaurants is the

close interaction between Customers and the Chef which ultimately delivers a unique

Experience to customers.

Familiar American food in an exotic setting has been offered using three basic menus

and freshly prepared food for Customers, which provides a fabulous memorable

dining experience for diners.

Each chef has his own unique style which he uses to amaze customers and thereby

create an atmosphere of fun. E.g., it could be a spin of the rice bowl or skilled cutting

of the shrimp. In the end it‟s all about creating an enjoyable experience.



15

Departure

“ First impressions last long”, will cease to be a valid statement unless you give the

same attention at the Departure of your Client. In Benihana, the Chef comes to the

table and bows as per traditional Japanese Customs to the Customers. Then he starts

his performance. The same way once he ends the show, he again bows and thanks

them and then leaves the place.

Follow up

Benihana doesn‟t have a standard system of colleting Customer feedback, which

would give immense support in the Management decision making process to move

the business forward. The only stated Customer feedback was from a Questionnaire

filled out sometime back. The problem here is lack of consistent feedback and also

the fact that we are relying on past data – how reliable are they over time?

Major design choices which generate operating efficienciesIn summary let‟s look at some of the service design choices which Benihana has made

and how these have resulted in operating efficiencies.

Degree of customer contact – This is very high in order to match its promise of a

unique dining experience. As a result, the process ensures a high level of contact

between the Chef and the customers.

Facility location – Located in high traffic business districts. The ideal target audience

for an exotic restaurant, since they are more prone to eat out.

Worker skills – The chefs are considered the key to Benihana‟s success. As such

they are given a thorough training in language, mannerism and the hibachi style. They

are perfectionists and master the art of entertaining while cooking.



16

QC – by limiting the menu to 03 simple items Benihana has been able to cut on food

costs, whilst virtually eliminating waste.

Product design – standard portions available – especially rice which is wholesome

(as stated by customers in the Questionnaire) and pre-determined mix of items for

various dishes. This helps to provide customers with greater value for money, as food

costs would also be low.

Process design – As discussed earlier Benihana adopts more of a Production Line

approach to service by providing limited variety, standard portions and batching of

customers. The benefits of batching would be discussed under Production planning.

Facility layout

Using Fresh food items (such as raw meat & fish) will decrease the usage of

Refrigerators which will help to reduce the space requirements of „Back of the

House‟.

In addition, the hibachi style of cooking eliminates the need to have a

conventional kitchen.

The Bar/Lounge area

The Bar/Lounge has two main purposes:

1) Waiting area for customers

2) Profit generating segment of the business

It appears that the greater the bar area with respect to the total floor area, higher the

bar sales. This is evident from the following figures.



17

Beverage sales as a % of total sales

Benihana West 18%

Benihana East 20%-22%

Benihana Palace 30%-33%

Table 2: Beverage sales of the Manhattan operations

However, the beverage cost remains at a constant 20% of beverage sales which means

that it is able earn a higher margin on such sales.

Appendix Dcompares the Bar to Food sales ratio in order to determine the number of

customers of each during lunch and dinner respectively. Benihana‟s largest money-

maker, the Chicago unit, has been used for the illustration.

It could be seen that there is a greater footfall (56% vs. 44%) when it comes to the bar,

which also provides a larger margin. However, the throughput time is much longer when

it comes to the restaurant.

The space allocation is as follows:

Dining area – 2/3

Bar – 1/3

Based on this it is possible to state that the average processing time at the bar is

supposedly much faster than the restaurant.

Benihana should look to achieve a standard ratio of bar/lounge area: dining area amongst all its restaurants. It could probably do a layout change in some of its older

restaurants such as the Benihana West and Benihana East without expanding the whole

restaurant, thereby shifting the sales mix and enhancing profitability. This is because

Americans primarily prefer to have a drink every now and then.



18

Production and Capacity planning

Important points to note include the following.

The batching of diners into groups of 08 as opposed to a typical restaurant.

Use of the bar/lounge area primarily as a waiting area to control the flow of diners

Using the formula for Average waiting time (TTq),

Where,

Ca = Variability in the rate of arrival/demand

Ce = Variability of the process or service time

u= Utilization

te = Actual average service time (Effective processing time)

Assuming a Poisson distribution, the rate of arrival is taken to be one batch of 08

customers per hour at each teppanyaki table.

The rate of service as stated would 45 min per batch of 08 customers.

Appendix E compares the Process performance figures of a typical restaurant with

that of Benihana.

