Harvard case analysis on Benihana

1. Case Study Analysis
Benihana of Tokyo
Binus Business School,
MM Executive Batch 20
Presented by Group I
Alexander Christian
Dina Sandri Fani
Jenna Widyawati
Ridwan Martawidjaja

2. Table of Contents
7/28/2014
2
The Story of Benihana
The 70’s Benihana Facing Issues
Detailed Analysis
Conclusion & Recommendation
Key Takeaways
1
2
3
4
5
Case Analysis – Benihana of Tokyo

3. Table of Contents
7/28/2014
3
The Story of Benihana
The 70’s Benihana Facing Issues
Detailed Analysis
Conclusion & Recommendation
Key Takeaways
1
2
3
4
5
Case Analysis – Benihana of Tokyo

4. Benihana of Tokyo in Years
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Case Analysis – Benihana of Tokyo
4
• 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

5. Americans and Their Eating Behavior
Enjoyed eating in
exotic surroundings
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1
Deeply mistrustful
of exotic foods
2
Enjoyed watching
their foods being
prepared
3

6. Problems at the Restaurant Industry in the United States
Case Analysis – Benihana of Tokyo 7/28/2014
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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

7. 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!!!

8. Case Analysis – Benihana of Tokyo 7/28/2014
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The 70’s Benihana Business Model
Unique positioning is reflected on its chosen business model
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

9. The 70’s Benihana Business Model
Unique positioning is reflected on its chosen business model
Case Analysis – Benihana of Tokyo 7/28/2014
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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

10. Case Analysis – Benihana of Tokyo 7/28/2014
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The 70’s Benihana Business Model
Unique positioning is reflected on its chosen business model
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

11. Table of Contents
7/28/2014
11
The Story of Benihana
The 70’s Benihana Facing Issues
Detailed Analysis
Conclusion & Recommendation
Key Takeaways
1
2
3
4
5
Case Analysis – Benihana of Tokyo

12. Benihana’s Issues in 1970s
Case Analysis – Benihana of Tokyo 7/28/2014
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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

13. 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

14. Table of Contents
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14
The Story of Benihana
The 70’s Benihana Facing Issues
Detailed Analysis
Conclusion & Recommendation
Key Takeaways
1
2
3
4
5
Case Analysis – Benihana of Tokyo

15. Benihana’s footprint in the restaurant industry in the United States
Steakhouse with a difference: grossed over $12 million per year
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1
Benihana Restaurant Chain Development
2
Period of 1935 to 1972
3
4
5
6
15
1935 1958 1964 1966 1967 1970 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!!!

16. Benihana’s Operating Statistics
Operates more efficient compared to the other typical US restaurants
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Labor Cost
(% of Operating Expense)
30-35%
10-12%
US Restaurant Benihana
Food Cost
(% of Food Sales)
38-48%
30-35%
US Restaurant Benihana
Beverage Cost
(% of Beverage Sales)
30-35%
20%
US Restaurant Benihana
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!!!

17. Winning Strategy behind Benihana’s Success
Case Analysis – Benihana of Tokyo 7/28/2014
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Implemen-tation
Strategy
Benihana
Effective
Training
Employee
Satisfaction/
Motivation
Effective &
Aggressive
Marketing
Competence
-based
positioning
Customer
Satisfaction
Compara-tively
lower
expenditure
“Ensuring
Benihana’s
success by
implementing
7 winning
recipes
consistently”

18. Winning Strategy behind Benihana’s Success
Implementation Strategy
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Ambience –
historically
authentic
Implementation
Strategy
Hibachi/
teppanyaki
table
arrangement
Economized
menu
choices
Collaboration
Effective
utilization of
Simple
space
management
structure
Site
Selection
Effective
implementation
strategy
Helped Benihana in:
 Penetration in U.S.
market

Positioning: appealing to
a different customer
need
 Successful cost
reduction

19. Case Analysis – Benihana of Tokyo 7/28/2014
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Winning Strategy behind Benihana’s Success
Effective Training
Implemen-tation
Strategy
Benihana
Effective
Training
Employee
Satisfaction/
Motivation
Effective &
Aggressive
Marketing
Competence
-based
positioning
Customer
Satisfaction
Compara-tively
lower
expenditure
Heavily invest on training
program for chefs

