benihana

CASE ANALYSIS

Christine – Graig – Kirt - Tamayo

AGENDA1. Executive Summary2. Framework3. Benihana’s Strategy4. Demand Management5. Process Management6. Business Analysis7. Key Issues Determined8. Recommendations

EXECUTIVE SUMMARY Benihana is a successful Japanese-themed teppanyaki restaurant chain with units

in various countries including the US. Benihana pioneered the communal dining concept in the US in the early 1960s

where up to eight diners sit around a steel hibachi grill and wait anxiously for their personal cooking show to begin. The food is prepared in front of the seated diners and is delivered to them with personalized service; at the same time ensuring that high quality standards of food production are met.

Benihana has utilised several tactics to manage demand and process variability resulting in the reduction of food costs and operational costs while simultaneously turning dining into a unique entertainment event resulting in higher margins than the traditional restaurant.

These unique characteristics which drive its success make the model difficult to replicate, whether for franchising or duplication.

FRAMEWORK

Layout Planning

Business Strategy

Process Variabili

tyManageme

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Business Environment

Demand Variabili

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Low Cost Structur

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Customer PreferencesCustomer Flow rate

Process Design

Processing Throughput

Human Resources Capability and

UtilizationInventory Management

Layout

Vision Mission Values

Competitors

SWOT

BENIHANA’S STRATEGY The overall strategy deducted was to lower all costs, reduce non-essential processes and

maximize process throughput of operations. Restaurants were established in high traffic areas, with more being spent on advertising as a

percentage of gross margin than the typical restaurant. The tables were set up for 8 resulting in multiple parties sitting together at one table, something

that differed from the typical restaurant. One chef and one waitress were assigned for every two tables, supporting the design process and at the same time reducing typical restaurant labor costs.

Benihana recruited staff from Japan to highlight the Japanese culture. Chefs were trained to perform great Japanese culinary entertainment. In addition to the Benihana style cooking, the training also included six months of learning English language and American manners. The paternal attitude towards employees, investment in training, Intrinsic motivational factors, and compensation practices helped Benihana in attaining low employees’ turnover.

The menu at Benihana was designed to reduce waste and food costs (30% to 35 %) by keeping the menu simplified to steak, chicken and shrimp.

BENIHANA’S STRATEGYComparison of Benihana’s cost structure to typical restaurant structure

Labour Cost (% of Operating Expenses)

Food Cost ( % of Sales) Beverage Cost ( % of Sales)

Typical US Restaurant Benihana

10 -12

30-3538-48

25-3030-35

20

DEMAND MANAGEMENTDEMAND MANAGEMENT TRADITIONAL VERSUS BENIHANA

Traditional

Benihana

Individual parties arrive

Parties may wait in the waiting area to be

seated

Parties escorted to table to dine in private

Individual parties arrive Parties may be escorted to the bar to wait

Parties escorted to table to dine communally when designated

batch of people arrive

DEMAND MANAGEMENTVARIABLE IMPACT OF VARIATION

Customer Flow Rate Customers arrive at a variety of rates based on when they choose to patronize the firm. This variation will result in the restaurant’s reaction to meet this fluctuating demand through the deployment of its resources. However, labour is the largest operating expense for restaurants and needs to be appropriately utilised to maximise profit. The greater customer flow rate variability the more likely they are to have the following scenarios to manage:

1.Excess labour capacity resulting in excess operating cost as a percentage of sales revenue.2.Insufficient labour capacity resulting in an inability to generate revenue at the maximum rate because of a failure to turn over customers, as well as sustainability through revenue loss over the long term from failing to meet customer expectations.

DEMAND MANAGEMENTVARIABLE BENIHANA STRATEGY TRADITIONAL STRATEGY FINANCIAL BENEFIT

Customer Flow Rate

In order to manage the customers’ flow rate variability, Benihana buffers and then batches its customers to eat together communally.

Customers arrive at varying times and in parties of different sizes. However, the flow rate is controlled by directing customers to the bar to have a few drinks if they need to wait. Additionally, different parties may be seated together if necessary, to create communal groups of 4, 6 or 8 as demand dictates.

Parties are seated as soon as accommodations suitable for the party’s size becomes available.

Restaurants seat parties separately.

Staff cost 30-35% of gross food sales

1. Operation cost reduction as a result of standardization of dining requirements per party regardless of size – labour and accessories.

