Mia Agnes M.

Tacoloy Entrepreneurship and Innovation

15-0598 August 28, 2019
Benihana of Tokyo: A Case Analysis
I. Point of View
As described in the case prepared by Professor W. Earl Sasser and Research Associate John Klug,
Benihana of Tokyo is “basically a steakhouse with a difference”—a restaurant brand with 15 units across
the U.S. carrying the Japanese authenticity to the fullest as shown in its food, hibachi table concept,
interior décor and atmosphere. The perspective that this analysis will attempt to orientate itself is that of
Hiroaki (Rocky) Aoki, the “youthful president” of Benihana of Tokyo, and his main upper management
team composed of Vice President for Operations Bill Susha and Manager of Operations Allen Saito, as
they endeavor to review the different alternatives of their current situation.

II. Statement of the Problem

By 1972, Rocky Aoki and his management team had decided to do away with the option of
franchising due to a number of problems involving restaurant control and experience with Japanese
culture, but mostly due to the strong belief that the success of the brand could not be easily replicated.
Now, the main problem facing management may be that of expansion of the business, as stated by Bill
Susha himself: “I think the biggest problem facing us now is how to expand.” In the case, a number of
alternatives were proposed, which involved entering new markets, further penetrating into existing
markets, growing through joint venture and overseas operations, or diversifying in terms of business
model.

III. Objectives/Goals of the Case

As referenced in the last few pages of the case, it is apparent that, considering the timeframe of
their present situation, which was the year 1972, the ultimate goal of Benihana of Tokyo is growth and
expansion. In order to achieve this in the most feasible manner and avoid potential problems, planning
must be done in determining the best possible way to expand the business. As franchising is now out of
the question, a number of factors must be considered for this decision, including the fact that
management is limited to opening only five units a year due to logistical concerns with Japanese
carpenters, the factor of cost and specialized staff.

IV. Decision Analysis

A. Options/Alternatives
a. Benihana going into hotels and overseas
The management team see potential in growth in overseas markets. These include joint venture
deals especially with hotels, some of which have already been made with Hilton Hotels and Canadian
Pacific Hotels. For each joint venture, Rocky emphasizes that the basis of negotiation would be what is
most advantageous to the parties concerned. Benihana is also currently trying out a new unit to be located
in Mexico City, and underway is a unit for a new hotel in Acapulco.
b. Benihana entering new primary and secondary markets in the U.S.
Primary market includes major cities such as Atlanta, Dallas, St. Louis and other cities that do not
have a Benihana. Through franchising experiences, management also learned that secondary markets
such as Harrisburg, Pennsylvania, Oregon and Portland also have potential as units in these places may
generate nice profits and “offer fewer headaches.”
c. Benihana going into American suburbs
Rocky believes setting up in the suburbs holds great potential. Bill Susha suggested this
alternative can be pursued after evaluating their success of going into primary markets.
d. Benihana further penetrating into existing markets
Another area for growth is to further penetrate into cities where a Benihana is already located.
Rocky sees saturation as no problem, since the existing three units in New York and greater Los Angeles
are all doing well.
e. Benihana diversifying into a label for retail sale
Rocky mentions in the case that management has entered into an agreement with a firm for a
feasibility plan involving the production of a line of Japanese food products for retail sale under the
Benihana brand. This would be a way to help make what the restaurant is known for more accessible,
and it is reported that a deal is being closed soon.
f. Benihana diversifying into quick-service operations
Rocky is also of the opinion that a Chinese-Japanese quick-service operation may be viable.
Management has already negotiating with an oil company to bring to life the idea of QSR operations in
gas stations that can be located anywhere.
B. Decision Criteria
a. Profitability
It would be necessary for Benihana to consider profitability as a decision criteria in a situation of
expansion primarily because the profit is needed to maintain operations and deliver on the promise and
philosophy the Benihana offers to its customers, which is to “simply…make people happy.” It would
also not maintain but even help improve any various aspects of running a unique business such as
Benihana as it would give more leeway to management in terms of strategic planning.
b. Cost minimization
It is important for Benihana to also reduce costs involved in putting up units as much as possible,
because this will greatly affect profitability if not well-regulated. As described by Bill Susha, “each new
unit costs us a minimum of $300,000.” For him, there is primary importance in considering this factor
as he enumerates this in projected plans for expanding the business.
c. Maintaining competitive advantage
Throughout the case, what is mostly kept consistent and apparent to the reader is that Benihana
and its management ensures that the restaurant maintains its unique value proposition or competitive
advantage. This is likely because this industry faces very stiff competition, which also produces the need
to expand. The reputation of the business also likely stems from this so it is important to maintain its
brand image.
d. Maintaining autonomy
It is mentioned in the case how franchising grew to be a problem to the organization instead of a
benefit. One of the reasons is because franchisees did not have the necessary experience to run a
restaurant of such caliber, and this situation likely caused management to see the importance of
maintaining autonomy in how it conducts business. Bill Susha also mentions as an example the offer
that was made by a large banking organization that would have stimulated growth at a faster pace.
However, management did not take this deal as it would have meant giving up a large amount of control
and autonomy, which was unnegotiable.
 Alternative Courses of Action
Decision Hotels and U.S. U.S. Further Retail sale QSR
Criteria Overseas primary and suburbs penetration operations
secondary in existing
markets markets
Profitability 8 8 7 9 7 7
Cost 8 9 10 9 10 10
Minimization
Competitive 10 10 10 10 7 7
Advantage
Autonomy 7 10 10 10 8 8
TOTAL 33 37 37 38 32 32

V. Conclusion
As seen in the decision analysis table, the best course of action garnering total points of 38 would be
for Benihana to further penetrate existing markets. The factors that most likely contribute to the success
of this option is, theoretically, adding more units in places of high foot traffic means that management can
simply replicate the technical know-how and experience involved with the first original units that were
put up within the area. According to the case, the market also wouldn’t be a problem since these are
largely urban locales with guaranteed high traffic, so customers are more likely to not be “depleted.”
However, the alternatives of setting up units in American primary and secondary markets as well as the
suburbs should also be considered since these are composed of major cities and areas that have a lot of
potential. Expanding in these places, where markets can range from very large to fewer but substantial,
can generate good profits for the company. Lastly, the option of going into retail and QSR operations
garnered the lowest scores most likely because of the change in business model that it would involve,
when Benihana is most known for its current business model which includes good service and atmosphere.
Taking away the hibachi concept where food is prepared in front of customers may influence sales for
these alternatives, although this might also just be a matter time for the market to accept such a change in
how they view the business.

VI. Recommendations
In order to further add more reliability to the process of making a decision on where and how to expand
the business, perhaps Benihana management could conduct more market research so as to better support
the outcome. It might also be for the greater success of the company to find more creative ways on
expanding the business without losing the credibility of Benihana, which is related to the autonomy of
management (as seen in the franchising dilemma) and which customers may associate with the service
that they experience when stepping inside a unit. It is also important to take care of what customers value
the most, which according to the market survey attached to the case, including food and its preparation.
Relating to this would also be the question of importing construction items used to build the units. Bill
Susha brings up this question, hinging on the worthiness of doing so when there may be less expensive
alternatives to this and that customers wouldn’t really mind otherwise. I believe that management should
go for this alternative to reduce on costs, because it is really the food that people value in the restaurant
and not the décor, according to the survey.