oscm_harvard business case_benihana

Binus Business School,

MM Executive Batch 20

Presented by Group I

Alexander Christian

Dina Sandri Fani

Jenna Widyawati

Ridwan Martawidjaja

Case Study AnalysisBenihana of Tokyo

Table of Contents

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The Story of Benihana

Detailed Analysis

Conclusion & Recommendation

The 70’s Benihana Facing Issues

Key Takeaways

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Cas

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nal

ysis

–B

enih

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of

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Detailed Analysis



Key Takeaways

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enih

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Benihana of Tokyo in Years

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• 1935 1st Benihana’s restaurant chain in Japan

• 1958 Introduction of Hibachi table arrangement

• 1964 Entry in US at West Side, NY

• 1966 2nd restaurant chain at East Side, NY

• 1967 3rd restaurant in Chicago; Big Blockbuster

• 1969 4th & 5th restaurant opened in SF and Las

Vegas. Started franchising the unit

• 1970 Opened Benihana Palace. Discontinued

franchising scheme

• 1971 Bill Susha joined Benihana’s management

• 1972 15 units in US (9 owned, 5 franchised, & 1

JV). Grossed revenue over $12 mio per year.

Considered future expansion

Enjoyed eating in

exotic surroundings

Americans and Their Eating Behavior

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Deeply mistrustful

of exotic foods

2

Enjoyed watching

their foods being

prepared

3

Problems at the Restaurant Industry in the United States

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High labor

cost

Contributed

30-35% to

total

operating

expense

Availability

Limited seating capacity

Food storage and food

wastage

Contribute significantly to

the overhead cost of the

typical restaurant

How Benihana responded Americans’ eating behavior and

problems faced by the restaurant industry in the United States

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Introduced hibachi table

arrangement

Simplified menu (Middle

American entrees)

Japanese historical

authenticity

Keep labor cost low at

a level of 10-12%

Minimize flow time

resulted to higher

turnover rate

Higher utilization and

throughput due to high

turnover rate

Virtually no waste

Lower overhead costs

Cut food costs to

between 30-35%

depending on the price

of meat

Hire two crews of

Japanese carpenters to

keep authenticity

Decorations, foods,

and chefs are all

Japanese

Creating unique business model is the key for Benihana to win the market!!!

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Customer Segment

• Business travellers

• Leisure customers

Value Proposition

• Theatre of Stomach

• Japan historical authenticity

• Simplicity in operational

Channels

• Owned restaurant and franchise (later stopped in 1970)

• Outstanding visual ads through newspaper and magazines

The 70’s Benihana Business ModelUnique positioning is reflected on its chosen business model


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Customer Relationship

• Personal assistance through full service restaurant system

• Co-creation by using customer feedback

Revenue Streams

• Beverage sale through lounge and Food sell from Hibachi

• Franchise system

Key Resources

• Restaurant physical asset

• Human resources: Japanese chefs and other staffs

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Key Activities

• Restaurant operation and management

• People development

• Competitive compensation and benefit

• Creative marketing

Key Partnership

• Raw material vendors

• Japanese carpenter

Cost Structure

• Restaurant cost: raw material, salary, bonuses, creative marketing

• Initial investment on Japanese style interior


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Detailed Analysis



Key Takeaways

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Benihana’s Issues in 1970s

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Limited supply of skilful staff

Benihana’s business model

required approximately 30

people who are all Oriental

1

High initial investment

Each new unit costs Benihana

a minimum of $300,000.

Use of Japanese authentic

material

High construction costs. Every

items used on construction

were imported from Japan

3

1. What is the right formula for

future expansion of Benihana?

• Branching out into the new

products concept?

• Branching out into new

geographic areas

2. Is Benihana really on the

forefront of a trend of the future?

Or in other words, should

Benihana emphasize restaurant

operations only?