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

20. Case Analysis – Benihana of Tokyo 7/28/2014
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Winning Strategy behind Benihana’s Success
Employee Satisfaction/Motivation
Implemen-tation
Strategy
Benihana
Effective
Training
Employee
Satisfaction/
Motivation
Effective &
Aggressive
Marketing
Competence
-based
positioning
Customer
Satisfaction
Compara-tively
lower
expenditure
Supportive ecosystem
available for all employees
 Chances of growth in
organization

Paternal attitude –
cultural bonding with
management
 Good salaries & perks

like bonus plan
Intangible benefits like
job security & well-being
of employees
 Pride serves as a
motivator factor

21. Case Analysis – Benihana of Tokyo 7/28/2014
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Winning Strategy behind Benihana’s Success
Effective & Aggressive Marketing
Implemen-tation
Strategy
Benihana
Effective
Training
Employee
Satisfaction/
Motivation
Effective &
Aggressive
Marketing
Competence
-based
positioning
Customer
Satisfaction
Compara-tively
lower
expenditure
Substantial investment in
creative ads & public relations
 Invested 8-10% of gross
sales in advertising

Promoted as an
experience vis-á-vis an
eatery
 Innovative advertising

approach
Outstanding,
contemporary, off-beat
visuals in advertisement
 Consistent word of mouth
policy

22. Case Analysis – Benihana of Tokyo 7/28/2014
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Winning Strategy behind Benihana’s Success
Customer Satisfaction
Knows who customers
really are and what they
really want
 Conduct a considerable
amount of market
research

Food quality drives the
satisfaction the most –
use of prime grade food
 Service & atmosphere
are the other key drivers
for satisfaction
Implemen-tation
Strategy
Benihana
Effective
Training
Employee
Satisfaction/
Motivation
Effective &
Aggressive
Marketing
Competence
-based
positioning
Customer
Satisfaction
Compara-tively
lower
expenditure

23. What’s more for the future?
Aimed to grow faster; however some constraints limited Benihana to do so
Case Analysis – Benihana of Tokyo 7/28/2014
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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

24. Table of Contents
7/28/2014
24
The Story of Benihana
The 70’s Benihana Facing Issues
Detailed Analysis
Conclusion & Recommendation
Key Takeaways
1
2
3
4
5
Case Analysis – Benihana of Tokyo

25. Unique business model helped Benihana stood out from the
competition in the restaurant industry in the U.S.
Case Analysis – Benihana of Tokyo 7/28/2014
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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.

26. Efficient process flow is one of the keys of its winning strategy
7/28/2014
BACK END
FRONT END
Customer
arrives
Seated @
hibachi table
Wait in
lounge
Customer
orders drinks
Drinks are
served
Chef's cart
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
Case Analysis – Benihana of Tokyo
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27. Economized menu choices helped Benihana to reduce labor costs
and total overhead costs
Case Analysis – Benihana of Tokyo 7/28/2014
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BENIHANA OF TOKYO – ONLY OFFER FOUR ENTREES
No waste +
reduce labour
cost
Reduce food
cost to 30-35%
of food sales
Increase profit
margin

28. 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

29. Entire space were being used effectively, including cocktail lounge
area. Functioned as temporary waiting area as well as revenue
generator
Case Analysis – Benihana of Tokyo 7/28/2014
Bar/Lounge
Temporary waiting area
Sell beverage while waiting
Enlarge restaurant capacity 29

30. Proposed Recommendation
To 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

31. Benihana’s nowadays
The 70’s business model has been adjusted to catch up a massive growth
Case Analysis – Benihana of Tokyo 7/28/2014
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BUSINESS OPERATIONAL COMPARISON: 1970s & 2014
1970s
Employ only
Japanese chef
trained in Japan
Stop franchise
Affordable price for
mainly business
segment
2014
Local chefs are
allowed
Allow more franchise
Middle up pricing for
middle up class
customers

32. Benihana’s nowadays
Menu has been also adjusted to cater more customer segments
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MENU COMPARISON: 1970s & 2014
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)

33. Benihana’s nowadays
Changes in operating model and menu selection required look & feel as well as space
layout adjustment
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LAYOUT AND LOOK & FEEL COMPARISON: 1970s & 2014
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

34. Table of Contents
7/28/2014
34
The Story of Benihana
The 70’s Benihana Facing Issues
Detailed Analysis
Conclusion & Recommendation
Key Takeaways
1
2
3
4
5
Case Analysis – Benihana of Tokyo

35. 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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