2. Faster turnaround of customers likely as a result of the batching process.

Staff cost 10-12%

DEMAND MANAGEMETVARIABLE IMPACT OF VARIATION

Customer Preferences Customers request various meal and beverage options from the restaurant’s menu, which require a variety of components. These selections are random and may provide challenges to meet, particularly as the number of possible options is increased. The greater the customer’s preference variability the more difficult it is to manage the following:

1. Cost of spoilage of perishables and holding costs from overstock.2. Opportunity cost, long-term survival from customer dissatisfaction as a result

of understock.3. Larger percentage of space allocated to storage as opposed to value adding

task reducing earning potential per area.

DEMAND MANAGEMENTVARIABLE MANAGEMENT STRATEGY TRADITIONAL STRATEGY FINANCIAL BENEFIT

Customer Preferences

In order to manage the customers’ preference variability, Benihana reduced the number of choices that were available on their menu.

For both lunch and dinner, there were only 3 meat options – steak, chicken and shrimp. The accompaniments were also limited to 5 options – bean sprouts, zucchini, mushrooms, onions and rice.

Restaurants traditionally provide as many variations as possible in order to satisfy as wide a market as possible.

Food cost 38 - 48% of gross sales

1.Reduction in wastage of meat and accompaniments as a result of standardization.2.Reduction in training cost of chefs to prepare dishes.

Food cost 30-35% of gross sales

PROCESS MANAGEMENT

Seating Ordering Preparation Cooking Plating Serving Bill Payment

Seating Ordering Preparation Cooking Plating Serving Bill Payment

Maître D Waiter Sous Chef Chef Waiter Waiter

Fewer dishes at any one time, Use of greater resources along the process, Greater material handling

Maître D Chef Waiter

More dishes at any one time, Use of less resources along the process, Less material handling

Sous Chef

PROCESS DESIGN TRADITIONAL VERSUS BENIHANA

PROCESS MANAGEMENTVARIABLE IMPACT OF VARIATION

Process Design Process design is highly influenced by the number and sequence of process steps. The greater the number of steps the greater the possible variation. Rapid changes in process design may occur based on changes in demand as well as challenges in human resource capabilities. Steps may be eliminated, added, lengthened or shortened, which may result in quality issues on one hand or customer dissatisfaction from long waiting on the other.

PROCESS MANAGEMENTVARIABLE BENIHANA STRATEGY TRADITIONAL

STRATEGYFINANCIAL BENEFIT

Process Design

Process design adopted by Benihana, but in a different way to the traditional restaurant. Benihana’s process goes beyond just grouping work stations by activity, but also grouping many activities to be performed by one person.

A simplified 3 step Benihana process was created by grouping several steps in the traditional restaurant service process into one step. Customer orders, food preparation, cooking, plating, serving performed by one person, the chef.

Hibachi table arrangement (Exhibit 2) puts chefs back to back. This enables chefs to assist if the need arises and learn from each other - layout resembles a U-shaped cell layout.

Typical restaurant service process comprises Seat Customer, Take Order, Prep food, Cook food, Plate food, Serve food, Customer payment.

1. Reduced labour cost as less employees are required for the process

2. Less material handling costs.

3. Benihana enhanced process layout produces very high volumes of output increasing revenue earnings per process cycle.

4. Reduced time from customer order to food service – reduces process cycle times and increases the number of revenue cycles possible.


Layout Variations in process layout/setup will be required based on the meal demanded. For example the processing of meats may require a separate layout and spacing requirements from the processing of beef or shrimp. Change in demand will result in cost to change the layout to adjust accordingly.

PROCESS MANAGEMENTVARIABLE BENIHANA STRATEGY TRADITIONAL

STRATEGYFINANCIAL BENEFIT

Layout One space (the hibachi table) for food preparation, cooking, plating, serving by the chef. The Benihana communal dining layout in tables of 8 persons allows for a controlled flow of dishes along the Benihana process that can be managed by one person - the chef.

Use multipurpose spaces - the hibachi table combines customer dining and food preparation spaces, thereby bringing the product closer to the customer in the process. This was in line with Rocky’s market research which showed that people enjoyed watching their food being prepared

Separate areas in the back of the restaurant designated for preparations, cooking, plating and serving.

Cooking and dining spaces are maintained separately.

Square footage needed for activities performed at the back of the restaurant was reduced by 8%. This space was used to generate revenue by increasing the restaurant's customer bar and dining capacity. This resulted in increased revenue per square foot.


Inventory Management Inventory management variability may result in either the storage of too much or too little product. This may result in increased cost through storage waste, wastage of food as it is a perishable commodity. On the other hand there may also be customer dissatisfaction and possible opportunity costs if inventory management is inadequate.