2

Future expansion

Find the right formula for future

expansion was a difficult task

for Benihana

4

Our Hypothesis

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Capacity problem due to authentic

Japanese materials and people

The Restaurant as a process

Benihana Value Proposition: food as a Broadway Show

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Detailed Analysis



Key Takeaways

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Benihana’s footprint in the restaurant industry in the United StatesSteakhouse with a difference: grossed over $12 million per year

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1935 1958 1964 1966 1967 1970 1972

Benihana Restaurant Chain DevelopmentPeriod of 1935 to 1972

• Three years of making a systematic analysis of the U.S. restaurant market before

decided to entry the U.S. market

• One basic criterion for site selection – high traffic!!!

Benihana’s Operating StatisticsOperates more efficient compared to the other typical US restaurants

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Labor Cost (% of Operating Expense)

US Restaurant Benihana

30-35%

10-12%

Food Cost(% of Food Sales)


38-48%

30-35%

Beverage Cost (% of Beverage Sales)


30-35%

20%

Low labor cost was driven

by eliminating the need

for a conventional kitchen

Simple menu resulted no

waste. Cut food costs to

between 30-35%

. Managed to get an

average of 20% of the

beverage sales

Being efficient in operationalizing its restaurant units!!!

Winning Strategy behind Benihana’s Success

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Benihana

Implemen-tation

Strategy

Effective Training

Employee Satisfaction/Motivation

Effective & Aggressive Marketing

Customer Satisfaction

Compara-tively lower expenditure

Competence-based

positioning

“Ensuring

Benihana’s

success by

implementing

7 winning

recipes

consistently”

Winning Strategy behind Benihana’s SuccessImplementation Strategy

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Implementation Strategy

Ambience –historically authentic

Hibachi/ teppanyaki

table arrangement

Economized menu

choices

CollaborationSimple

management structure

Site Selection

Effective utilization of

space

Effective

implementation

strategy

Penetration in U.S.

market

Positioning: appealing to

a different customer

need

Helped Benihana in:

Successful cost

reduction

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Winning Strategy behind Benihana’s SuccessEffective Training

Benihana

Implemen-tation

Strategy

Effective Training





Competence-based

positioning

Three years formal

apprenticeship training

with certification in

Benihana form of

cooking

Three to six months

course in English

language and for

American manners

Training was a

continuous process

Heavily invest on training

program for chefs

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Winning Strategy behind Benihana’s SuccessEmployee Satisfaction/Motivation

Benihana

Implemen-tation

Strategy

Effective Training





Competence-based

positioning

Chances of growth in

organization

Paternal attitude –

cultural bonding with

management

Intangible benefits like

job security & well-being

of employees

Supportive ecosystem

available for all employees

Good salaries & perks

like bonus plan

Pride serves as a

motivator factor

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Winning Strategy behind Benihana’s SuccessEffective & Aggressive Marketing

Benihana

Implemen-tation

Strategy

Effective Training





Competence-based

positioning

Invested 8-10% of gross

sales in advertising

Promoted as an

experience vis-á-vis an

eatery

Outstanding,

contemporary, off-beat

visuals in advertisement

Substantial investment in

creative ads & public relations

Innovative advertising

approach

Consistent word of mouth

policy

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Winning Strategy behind Benihana’s SuccessCustomer Satisfaction

Conduct a considerable

amount of market

research

Food quality drives the

satisfaction the most –

use of prime grade food

Knows who customers

really are and what they

really want

Service & atmosphere

are the other key drivers

for satisfaction

Benihana

Implemen-tation

Strategy

Effective Training





Competence-based

positioning

What’s more for the future?Aimed to grow faster; however some constraints limited Benihana to do so

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Franchisee

No experience of investors with

regards to restaurant business

No knowledge of Japanese culture

and Benihana style of cooking

Does not have full control towards

operational

Expansion

Funds – reluctance to take loan from

financial institutions

Scarcity of surplus trained staff

Productivity & limitation with 2

carpenters

Operations

No quick service option

High advertisement cost & specifically

target towards food

Limited to primary market in USA

Limited variation in menu

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Detailed Analysis



Key Takeaways

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Unique business model helped Benihana stood out from the

competition in the restaurant industry in the U.S.

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Japanese historical authenticity

Use of 100% authentic Japanese material. Hibachi table arrangement

keep turnover rate high.

Theatre of the Stomach

Making Japanese cooking tangible. Customers watch their food

cooked/fun and in time experience.

