Master of Science in Management

University of Asia of The Pacific

School of Management

Submitted by:
BUNDA, Nogin C.

Submitted to:
Ms. Jodie Ngo
Faculty-in-Charge
October 12, 2017
Case Facts

Benihana of Tokyo started as a family business in Japan that grew out established itself in
New York in 1964. Today, Benihana of Tokyo houses 77 restaurants in various countries such as
the Caribbean, Central and South America, and United States. In these 77 restaurants, the running
principles that they kept on implementing in order to maintain the leadership in the kind of business
was their good relationships with their guests, investors, and employees.

Year Event
1935 Benihana was established in Japan by Aoki Yunosuke
1958 The concept of hibachi table was introduced to cut down the costs in operations
1964 Aoki Hiroaki (Rocky) established Benihana of Tokyo in New York (West Side)
1966 The second restaurant was established in East Side of New York
1967 The third restaurant was established in Chicago
1969 The fourth and fifth restaurants were opened in San Francisco and Las Vegas; they
ventured also in franchising of Benihana.
1970 Benihana Palace was opened; the venture on franchising were halted.
1971 Bill Susha was appointed as the Vice President of Operations
1972 Total of 15 restaurants were established that grossed over $12 million per year.
Table 1: Milestones of Benihana of Tokyo as mentioned in the case.

Market behavior
Upon Aokis arrival in the United States, he was already enthusiastic in learning the
industry of restaurant in USA. With that observation and studying, Aoki discovered that Americans
enjoyed exotic surroundings yet they are deeply mistrustful of the exotic foods and finally,
Americans enjoyed how they see their food being prepared.

Industry Problem
In the presented case, Rocky Aoki identified that the restaurants in the United States faces
three problems availability, high cost of labor, and food storage and wastage. To address these
problems, Rocky Aoki implemented and adapted several processes in his restaurants, such as the
hibachi style of preparation of food from his father which helped him in maintaining the cost of
labor around 10% - 12% of the gross sales. It also gave him significant proportion of floor area
which lead to productive dining space. Instead of having 30% of the total space as the storage,
preparation area, cooking area; Benihana had it at 22%. Looking into the concept of time and
motion study, this seemed to be the working principle in the business that Rocky and his family
until this time since as it can help the restaurant to cut down significant costs and increase
productivity rates.

Food storage and wastage was also a problem since it contribute significantly to the
overhead costs of the typical restaurant. As a solution, he cut down the menu to only three simple
middle American entrees such as steak, chicken, and shrimp. This cut down food costs between
35% to 35% of food sales. In the Japanese minimalist food culture, Japanese people focus on
taking the necessary nutritious food in their body without taking too much. This culture was
prevalent in other Japanese restaurants as well. Historical authenticity was also preserved so that
they can instill the vibe that the American diners want eating on an exotic place, and thus helped
him as well in preserving the tradition and culture that he grew into.

Results
With the unmatched efforts that he did in order to establish Benihana of Tokyo, the payback
period was cut down to six months. Other opportunities took its rise as well in which Barron Hilton
the owner of Hilton Hotels talked to the owner about the possibilities of opening another branch
in Marina Towers, one of their real estates. With such venture, the Chicago branch became the
companys cash-cow since it grossed ~$1.3 million per year as the management was able to keep
the expenses at lower levels. Because of this success, the fourth and fifth unit of Benihana was
established in San Francisco and Las Vegas thus, resulted to hundreds of people wanting to
franchise the business.

Franchising
The idea of franchising units of Benihana took its place in 1969 at the height of Benihana
in United States. This move conceived into six branches in Puerto Rico, Harrisburg, Fort
Lauderdale, Portland, Seattle, Beverly Hills, Boston. But then the perceived success of franchising
such restaurant only resulted to short-lived experience since Aoki realized four things: 1.) That the
investors who bought the restaurant did not any experience in the field. 2.) American investors
found it difficult to relate with the Japanese staff that they need to employ. 3.) The control is much
more difficult. 4.) It is more profitable for them to own all the branches of Benihana.

Market for Bar and Lounge

Typically, Benihana devotes a specific area for bar / lounge/ holding area to provide the
customers the drink that can be a match for the kind of food that they are eating. However, the next
branches of Benihana only increased the area of the bar / lounge at minimal percentage that is why
Benihana Palace had a bigger area for the said part which garnered 30% - 33% of sales as compared
to the other first branches.

Successful Business Strategy

Benihana of Tokyo under the care and continuous improvement of its stakeholders have
developed a successful business strategy that other competitors could not match. Benihanas
success can be seen in implementing the strategies of effective site selection, effective training,
continuous improvement, kaisha (as a form of effective employee satisfaction), effective
organization control, and effective marketing.

Effective site selection. Benihana, like any other Japanese businesses, give importance to
the lunch time businesses where most of the time employees talk about work related things. With
this, Benihana took into consideration the places with high foot traffic in which focused on
business districts rather than of the suburbs.

Effective training. Benihana boosts its training process of the chefs through their
advertising. The training that they are giving is considered as the key success factors why the
people kept on coming back in the restaurant. The chefs that they employ must pass several criteria
such as completion of three-year apprenticeship. The chefs are also given lessons on language so
that they are able to communicate with the American customers.

Continuous improvement. Upon the completion of training, the chefs are always learning
their techniques of cooking and showmanship to become the chief chef of the branch. In order to
monitor the continuous improvement of the chefs, travelling head chefs are inspecting the branches
from time to time in order to check on the performance and quality of the chefs that they are
producing.

