Benihana

Benihana

Background:

Chain of 15 restaurants that grossed over $12 million per year

Started by Hiroaki (Rocky) Aoki, President of Benihana of Tokyo

Philosophy of the restaurant business is: Simply to make people happy

Why is Benihana successful:

1. Historical Authenticity:

2. Availability and Cost of Labor in USA

a. Hibachi table arrangement: Eliminate need for a conventional kitchen

Provide unusual amount of attentive service

b. Keep labor cost to 10%-12% of gross sales

3. Usage of restaurant space

a. Increase proportion of floor area devoted to productive dining space

b. 22% of total space of a unit is "Back of the House":

Includes preparation areas, dry and refrigerated storage, employee dressing rooms, and office space. (Normal is 30%)

4. No waste concept

a. Reduce menu to only 3 simple entrees: Steak, Chicken, and Shrimp.

b. Cut food costs to between 30% and 35% of food sales

5. Advertising: Substantial investment in creative advertising and PR

Company invested 8%-10% of its gross sales

Different and original in approach

Visual product to sell, Benihana uses contemporary copy(text), sometimes offbeat

Know who customers really are, they conduct a considerable amount of market research

6. Location, location, locaton:

Main criteria for site selection: high traffic & locate in predominant business districts

7. Showmanship factor:

Chef training is key to success

Restaurant breakdown:

3 units: Chicago (largest money-maker - instant success, grossed approximately $1.3mil/year)

4th unit: San Francisco

5th unit: Joint venture in Las Vegas in 1969

Franchises: 6 (Harrisburg, Fort Lauderdale, Portland, Seattle, Beverly Hills, Boston)

Expense Breakdown:

Food and beverage split was 70/30

Food (30%),

Labor (10%),

Advertising (10%),

Management (4%)

Rent (5%).

Average turnover

1 hour - Teppanyaki table was an hour

1 hour to 1 and half in slow periods

Average check: including food and beverage, $6 at lunch, $10 at dinner

Lunch business important, accounting 30%-40% of the total dollar volume

Beverage sales: West - about 18% of total sales; East, about 20%-22%

Palace, they ran a handsome 30%-33% of total sales

Beverage cost averaged 20% of beverage sales

Benihana Challenges:

1. Rent normally ran 5%-7% of sales for 5,000-6,000 square feet of floor space.

2. Difficult to attract chefs and other personnel from Japan

3. Low Organization and Control

a. Each restaurant carried simple management structure:

Manager (salary of $15,000/year),

Assistant manager ($12,000/year),

2 or 3 front men ($9,000/year)

b. Staff is biggest constraints

Each unit requires 30 people

Six to eight of them are highly trained chefs

Same number of waitresses

4 to 5 managers and front men, 2 to 3 people in the bar

Remainder are bus staff and dishwashers

Future Expansion problem:

1. Prefer not to do franchising

Uniqueness of operation in the hands of novices made control more difficult

More profitable to own and operate the restaurants

Problems:

Franchisees have no restaurant experience

Difficult for the American investors to relate to predominantly native Japanese staff

Difficult to Control

2. Limited to opening only five units a year

Only 2 crews of Japanese carpenters who can do the work

Cost factor - each new unit costs a minimum of $300,000

Do they need to import from Japan every item for construction, 100% authentic.

3. Need to decide: advantages and disadvantages of going into hotels

Presently in 2 Hilton Hotels (Las Vegas and Honolulu)

Signed an agreement with Canadian Pacific Hotels

4. Other areas tapped for growth:

a. United States - need to expand into the primary marketing areas through