Efficient process flow is one of the keys of its winning strategy

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BACK END

FRONT END

Customer

arrives

Seated @

hibachi table

Wait in

lounge

Customer

orders drinks

Drinks are

served

Chef arrive with

cart

Waitress takes

order

Salad, soup, rice &

beverages served

Cooking

show

Customer

eats

Check is

prepared

Customer

pays

Customer

leaves

Food

Storage

Cleaning Cooking Precook rice &

soup

Preparation

Salad bar

Chef's cart

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Economized menu choices helped Benihana to reduce labor costs

and total overhead costs

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No waste + reduce labour

cost

Reduce foodcost to 30-35% of food sales

Increase profit margin

BENIHANA OF TOKYO – ONLY OFFER FOUR ENTREES

Introduction of hibachi table arrangement gave a huge impact in

efficiency of the back-end process

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Bigger dining room

Combining storage, task and flow of information in one

Smaller back space size required

Only about 22% of unit total space is back of the house (vs. 30% in typical the U.S. restaurants)

Efficient kitchen arrangement

Maximizing space usage through careful selection of kitchen equipment

Entire space were being used effectively, including cocktail lounge

area. Functioned as temporary waiting area as well as revenue

generator

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29Enlarge restaurant capacity

Sell beverage while waiting

Temporary waiting area

Bar/Lounge

Proposed RecommendationTo address management concerns, consider to improve current operating model as well

as to further implement cost reduction in several areas

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Expansion

• Explore potential areas for further expansions, e.g. suburb areas

• Can go for joint ventures instead of franchisee (e.g. with international hotel chain)

• Take funds from financial institutions. Cash flows were not an issue for Benihana at that time

• Expanding to international market mostly South East Asia market. Focus on mid to upper class segment

• Develop several brands with different value proposition e.g. Benihana Signature, Benihana Oriental Express, and Benihana of Tokyo

Cost

• Reduce site cost by expanding to the suburb areas

• Economize advertisement cost

• Use local building material for giving shape of Japanese architecture

• Use local available manpower for carpentry work

• Purchase in bulk for decoration material to get more discount

• Build workshops in 3rd

country, e.g. Thailand or Indonesia to produce Japanese décor craft as a new line of business.

Operations

• Go for quick-service operation to cater younger segment

• Can go for add-on business of selling traditional Japanese stuff in a dedicated area of restaurant

• Introduce variations in menu, e.g. sushi-on-the-go, robatayaki, or even udon

• Introduce attractive schemes for females and older generation

• Introduce a complimentary membership card to offer special offer package to its loyal customers

• Build local training center to train local staff

Benihana’s nowadaysThe 70’s business model has been adjusted to catch up a massive growth

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1970sEmploy only

Japanese chef trained in Japan

Stop franchise

Affordable price for mainly business

segment

2014Local chefs are

allowed

Allow more franchise

Middle up pricing for middle up class

customers

BUSINESS OPERATIONAL COMPARISON: 1970s & 2014

Benihana’s nowadaysMenu has been also adjusted to cater more customer segments

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1970s

Familiar Middle America entrees

mainly hibachi steak

Limited number of menu choice (4 main

dish)

2014

Traditional & fusion Japanese food e.g.

sushi, udon, robatayaki and

kaiseki

Vast array of menu choice (more than 60

menu items)

MENU COMPARISON: 1970s & 2014

Benihana’s nowadaysChanges in operating model and menu selection required look & feel as well as space

layout adjustment

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1970s

Keep authenticity of Japanese style and

material

Simple and efficient kitchen

2014

Modern Japanese style without necessarily

Japanese material

Require additional sushi station, noodle & robatayaki equipment

and cold kitchen

LAYOUT AND LOOK & FEEL COMPARISON: 1970s & 2014

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Detailed Analysis



Key Takeaways

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Key Takeaways from Benihana’s Case

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1

• Have a dream

2

• Do the homework seriously – making systematic analysis for the market

3

• Reduce costs on smart way that give more advantages

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oscm_harvard business case_benihana

Business

opened benihana palace

restaurant industry

rd restaurant

benihanas restaurant

nd restaurant chain

japanese chefs

benihanas management

food costs tobetween