PROCESS MANAGEMENTVARIABLE BENIHANA STRATEGY TRADITIONAL STRATEGY FINANCIAL BENEFIT

Inventory Management

Benihana simplified its menu to restrict the number of products moving along its process.

Benihana limited its main course dishes to 3 items - steak, chicken and shrimp. This enables Benihana to group many activities into one step for the chef to perform. With a focus on product quality as inventory reordering was more frequent.

The typical restaurant would have upwards of 5 main course dishes.

Typical restaurants have a wide variety of dishes available; this contributes to higher levels of wastage and requires more storage.

Reduced inventory holding cost .

Reduced man hours need for purchasing and managing inventory.

Improved inventory management because of limited stock items needed for simplified menu. This resulted in savings from less wastage.


Human Resources Human resource variation may be a challenge, as there are multiple personnel with varying skill levels and deliverables. Personnel are more specialized and focus on individual task assignments, hence reducing flexibility. Additionally, this specialization will also contribute to a greater number of employees needed. Managing operations will be a challenge:

1.How many total employees are necessary?2.How many employees are needed for each process?


Human Resources

Process designed for fewer persons performing multiple activities.

More employees are hired for the critical activity of the process, that is, chefs for cooking. This is made feasible by having chefs perform additional activities within the process, thereby reducing manpower in other areas, such as food preparation, plating and serving.

Chefs are highly trained in multiple functions – customer engagement/entertainment, food preparation, cooking, plating and serving.

Chefs at standard restaurants have varying degrees of training and do not have Benihana’s rigorous training requirements.

Chefs in standard restaurants perform single task within the process – cooking, and cannot control quality in other activities within the process.

Reduction in labour requirements and management and hence costs.

There is however, a weakness here as staff availability is a challenge and training is more sophisticated making turnover costs unusually high.


Processing Throughput As a result of different process lengths based on customer demand, traditional restaurants struggle with maintaining a consistent cycle time with the limited resources. Some customers may experience longer waiting times than others, more popular items may be processed faster than others. This may result in customer dissatisfaction.


Processing Throughput

Benihana’s process allows for a greater number of dishes to be produced at any one time and at a faster rate. The faster process rate is achieved by reducing the number workstations and persons that dishes must move to within the process. It takes time to move the dish between workstations and persons. A greater number of dishes can be produced as there is a concentration of highly skilled resources (chefs) at the most critical and lengthy activity within the process, that is, cooking.

The chef performs multiple activities at a time, such as preparing one ingredient while cooking another. Cooking while plating and serving.

Output times vary depending on the type of dishes ordered and bottlenecks occurring along the process.

Likely increased sales from higher customer satisfaction .

Increased sales from quicker turnaround times.

BUSINESS ANALYSISSTRENGTHS Minimized menu and staff to reduce major operational costs. Increased process flexibility to match demand and supply. Unique product delivery process help distinguish Benihana from competitors. A strong brand name, which is maximized from greater advertising per sales than traditional

restaurants.

WEAKNESSES High startup costs as specialized unique building materials and key staff are imported from

Japan at high costs. Menu variety limited and may impact market share as well as long term customer retention.

BUSINESS ANALYSISOPPORTUNITIES New markets for expansion of the business if the formula for duplication can be

improved. Bar entertainment to improve the customers’ batching experience and maximize

revenue per customer.

THREATS Intense competition from franchises that are able to expand more easily. Change in consumer expectations, such as greater variety or non-communal

dining would be very difficult for Benihana to adjust to.

KEY ISSUES DETERMINED Human resource is extremely critical for business sustainability. Chefs are difficult

to recruit, costly to train and must be managed to minimize turnover. Infrastructure difficult and expensive to acquire as there are many components

indigenous to Japan. Food raw materials must be pre-processed in order to minimize portioning and

process times, as a result supply chain management is also critical to operations efficiency.

Limited menu in this age of greater market segmentation and information is a major threat to business model sustainability.

RECOMMENDATIONS Benihana could possibly create new restaurant brands using different cultural

foods while using the same business model to diversify the risk in obtaining niche staffing and infrastructure components.

Benihana should consider using local crews and materials for expansion since the raw materials could be sourced in the US and also more carpentry crews would mean units could be built at a faster rate.

Benihana may consider upstream investment to have greater control of the supply chain.

Benihana should consider more frequent menu changes, while maintaining limited options on each change.

benihana

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