Benihana Case Study Essay

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Benihana restaurants have been amassing great success for many years, however there are several recommendations that could create even more success and profitability for them. Benihana should consider expanding into high-end hotel chains while maintain management control. They should terminate the use of franchises as well as the idea of a fast food chain. Benihana also should avoid focusing on targeting the younger generation. In order to help improve the size of their customer base as well as their loyalty, a rewards program should be implemented.

Also, Benihana should consider how profitable it is to use all authentic decor or whether those resources could be better used elsewhere. A trial restaurant in Europe, particularly the London area should also be opened. With these recommendations, Benihana can generate more loyal customers and greater profits. Company Background The Benihana chain started in Japan by Yunosuke Aoki in 1935 in Japan. Yunosuke was very practical and resourceful and was always considering rising costs and increased competition.

In 1958 he implemented the use of hibachi tables, which would become a pillar of the Benihana restaurant experience. Yunosuke handed down the Benihana restaurant chain to his son Rocky Aoki. Rocky Aoki in 1959 had gone to the United States on a tour with his university wrestling team at age 20 and realized that America offered him vastly more opportunities than Japan. He decided to enroll in the School of Restaurant Management and then spent three years analyzing the U. S. restaurant market.

Four years later in 1963, after combining the money he had saved and money he borrowed he opened his first Benihana on the West Side and put all his knowledge to use. This first unit paid for itself in only six months. To deal with the high customer volume he opened another unit in 1966 three blocks over on the East Side. After a suggestion from Barron Hilton in 1967, Rocky opened his third Benihana location in Chicago, which proved to be a hugely profitable, grossing $1. 3 million a year. After Chicago, in 1969 units in San Francisco and Las Vegas were opened.

Rocky then sold six franchises located in Puerto Rico, Harrisburg, Fort Lauderdale, Portland, Seattle, Beverly Hills and Boston. However, they stopped franchising after these six. Franchises held many issues for Rocky and the Benihana company. They were typically bought by investors. These investors had no restaurant experience and had a hard time interacting with and relating to an almost completely Japanese staff. Also, Rocky couldn’t control a franchise owner nearly as well as a company manager.

With all these issues, Benihana should not consider franchising their restaurants as a profitable, or advantageous, venture. Organization Structure Bill Susha states: “.. at present, the company is essentially being run by three people—Rocky, myself, and Allen Saito. ” These three men have proved to be the pillars of the corporate organizational structure. Hiroaki (Rocky) Aoki, son of Benihana founder Yunosuke Aoki, is the current owner of Benihana. Bill Susha, an American, is the Vice President of Operations.

The final member of the trio running Benihana is Allen Saito who is Japanese and the Manager of Operations for the company. These three men are the foundation for Benihana’s corporate operations. The organizational structure of each restaurant includes approximately 30 oriental people. Of these 30 employees the breakdown is as follows: six to eight are highly trained chefs, another six to eight are waitresses, four to five are managers and front men, two to three are bartenders and the remainder are bus staff and dishwashers.

This structure is used across the board in all Benihana locations. Keys to Success There are several key ingredients that add up to Benihana’s amazing success. The first key is the use of minimal food options. They offer three entrees consisting of steak, chicken and shrimp with bean sprouts, zucchini, fresh mushrooms, onions and rice as the sides. In a typical restaurant food storage and waste are a major factor to overhead. However, this choice to offer a very limited array of options at Benihana left them with almost no food waste and cuts their food costs between 30% and 35%.

Another key to success is the due to the way their food is prepared. With chefs cooking directly at the teppanyaki table, it eliminates some of the space needed, as well as the amount of people needed, for the back of the house. In a Benihana restaurant, the back of the house accounts for approximately 22% of the total space of the restaurant while a typical restaurant uses 30% of their total space for back of the house. By using less space for the back of the house, that means they have more space to use for dining area which equates to more revenue coming in.

The highly trained chefs are a key ingredient in themselves. All chefs at Benihana are young, single and Japanese. To become a Benihana chef they must first complete a three-year formal internship to become certified then have to complete courses on the topics of the English language, American manners and showmanship. These chefs are trained to be the best and provide the best food and service possible, which is highly regarded by all Benihana customers. However, the atmosphere of Benihana is one of the biggest things that makes Benihana what it is.

From the food being cooked right at your table by a highly trained chef, to the authentic straight from Japan decor, the atmosphere is something unique to much of their clientele and is a major drawing point for customers regularly. Benihana has all building materials shipped from Japan and Japanese carpenters also build everything once it arrives. There is no question to the authenticity of everything within Benihana, which creates an atmosphere that few of their customers ever get to experience anywhere else.

Restaurant Layout Benihana brings in a lot of their revenue through their bar area. Customers are spending between 45 minutes to an hour at a table before it can be turned over. Although they are at tables for a longer period of time they are often spending time in the bar area, either prior to or after their meal, which helps make up profits from having a slower table turnover rate. Benihana has continually increased their bar area and this has allowed them to maximize their revenue in each location.