Kaisha. Benihana is considered a kaisha or a sharing group since in joining a kaisha, there
is a sense of being part of something big and significant and thus not resulting to loss of identity
but rather a gain of pride for both workers. This is the primary reason why the Japanese chefs
decided to stick in the company aside from the handful compensation that they gain.

Effective organization control. Benihana follows a simple management structure which

focuses on growth as its priority objective. With the implementation of their new control methods,
this also motivated the employees to do more by setting up a quota system that if exceeded, bonuses
would be provided.

Effective marketing. Benihana invested a lot of budget in their advertising, giving out 8%-
10% of their gross sales. Benihana always strive to be a unique restaurant rather than of other
restaurants. They promote their business not as a restaurant but rather in a way that the people
would be curious on the things that they see on the advertisement which leads to the customer
going to Benihana.

Future Expansion
Benihanas management is always focused on their growth as a company that is why it is
very important for them to consider the future plans for the company. In any planning course, it is
important to know where the company wants to go and identify the associated risks with it. This
part deals with the future plans of Aoki and Susha along with the recommendations that can be
considered.

Susha have identified that it is one of their biggest problem since there it requires high
initial outlay in building a unit, limited supply of skillful staff, and there is lack of authentic
materials from Japan. In order to establish a Benihana, they need to invest $300,000 for it. Though
that there are major financial institutions that want to invest, the management does not want to lose
their control of the company with this, it is very much recommended to look onto smaller
institution that will provide the same amount since the return on investment for each is easy to
earn. Along with this problem lies on the need for the skillful staff mainly the oriental staff. This
effort of recruiting Japanese people tackles the issue on preserving the exoticness and authenticity
of the food that they are serving, though this issue can be addressed by employing local people
though this would lessen the experience that the diners are looking in Benihana. Lastly, Benihana
is built by the carpenters that built Benihana in Japan and entailing with the cost and time of
building the branch, there is a lack of presence of authentic Japanese material in America. This
issue though can be addressed by using the local materials in America that can appear as the best
next alternative for the construction materials only.

On the other hand, Aoki have also given his perception on where the company should go.
Expansion on other locations, retailing, new target market, and new brands. Aoki eyes the
branching out of Benihana to other parts of United States as well as overseas, and in Japan. In
expanding to other parts of US include venturing into the suburbs in which holds a great potential
(for Aoki). Another point is to expand in other countries in which they tried on Mexico in the
hopes that they can deliver the experience to Mexicans. But then the testing of the market that was
envisioned by Aoki was too optimistic since he wanted to even take over the management of the
hotel that they are targeting. Aoki also looks into targeting the retail industry by which he is going
to sell Benihana in retail markets. He also considered targeting new markets since he realized that
the people who are currently eating in the restaurants are middle class who are working, with the
new vision that he have, he is also targeting the younger generations to eat in Benihana. Lastly,
Aoki considers on creating a new brand by which targets the people who are in need of food but
no time to prepare or dine.

OPERATIONS COST CUTTING

Venture into the new places of suburbia with greater foot traffic so that the rent expenses will
be lessened even more.
 If the management does not want to franchise Try other forms of advertising that will
more of the branches, do partnerships and account for lesser cost.
joint ventures so that they can still implement
the things that they want to implement.

Try looking for smaller financial institutions if Use local materials instead of importing from
they are in fear of less control over the Japan
management. The payback for establishing
one unit can be gathered back after 6 months
to a year.

Expand more onto countries that has a market Hire local workers in order to cut down the
for Japanese food. cost for constructing a new unit.

Create new brands that Benihana can also use

to create new revenue streams and new
generation.
Hire the locals in order to cut down the costs and to address the lack of manpower and skillful
staff
Table 2: Recommendations that Benihana can undertake to further improve what they currently
have.

Discrepancy
Despite the perception of the owners and management of Benihana, the customers who are
dining as well in the restaurant gave their responses on why they are going in Benihana, what they
like about it, and who were the ones who go in the place. With that, there were some notable
deviations from what they are saying as against to what the customers have said. Firstly, it was
mentioned that business men were the usual people who go in Benihana but then in the survey,
61.3% was accounted for people who go for pleasure. Another issue was regarding the advertising,
Benihana boasts their skills on effective marketing strategies and they have invested a significant
amount on their advertising but then on the survey that they have conducted, people go there
through word of mouth (67%) followed loosely by magazines at 6.9%.

To answer the question given by Carpenter on what is Benihana is selling, the answer is
food. In the question What persuaded you to come? accounts good food for 46.7%, followed by
atmosphere which is only at 13.3%. That is why in the concern of the authentic materials used and
construction, it can be said that they should just source local materials and construction since it
was not something that the customer look at first.

Survey Answers
90

80

70

60

50

40

30

20

10

0
Food Service Atmosphere Highlight

Series 1

Figure 1: Survey Answers which is the most important?

Conclusion
In conclusion, the uniqueness of Benihana helped the business in being the number one
among the restaurants who offer the same concept in USA. The use of authentic Japanese hibachi
kept the business always moving. The method and the way of service that they offer is unparred
with the other businesses. Their few menu items resulted to economical favors to them since it
reduced a lot costs and increased profit margin yet they kept the customers wanting more of those
menu items. Finally, the use of the other spaces was used efficiently in driving more of the revenue
for the company which made Benihana one of the successful restaurants in United States.