BENIHANA OF TOKYO

Group 1
Akshit Mathur | 13P004
Robin Bansal | 13P035
Manu Mehrotra | 13P084
Amitabh Gautam | 13P123
Siddharth Jain | 13P173
Rohit Thakur | 13P229
 Context

 Benihana is a restaurant chain

founded in 1964, by Hiroaki (Rocky)
Aoki Optimum Space
 Consisting of 15 restaurants in US by Utilization
1972
 Gross Sales of the entire chain is Location Hibachi Table
about $12 million Advantage Arrangement
Benihana
 Offers a limited menu and targets
Key Elements
Business person, Tourist visitors and
White Collar
 Targets high traffic area and spends
heavily on advertisements and Historical Waste
Authenticity Management
promotion
 Targets rapid growth by collaborating
with various hotel chains and
opening quick service stations
Benihana Concept

 Limited Menu
 Offers only three simple Middle American entrees: steak, chicken & shrimp
 Keeps cost of food and wastage to bare minimum
 Minimal inventory
 Minimize flow time
 Keeps turnover rates high, thus high utilization and throughput
 Reduces wait time for customers
 High Space Utilization
 High proportion for productive dining space
 Only 22% of the total space of a unit is back of the house
 Non Conventional Kitchen
 Follows Hibachi Table Arrangement, thereby providing high customer attention
 Reduced Labor Cost and the additional cost of kitchen space
 Infrastructure
 Infrastructure is specially imported from Japan, thereby giving Historical Authenticity
 Good atmosphere and authentic ambience
 Process Flow of Operations

Enters Dining Chef Pays for

Area & arrives the
Customer Waitress and food
Enters takes the starts and
Restaurant order cooking leaves

Enters Bar Waits for Customer

& orders the chef enjoys the
for drink food
 Benihana v/s Typical Restaurant

Customer Waiter Chef Customer Chef

Typical Restaurant
Benihana
Waiter
Cost Structure
Cost Head (% of sales) Typical Restaurant Benihana
Food Cost 38 – 40% 30%

Beverages Cost 25 – 30% 20%

Labour Cost 34 – 42% 10 – 12%

Management Salaries 2 – 6% 4%

Rent 4.5 – 9% 5 – 7%

Promotional & Advertisement Cost 0.75 – 2% 10%

Cost Savings 21.25 – 50%

Chef’s Annual Wages for Chicago Unit

Benihana (Chicago Unit)

Chicago Unit Revenue $1.3 million

Total Labour Count 30 (approx.)

Labour Cost 10% of sales = $.13 million

Manager (1) $15,000

Assistant Manager (1) $12,000

Front Men (3) $9,000 * 3 = $27,000

Total (5) $54,000

Remaining (Chefs, Waitress, Staff & Dishwashers – 25) 130,000 – 54000 = $84,000

Annual Wage for Chef* 84,000/25 = $3,360 / year

*Assuming Chef, Waitress, Staff & Dishwashers get equal salaries. (as breakup for each of them is not given)
Profit After Tax for Chicago Unit (1/2)

Balance Sheet
Sales 100%
Food 70%
Beverage 30%

Cost of Sales
Food 20%
Beverage 10%
Total Cost of Sales 30%

Gross Profit 70%

 Profit After Tax for Chicago Unit (2/2)

Balance Sheet Balance Sheet

Operating Costs Operating Costs
Labour 10% Administrative Expense 2%
Advertising 10% Repairs 2%
Management 4% Rent 5%
Laundry Linen, Uniforms 2% Taxes (real estate) 1.5%
Replacements 1% Insurance 1%
Supplies 1.5% Interest 1%
Menu 0.5% Depreciation 4%
Music 1% Total Operating Expense 48.5%
Utilities 2% Net profit Before Income Tax 70 – 48.5 = 21.5%

 Net Profit Before Income Tax = 21.5% of $1.3 million = $279,500/year

 Profit after tax (assuming Tax rate of 33% in US) = $187,265/year
Service Characteristics

Intangibility • Authentically detailed Japanese Country Inn Décor

Simultaneous
• Food was prepared in front of the customers by
Production and Japanese chefs
Consumption

Proximity to the • Customer involvement in the service production

customer process

• As the Chefs prepare food in front of the customers,

Perishability hence if the restaurant does not have enough
customers, it leads to perishability of the chef’s time
 Service Operation Concepts

Service Package Service Process Matrix

• Teppanyaki table Degree of Interaction and

Supporting arrangement
facility
• Large Bar Customization
Low High
• Authentically

Degree of Labour
Facilitating detailed Japanese
goods Country Inn Décor Service Service

Intensity
Low
Factory Shop
• Limited Variation in
Menu
Information • Extensive
Marketing Mass Professional
High
Service Service
• Customer
Explicit or participation
Implicit
Service • Reduced waiting
time Due to low Degree of Labour Intensity and low
degree of customization, Benihana come into
the “Service Factory” Category
Success Parameters
Order Qualifiers Order Winners

 Speed: Fast table turnover  Creative Advertising

 Quality  High expenditure on Advertising and
Public Relations
 Skilled and Motivated Workforce  High quality and customer service
 Lost Cost Operations  Authentic Japanese atmosphere
 Low food wastage and storage costs
 Low labor costs
 High space utilization
Management Concerns

 Franchising
 No knowledge of native Japanese style
 No experience of Investors w.r.t restaurant business
 Future Expansion
 Fund availability
 Concern about loosing autonomy by taking loans
 Manpower constraints
 Higher cost and lead time for Japanese construction material
 Limited carpenter crew
 Catering need of younger generation
 Operations limited to primary markets only
 Analysis

No knowledge of Reluctance to take High advertisement

Operations
Expansion
Franchisee

Japanese culture loans from financial and PR cost

and Benihana style institutions Limited variation in
of cooking Limited carpenter menu
crew No presence in
No experience of
investors w.r.t Scarcity of surplus secondary markets
restaurant business trained staff and markets outside
USA
Low control over the
business operations
Recommendation

• Explore secondary markets and other potential areas for

further expansion
Expansion • Collaborate with more hotel chains to expand overseas
• Go public to secure funds
• Employ more staff for further expansion

• Introduce quick service option

• Introduce variations in menu
Operations • Introduce attractive schemes for female and older people

• Optimize the advertising and PR cost

• Use local material for infrastructure
Cost • Use local manpower for carpentry work in order to
rapidly expand the operations and lower cost
THANK YOU
References

 Video Links:
 https://www.youtube.com/watch?v=epoIPgQrAyQ&list=PL6D1E20BB6FADB467
&index=3
 https://www.youtube.com/watch?v=YfWOtDAi4qM
 https://www.youtube.com/watch?v=iKHiQ3Fkkyg
 Website:
 http://www.benihana.com/