Operations Management

Case Study Report

Case: Benihana of Tokyo

PREPARED BY: UNDER THE GUIDANCE OF:

Dhruv Gupta 13DM066 Prof. A.K.Dey

Gunjan Kalita 13DM075
Jigyasa Gautam 13DM086
Kishlay Saurabh 13DM092
Naveen Malik 13DM112
Navpreet Singh Sachdeva 13DM113
Contents
Page No

Activity Diagram 3
Summary 4
Strategy 6
Initial Strategy 6
Operational 6
Marketing Strategy 6
Competitive Priorities 7
Low Cost 7
Distinctive Service 8

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Activity Diagram

3 Diagram
Figure 1: Activity
Summary

When Hiroaki Aoki (Rocky) came to US in 1959 as part of a

wrestling team he realized that there were more opportunities
for him in America than in Japan. He got himself enrolled in the
school of restaurant management at New York City College,
thinking that he would never go hungry in the restaurant
business. He did a systematic analysis of US restaurant market
and discovered that although American enjoyed eating in
exotic surrounding but were deeply mistrustful towards exotic
foods. He also learned that the American enjoyed watching
their food being prepared.

These learning helped Rocky to open up his first unit of Figure 2: Benihana founder Hiroaki
Benihana by 1963. The major problem that Rocky addressed "Rocky" Aoki
from the analysis was the shortage of skilled labor which he
eliminated with the Hibachi table arrangement, which required only the chef as a skilled
person. This arrangement also helped in reducing the total space of the “Back of the house”
unit from 30% to 22%. In addition to this he reduced food storage and wastage by reducing
the menu to only three simple “Middle American” entrees and was able to cut food costs up
to 35% of food sales.
The instant success of the first unit helped Rocky to open six franchises within the next
seven years soon after which he realized that the franchise owners were investors and had
no restaurant experience which made it even more difficult for them to relate to a native
Japanese staff.

Benihana sells: Food and beverages

Types of food served: Steak, chicken and shrimp

Target customers: Business person, tourist visitors, white collars

Site selection: Target high traffic area

Benihana restaurants adopted well defined and accurate methods during site selection and
training of chefs which helped them reduced the average dinner turnover time. Apart from
this each restaurant had a simply management structure which allowed all the managers to
report to the operation manager, Allen Saito who in turn reported to Bill Susha (Vice
President) which made it easier for the top management to control the company. The
company had also invested 8-10% of its gross sales in creative advertising and public

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relation. All this along with the unique combination of Japanese paternalism in an American
setting made the Benihana model difficult to replicate but there were certain problems that
the management was facing during the future expansion plans. According to Bill Susha (Vice
President) the company could limit to opening only 5 units a year because that was as fast
as the two crews of Japanese carpenter could work. Furthermore they had the constraints
of the staff and the cost factor which confined them to open there units in major cities.
There were other issues which had to be addressed for example importing every item from
Japan used in construction of a unit and using Japanese carpenters.

Considering all these advantages and disadvantages into account the company had three
principal areas for growth: The United States, overseas and Japan. With the idea of going
public someday the company had moved into joint-ventures in Mexico and overseas for the
meantime.

The future plans also include targeting younger generations and introducing a combination
of Chinese and Japanese operations and expand the Benihana experience in various other
domains such as Renoir exhibitions and model agencies etc.

Observations

 Simple model leads to greater efficiency and resource utilization.

 High customer recommendation and word of mouth publicity is a clear indication of
the fact that Benihana has been able to provide a good customer experience.
 Franchise was stopped as a step to curb the replication of practices by other players.

 8-10% of revenue spent on ads while only 16.5% new customers discover Benihana
through ads.

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Strategy
Initial strategy

 Introduce of Hibachi to:

 Provide greater attention and service to the customer while still keeping
costs low.
 Increase the proportion of the productive area.
 Limit the main menu to 3 entrees to reduce wastage and cut costs.
 Insist on historical authenticity.

Operational

 Selected high traffic sites in business districts for setting up a restaurant.

 Brought in highly trained chefs from Japan.
 Provided good incentives to the employees and created a connection with them,
thus helping reduce the employee turnover.
 Low management expenses

Marketing strategy

 Invested heavily 8-10% of operating expenses on marketing.

 Promoted the entire Benihana experience.
 Used outstanding visuals and offbeat themes.

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Competitive Priorities
Competitive Priority of Benihana has been broadly classified into two, namely Low Cost and
Distinctive Service

LOW COST DISTINCTIVE SERVICE

• Limted Menu • Site selection

• Food cost low relative to • Japanese interior
the industry • Japanese chefs
• Beverages cost lower than • Clientele all income
the industry groups - Large potential
• Minimum wastage market
• Minimum back space • Training - skilled labour
• Low labour cost • Hibachi & Teppanyaki
Table
• Model difficult to replicate

Let us look at the points mentioned within the two competitive priorities:

Low Cost

Rocky realized that low cost could be achieved and as the customer experience was unique,
so it led to high profits.

1. Limited Menu: Menu items were limited to steak, chicken and shrimp, which would
mean low wastage and would cut the cost by 30-35%.
2. Food cost relative to the industry: Food costs were 30-35% for Benihana compared
to the average industry cost of 38-48%.
3. Beverages cost lower than the industry: Beverages costs were 20% for Benihana
compared to the average industry cost of 25-30%.
4. Minimum wastage: As the menu was simple and limited so, the food wastage was
reduced.
5. Minimum back space: The hibachi table made most of the area productive dining
space; only 22% space was back of the house.

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 6. Low labour cost: Labour costs were 10-12% for Benihana compared to the average
industry cost of 30-35%.

Distinctive Services

Benihana’s USP lie in their services which are unique to them and can’t be easily replicated.

1. Site selection: They targeted high traffic area; Rent normally 5%-7% of sales for
5000-6000 square feet of floor space.
2. Japanese interior: Authentic Japanese atmosphere
3. Japanese chef: Highly trained, skilled and motivated chef’s 3 yr formal
apprenticeship, they are given 3-6 months course in English and also American
manners and training of the chefs used continuously.
4. Clientele all income groups’ large potential market: They keep an optimal mix to
meet the business district and residential flow.
5. Training- skilled labour: Labour skilled at providing an interactive dining experience,
equal attention to all the customers
6. Hibachi and Teppanyaki Table: Tables are designed in such a way that chef prepares
food directly in front of the customers therefore reducing variability from waitress
and customer can easily communicate the menu. Then table helps the customer to
participate in the cooking process.
7. Model difficult to replicate: Benihana restaurants adopted well defined and
accurate methods during site selection and training of chefs which helped them
reduced the average dinner turnover time and the unique combination of Japanese
paternalism in an American setting made the Benihana model difficult to replicate