Typical restaurant:

If you take a typical restaurant the flow of customers is random and hence the

distribution is a Single Channel, Poisson Arrival, Exponential Service Time .

Ca2

+ Ce2 u

2 1-u* * teTTq =



19

Benihana:

What Benihana has actually tried to achieve by batching customers is to reduce the

variability in demand (Ca) since the variability in service (Ce) would anyway be low

since the Chefs are highly trained. Thus, the distribution at Benihana is that of a

Single Channel, Poisson Arrival, Constant Service Time .

In both cases the system utilization is 75%, but at Benihana where more of a

Production Line approach is followed it could be observed.

Shorter average number in line (1.125 vs. 2.25)

Shorter average number in system (1.875 vs. 3.00)

Shorter average time in line (0.1406 hours vs. 0.2813 hours)

Shorter average time in system (0.2344 hours vs. 0.375 hours)

Thus, Benihana is able to provide a better level of service to its customers.



20

Long Term Expansion Strategy

Current Issues faced by Benihana

Difficulty in attracting chef & other personnel

Benihana require a minimum of 30 Oriental staff for each new unit. But presently

they find it difficult to attract chefs and other personnel due to the general level of

prosperity enjoyed in Japan as well as competition from other restaurants bidding for

their talents.

Out of the 30 staff, 06 to 08 would have to be trained chefs and as discussed earlier a

chef requires a rigorous training of 03 years formal apprenticeship plus another 03 to

06 months course in English language, American manners and the „hibachi‟ style of

cooking.

How to expand?

Benihana grew very fast in US. Vice president Bill Susha now thinks where Benihana

is and what they want to do.

The franchise operations have been of limited success due to 04 main reasons,

Investors had no restaurant experience

American investors didn't care about the welfare of the Japanese employees

Lack of control over franchise operations

It is more profitable to run own business rather than franchising

This was faced by Benihana merely due to lack of research on franchising operations.

Further own expansion is limited to opening only 05 units a year, as this the

maximum speed the two crews of Japanese carpenters could build the units.



21

Cost constraints

Each new unit requires a minimum of $300,000. Almost all the interior items are

imported from Japan which involves a significant cost. (Both the Japanese carpenters

to re-assemble and the union carpenters to sit and watch)

Youth market segment

Presently Benihana is enjoying business from a middle-income audience (As per Qs

17 of the Questionnaire – 50.2% of the customers earned a salary of between $15,000

and $40,000. It fails to attract the younger generation (10-25years) which currently

constitute less than 25% of its customer base. Will this younger generation beattracted by the “Hibachi” style of cooking? Will they be happy with the “only 03

items” menu? More research will be required on this target market.

Future Options

Below is a list of future expansion options which Rocky Aoki is considering.

US

Primary marketing areas – Atlanta, Dallas, St Louis

Secondary markets – fewer headaches and nice margins (Cincinnati and

Indianapolis)

Suburbs – not yet present

Penetration – saturation not a problem

Joint Ventures (Overseas) – 04 deals have not been consummated as yet.

Canada – Royal York Hotel (Toronto)

Mexico – build and operate unit or take over management (Acapulco, Mexico

City)

Great Britain and across Europe (Paradine group)

One in US



22

Japan – negotiating to take over a chain of beer halls

Diversification

Line of Japanese food products under Benihana label for retail sale

Japanese quick service operation (combined Chinese-Japanese operation) in US

Negotiating with an oil company to put small units in gas stations

Negotiating for a site on Guam

Going public

Option Evaluation

Expansion in US Market

It has been identified that functioning in secondary markets such as Harrisburg,

Pennsylvania, Portland etc are profitable. These markets consume less

administration cost and make good profits.

However, primary markets are highly concentrated with people who actually eat-

out and also have the spending potential.

Hence the cost-benefit of both markets must be analyzed.

Further Benihana does not have any issues penetrating to existing markets as

saturation does not seem to be an issue. Nevertheless more customer surveys are

required to confirm the saturation level before penetrating. Moreover the existing

places are already known for Benihana and its goodwill is very high. Hence, there

will not be an additional promotional cost for the new units.



23

Suburbia carries good potential for restaurants – but the acceptance of the hibachi

style of cooking and its ability to blend with the lifestyle needs to be researched.

Going Public

Good option to raise funds, nevertheless cost of issues must be concerned. Further

abiding by government regulations, stock exchange regulations, financials, delighting

the shareholders, maintaining stakeholders‟ satisfaction with their requirements so on

and so forth will be a main concern. As the way presently Benihana functions i.e.

main board runs by Rocky, Bill Susha and Allen Saito; will going public make them

accountable for the shareholders. If Benihana is not happy about lack of control withfranchisees they will not be happy about shareholders managing or controlling them.