Shown in Exhibit C, you can see the area of Benihana West’s cocktail lounge area in proportion to the dining area. This was the smallest bar area of the Benihana restaurants and they increased this area in size with each Benihana. Beverage sales in West account for 18% of total sales. Rocky then increased the bar area in East and their beverage sales were 20%-22%. Finally Benihana Palace in Manhattan had an enormous bar area and their beverage sales accounted for 30%-33% of total sales. Overall, the use of a larger bar area has proved to be a big revenue boost to Benihana’s success.

Benihana restaurants utilize teppanyaki tables, shown in Exhibit A, which have a gas-fired steel griddle plate with a 9 1/2“ wooden ledge bordering it to hold customers’ plates and silverware. These tables seat eight customers. Every chef and waitress pair service two tables at any given time. Through the use of only eight person tables they are in a way reducing their efficiency because when a party of smaller than eight comes in they will not be able to reach max capacity in their restaurant while that party is dining due to them not completely filling the table.

However, they also face the concern of if they create more, smaller tables, they may have to hire more chefs and waitresses which may counteract the profitability of having smaller tables to serve smaller parties while leaving the eight person tables open for large parties. Another option to this issue may be to consider seating smaller groups together at one table in order to be able to reach capacity without losing money by having to have more employees working at one time. Service Delivery System

The service delivery system is different from many other typical restaurants, which contributes to the prior mentioned atmosphere. Customers will be seated at a table, capable of holding eight, and will give both their drink and food orders to the waitress. The waitress will then bring all beverages and any soups or salads ordered to the customers while the chef rolls out a cart with all ingredients necessary. The chef cooks all diners’ orders right in front of them, something very unique to Benihana, in a very showman like manner, which can be see in Exhibit A.

When finished cooking the food is served to the customers and they are able to enjoy the rest of the meal with the waitress checking in for beverage refills and fulfilling any other requests. This service delivery system allows for customers to have an enjoyable experience as well see all food preparation being done before them giving them the ability to see the quality of the ingredients and the impressive level of skill the chefs possess. Implementation There are several opportunities that should be exploited by Benihana. The first opportunity is the expansion into hotels.

Benihana should consider pairing with only one or two high-end hotels while still maintaining all operating management control. Canadian Pacific Hotels as well as Hilton Hotels Corporation would be ideal choices for their hotel expansion since they have already started communications with these corporations. Expansion into hotels is an opportunity that is likely to result in great results. Exhibit B shows that 40% of diners are from out of town as well as about 40% being here on business it is an ideal location to draw in all these customers.

With Benihana being located directly in the hotel it makes it the convenient choice for business associates to hold business lunches or dinners. This location will draw in business people that are already staying at the hotel, and once they experience Benihana, are likely to return and hopefully choose their hotel based on if it has a Benihana in it for the future. Another opportunity that should be exploited by Benihana, though cautiously, is the opening of a Benihana by David Frost. Benihana should allow David Paradine Ltd to open a Benihana in the largely populated London area and use it as a trial restaurant.

Benihana should be caution of how much time and money they take to do opening and development of this restaurant though. They also should consider researching the preferences of London diners and adjust things if needed because Benihana was built on American dining ideals and that may not translate to the European location well. After allowing this trial restaurant to operate for a reasonable amount of time, Benihana should consider if expansion into Great Britain and the eventually the rest of Europe is a profitable venture.

As shown in Exhibit B, 67% of Benihana customers have heard about the restaurant through a recommendation. With this high of a percentage of customers coming through customer recommendation, minimizing marketing costs in other aspects while implementing a customer reward system could be advantageous to Benihana. They could consider having a reward system that gives current customers a reward for recommending Benihana to new customers. Primary Concerns There are a few primary concerns regarding choices Benihana is considering making.

The first concern is the idea of branching out into a fast food restaurant called Orient Express. By opening Orient Express, Benihana is risking discrediting their image. Currently Benihana is known as a higher end, high quality restaurant with an authentic atmosphere. However, if Benihana lowers to a fast food restaurant they no longer are 100% associated with these things. Due to the decrease in food quality and atmosphere that is bound to happen when moving to a fast food chain, they lose some of their image as a high end, high quality restaurant immediately.

It is a risky move that may prove profitable, but risks need to be very heavily considered. The second primary concern is the targeting of the younger generation. Though it is not a bad idea to target the younger generation, it must be done with caution. In order to bring the younger generation into the restaurant, prices may need to be lowered which in turn brings out the concern of lower quality food in order to meet the price constraints put on by the desire to bring in a younger customer base.

However, if costs can be minimized in other ways and Benihana can maintain their same, or very similar, high quality overall experience, the target of the younger generation could potentially bring in a huge new source of revenue. A final concern is the cost of using their resources to make sure that everything in the restaurant is authentic. By bringing in all of their decor straight from Japan, it results in high costs and slower expansion times.

Benihana may want to consider how noticeable it would be to the American costumer if they used decor they can find in America that looks similar to the Japanese decor but at a lower price and more easily accessible. The use of non-authentic decor could increase expansion time and increase revenues. Conclusion Benihana restaurants are flourishing in the restaurant world. With a few changes and implementations, including a reconsideration of restaurant layout, the expansion to hotels and Europe and a consideration of what revenue uses are necessary, they are destined to remain a highly profitable, continually growing restaurant chain.

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