1. Analyse and then describe any three operational aspects of the Benihana business that has led to its enormous success between 1964 and 1972. Why would you classify Benihana a great success story?

Benihana’s corporate strategy revolves around service (product) differentiation and cost leadership. Hence, its operations are aligned with these strategies that led to its success.

Benihana has achieved product differentiation through introducing an innovative idea where chefs do not only cook, but also entertain the customers through their expert cooking and culinary skill, thus presenting a unique dining experience. With the Hibachi table arrangement, the cooking process was done in front of the customers and the need for a conventional kitchen and waiters was eliminated, thus reducing labor and overhead costs and keeping the customers engaged during the food preparation process. This results in increased efficiency as it does not only reduces the time for waiter to bring order and then serve the food, but also the perceived waiting time by customers through entertaining with the skills of chefs is reduced.

Benihana has maintained cost leadership as it experiences low food costs because of its simple menu, consisting of only 3 types of quality meat. Since there are fewer variations in the food menus, it translates into high inventory turnover compared to other restaurants, and hence storage costs are minimal. Also wastages are likely to be less since consumption of similar types of ingredients remains stable, and so Benihana can order according to its forecasts. It is also probable to assume that Benihana must be availing discounts for ordering ingredients in bulk, which also results in overall reduced costs.

Management of customers in waiting by replacing the waiting area into bar is another important operational aspect that contributed to efficiency as well as profits. This was done because demand in peak hours was more than the dining area available, so in order to reduce the perceived waiting time of customers, the waiting at the bar area keeps the customers busy with the drinks and they get to interact with each other as well. This smart move not only allows for effective queue management, but also because Benihana keeps higher than average margins in its beverage sales, profitability has also increased.

Benihana is a huge success because Rocky was able to establish himself as an entrepreneur by introducing a completely novel idea, and unique services it offers. Effectively streamlining its operations, its profits remain high, and its future focus on expansion locally as well as internationally looks promising.

2. Analyse and describe any three additional extra-operational aspects of the Benihana business that has led to its success. Why or why not these six operational or otherwise

decisions taken by Rocky could be copied by some other restaurant in the same industry?

Effective space allocation resulting from the Hibachi table concept also means that space available for dining area is more since preparation and storage areas are limited to 22% of the total floor area. Hence more dining tables can be set up, resulting in increased sales. Also the conversion of ‘idle’ waiting area into a bar has also increased productivity in terms of beverage sales, and not losing customers who prefer to go somewhere else rather than wait.

Authentic Japanese experience is another key aspect of Benihana’s operations. Benihana puts a lot of emphasis on the dining experience of its customers, and they believe ‘to make people happy’ by offering a true and authentic Japanese experience with high quality cuisine made by Japanese chefs trained in Japan for 3 years, and interior décor of restaurant from Japan , and re-assembled by Japanese carpenters. Their objective of revolutionizing the way Americans think about Japanese food is being accomplished through streamlining their operations and providing personalized services to the customers in a refreshing and vibrant environment.

Strategically selecting the site of restaurant is another key element to Benihana’s success. Despite lower check average, lunch business accounted for 30-40% of total volume and therefore targeting white-collar workers and professionals during lunch time ensures high traffic for Benihana, and premiums can be charged from them.

1. The Hibachi table concept is unique and Japanese oriented so it is difficult to replicate for someone who is not from Japan to work on a Japanese theme based restaurant.

2. Low food costs are difficult to achieve because Benihana enjoys economies of scale plus it relies on its quality of food that gives it competitive edge.

3. Replacing the waiting area into a bar can be copied, but this idea worked for Benihana as it does not require a kitchen, so it has a larger free area to be allocated to bar. This is usually not the case for other restaurants.

4. Same justification ( point 1 and 3)5. Authenticity is a feature that cannot be copied especially being in the service

industry. 6. The flow of customers for Benihana is relatively stable because of high customer

turnover rate at around 45 to 90 minutes which gives it a competitive advantage. So exactly streamlining the operations to beat this rate as well as satisfying customers like Benihana is hard to do for any other restaurant owner.

3. Is franchising a good strategy for business expansion? Why did it fail for Benihana? What operational strategy would you suggest Rocky for further growth of his business? Briefly describe risks and benefits associated with each of your suggested strategies.

Franchising is a good strategy for business growth globally, especially for manufacturing industries but today, many service industries have also opened up franchises. It requires less capital investment, and the strong brand name often results in rapid growth.

However, it failed for Benihana for a number of reasons. Firstly, the operations of Benihana are not easy to reproduce, so the quality of food and services suffered, which could potentially hurt the brand name. Secondly, the investors lacked the experience of running a restaurant and they saw it just like another investment opportunity. Finally, it was not easy for Americans to work with Japanese due to cultural differences, hence it became difficult to manage and maintain control.

For future growth of his business and expansion into overseas markets, it is suggested that he selects the right business partner. Among the three potential partners to choose from (two from hotel groups, and one an expert of public relations, advertising etc), it is advised for Benihana to partner with any one from the hotel group.

Similar industry experience will yield a lot of benefits for Benihana including easy access to logistics and supply chains, as well as sharing the operational experiences of running a restaurant so less training will be required for chefs to deliver the authentic Benihana experience to the customers. In addition, the hotel group can also assist in providing important information regarding local market conditions. Aligning operational strategies will give both partners economies of scale and higher profits. It will also make it easier for Benihana to penetrate into market on the basis of success in future.

The potential risks associated with this strategy are slightly similar with those of franchising. Benihana risks losing managerial control and it might require making changes in its organizational structure. Moreover, Benihana needs to further study about the demographics of locals and their eating habits to serve them accordingly. The current ads of Benihana might not work in another country. So Benihana needs to invest in advertising suiting to the local residents. Finally the most important risk is related to the quality of food and hence to the brand name itself. Benihana needs to ensure regular supply of ingredients from reliable sources, and hygienic conditions of the food and restaurant.