Moreover can Benihana carry out business the way they carry out now?

Overseas markets

These are beneficial as the domestic company knows the cultural aspects and target

markets and Benihana has the know how of running a restaurant. Since extensive

negotiations are carried out prior to entering into agreement, it is vital that a clear

agreement is arrived upon the respective responsibilities of each party to the venture.

However other political, economical, social and technical factors must be considered.

Diversification

As shown above Benihana has looked upon a number of related diversification

opportunities. In an industry where barriers to entry are low – competition is high,

and arises not only from Japanese restaurants, but from other Asian cuisines such as

Chinese, Korean, Singaporean, Thai, etc. This is because most of the time they

compete for the same need. Thus, diversification into related areas could prove

fruitful, but particular attention must be paid with regard whether the new business

fits the current Operating strategy and Competitive advantages.



24

Benihana must concentrate more on research in to these types of arrangements as they

have already failed in franchising. Further it also must understand for what reasons it

wants to diversify. Is it a risk mitigating strategy? Profit sharing? Cost reduction?

Unless the aim is clear the operation may not be smooth and successful. Moreover

what will happen to the name gained as 'Hibachi”, “authentic Japanese”, after the

diversification?

Prioritization

First important point to consider is that payback is very low. For example, if you take

Benihana‟s largest unit (Chicago) the payback would have been around 03 months

(300,000/1,300,000*12 months).

Secondly, the concept of a Plant-Within-a-Plant (PWP) needs to be kept in mind when

developing an Operations strategy. As such Benihana could run different types of

operations under the same company. Each operation is managed according to its own

strategy to minimize the confusion associated from shifting from one type of strategy to

another.

We recommend Benihana to adopt the following sequence when exploiting its strategic

options.

Open up small units in gas stations – since the investment would be less, and as it

would also enable some kind of test marketing.

Enter into franchise agreements to expand only in secondary markets – This is

because success has been observed with regard to franchising in secondary markets.

Franchising means no overhead cost and no burden of managing operations. Only the

control aspect needs to be focused upon.



25

Joint ventures also look a more feasible in that it shares both risk and resources. In

addition, it helps Benihana to obtain a global presence, whilst enabling it to get

exposure in different markets. Since anyway the agreements are almost concluded it‟s

better to make use of the opportunity.

First obtain a listing in the main board and raise some funds – probably to expand the

US operation. (Suburbia and Penetration of existing markets)

Going public with IPO – the objective should be to finance solid expansion

Expansion into other primary markets in the US – acquisition or otherwise

Based on the PWP concept, introduce 02 new service concepts.

Quick service restaurant – targeting both the busy executives (junior and middle)

and the younger eat outs. Should serve inventive Japanese cuisine ranging from

sushi, sashimi and creative salads to signature dishes like carpaccios, ceviches,

tartares, filet mignon, grilled spicy shrimp and specialty rolls. Most importantly it

should also provide delivery and catering services, and a vibrant bar scene at most

locations.

Sushi restaurant – to appeal to the younger crowds. This would feature

imaginative sushi, fusion cuisine and specialty cocktails. It would also offer a

playful and award-winning dining experience, complete with music and a

stimulating atmosphere.

Introduction of a line of Japanese foods – easiest way to reach the most important

person in the consumer decision making process, i.e. the housewives. It would help

Benihana to touch the typical American family.



26

Conclusion

In conclusion, Benihana needs to adopt the following measures in the future.

Maintain a consistent bar/lounge area: dining area – probably a ratio similar to that

of the Manhattan Palace.

Implement the strategic future options in the order discussed above.

Develop a means by which the top management could get regular feedback on

customer service and customer profiles. Probably a diner‟s questionnaire given

monthly.

As far as expansion into hotels is concerned what Benihana should ideally do is own

the hotel and allow the other party to manage, rather than run the hotel themselves.

As per the Questionnaire only 13% of customers highlighted the authentic Japanese

atmosphere. Hence, Benihana should use material available in the US and achieve

substantially the same effect as stated by Bill Susha.

Ensure that its advertisements keep on emphasizing the ‘ Experience factor’

and avoid pitching functional advertisements.



27

Appendix A: Service map

Customer

arrives

Bar Lounge

Batching of customers

into groups of 08

Group of 08 at

Te an aki table

Food ordering

Chef appears

Serve starters and beverages

Live cookin

Food served and consumed

Payment

Exit

Benihana service process Typical American restaurantVS.

Customer

arrives

Bar Lounge

Enter restaurant

Food ordering

Waiter appears

Food prepared in kitchen

Food served and consumed

Payment

Exit

Serve starters and beverages



28

Appendix B: Summary of Benihana’s approach to Promotions

Summary of the Advertising policy Ads are characterized by a bold headline statement & eye catching illustration. (Ex.

Go forth now & cook amongst the Americans, theatre of the stomach, two

philosophies of the steak, and the mission of Rocky Aoki.)

Benihana was never advertised on the entertainment pages of newspapers among the

other restaurant ads.

Benihana takes a full page advertisement which creates an impact, on national

publications once in a while, not follow a regular schedule of small ads.

Benihana advertises on magazines read by its target audience (New York Times,

Woman‟s Wear Daily, New York Magazine etc.)

Engaging ads that will make the reader read till the end & visit Benihana.

Ads target both residents of the area & tourists to the area as well.

The word „restaurant‟ was never used in its advertising messages to describe

Benihana.

Involves its self in varied promotions; catering to celebrities, hosting youth groups,

sending matchboxes to conventions, scheduling interviews for Rocky etc.

Through its P. R. machine, Benihana is made to be mentioned through T. V. radio or

magazines in some way at least once every day.

Summary of the common points in the Advertising Messages

The hibachi style of cooking

cooking on the table grill

The concept (Cooking in front of the customer)

Speed of delivery (direct to your plate)

The showmanship of the chef (knife movements, choreography of body movements

in adding seasoning etc.)

The menu- available meat items; shrimp, poultry, sirloin, steak & vegetables.



29

The seasoning used (pepper, sesame, etc.)

The taste of the food

Mention of the Japanese element in Benihana (bowing, samurai warrior, chopsticks

etc.)

The joy & excitement of the atmosphere (the chef‟s attitude etc.)



30

Appendix C: Key Operating figures

Benihana(Chicago)

Sales

Food 70.0% 80.0% 70.0%

Beverage 30.0% 20.0% 30.0%

Total Sales 100.0% 100.0% 100.0%

Cost of sales

Food cost (% of food sales) 38.0% 48.0% 30.0%

Beverage cost (% of beverage sales) 25.0% 30.0% 20.0%

Cost of total sales 35.0% 45.0% 27.0%

Gross profit 65.0% 55.0% 73.0%

Key Operating expenses

Labour 30.0% 35.0% 10.0%

Advertising and promotion 0.75% 2.0% 10.0%

Management salary 2.0% 6.0% 4.0%

Rent 4.5% 9.0% 5.0%

Shadow margin 27.75% 3.00% 44.00%

Ranges (%)Typical restaurant

Highest possible scenario Lowest possible scenario



31

Appendix D: Bar vs. Food sales

Total revenue per annum $1,300,000 Total revenue per annum $1,300,000

% of total dollar volume 30% 40% % of total dollar volume 60% 70%

Lunch (p.a.) $390,000 $520,000 Dinner (p.a.) $780,000 $910,000

Food 70% $273,000 $364,000 Food 70% $546,000 $637,000

Average check $4.5 Average check $7.5

Annual customers 60,667 80,889 72,800 84,933

Beverage 30% 117,000 156,000 Beverage 30% 234,000 273,000

Average check $1.5 Average check $2.5

Annual customers 78,000 104,000 93,600 109,200

Customers per day Customers per day

Food 166 222 44% Food 199 233 44%

Beverage 214 285 56% Beverage 256 299 56%



Appendix E: Process performance metrics

Typical restaurant : Single Channel, Poisson Arrival, Exponential Service Time

Arrival rate = 8

Service rate = 10 2/3

Interarrival Time 1/ = 0.1250

Service time 1/ = 0.0938

System Utilization = 0.7500

Probability system is empty P0 = 0.2500

Average number in line Lq = 2.2500

Average number in system Ls = 3.0000

Average time in line Wq = 0.2813

Average time in system Ws = 0.3750

Benihana : Single Channel, Poisson Arrival, Constant Service Time

Arrival rate = 8

Service rate = 10 2/3

Interarrival Time 1/ = 0.1250

Service time 1/ = 0.0938

System Utilization = 0.7500

Average number in line Lq = 1.1250

Average number in system Ls = 1.8750

Average time in line Wq = 0.1406Average time in system Ws = 0.2344

Benihana Report

Documents

Transcript of Benihana Report