Question 1:
Analyze 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? Following are the three operational aspects that led to Benihana business to its success during 1964-72: THE HIBACHI TABLE CONCEPT
Rocky learnt from research that the main problem the Typical American Restaurants are facing is the higher cost of labour. In order to overcome this issue Rocky adopted the Hibachi Table Concept which offered great advantages to the Benihana Concept Restaurants.
Treatment of the customer: The customers enjoy a unique dining experience at the Benihana Restaurant because there is a high level of contact between the Japanese chef and the customers. The customers are able to see their foods cooked which removes the distrust associated with restaurant food’s quality. In addition to this, the customer can communicate exactly what they want while getting entertained with the chef’s unique skills of making foods. Lower Costs: The Hibachi table lowers the cost of labour by 10%-12% due to the elimination of the conventional kitchen (as present in Typical American Kitchen). This has also helped in decreasing the space of back of the house to 22% as compared to the 30% in the American restaurants.
OFFERING LIMITED FOOD ITEMS
Rocky also discovered that the food wastage and storage contribute significantly to the overheads of the restaurants. So, he started his restaurant with three American dishes; steak, chicken and shrimp only. This short menu virtually has no waste and it helped him in bringing the cost of the food to 30%-35% as compared to 38%-48% for an American Restaurant. KEEPING THE JAPANESE HISTORICAL AUTHENCITY
Since Hibachi Table concept is a Japanese style of serving food and Rocky knew that without the Japanese environment around the restaurant this concept will not have a profound impact on the customers. That is why all the walls, ceilings, beams, artifacts and decorative lights of the restaurant were imported from Japan. Even the installation is carried out by the Specialized Japanese Carpenters in order to keep that look as authentic as possible. Is this a success story? Yes it is, as mentioned in the case that from 1964-72, they opened a number of restaurants based on this concept and were all successful (except some franchises). The reason behind their success is because of Benihana’s Benihana ’s understanding of customers and the unique environment they produced which clearly differentiated them among the normal American Restaurants.
Question 2:
Analyze 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? Additional extra aspects of Benihana business that were adopted by Rocky were: SELECTION OF RESTAURANT SITE
Knowing the importance of the lunch time business, Benihana basic criteria for the selection of the site is High Traffic. Management wanted to be sure that there must be a lot of people around in the lunch and the dinner time. So, they always wanted to start the restaurants in a predominantly business district, though some had easy access to the residential areas. The high traffic means lots of customers and the more the satisfied customer Benihana had the more the success they embraced. Shopping centers were not considered till 1972. TRAINING OF CHEFS AND ORGANIZATION & CONTROL
The Hibachi Concept is all about the Japanese Style of Cooking. The Specialist and Qualified Benihana Style Chefs have always been the significant part of Benihana success. Since a lot is dependent on these Chefs therefore the company has a strict selection and training policy. The Chef’s must be certified (three years of apprenticeship) after that they were given 3-6 months of training in English, American Manners and the Benihana Showman’s Style of Cooking in Japan before sending them to USA. In USA the continual training program is also conducted. This helped maintaining the same unique taste of the foods throughout the Benihana chain of restaurants. The success of a venture is greatly dependent on how the business is organized and controlled. Benihana management established the control systems using sales goals and budgets for assessing the performance of all the employees so that everyone can justify its position within the organization. Moreover they hired an accountant to monitor their costs continuously. ADVERTISING POLICY
The Management invested a great deal of money in the advertisements (10% of sales) because Rocky knew that another important factor in restaurant success lied in substantial investment in creative advertisement and public relations. Benihana advertising strategy involves outstanding visuals in ads and their USP (Unique Selling Proposition) is not the restaurants or food they served but the environment in which the food is served. As mentioned in the case that in their last ad they never used the word restaurant at all. Benihana adopted different advertising approach utilizing outstanding visuals in ads; they also kept in check by market research, who our customers really are. Reasons why other companies had not been successful (even after copying):
Rocky belonged to a Japanese Family and his family was in the business very long. He knew all the ins and outs of the business. The copied ventures lacked the insights required for these businesses. Being the first mover in the Japanese Hibachi Concept Restaurant, Benihana has great brand loyalty and the customers don’t trust any other restaurant with the same concept.
The Japanese Environment as provided by Benihana must have been missed. The Unique Style of Chefs cooking and entertainment must be missing. The Hibachi Table arrangement might have been in-appropriate. Communication gaps between Americans and Japanese workers. Catering multiple dishes i.e. increasing material storage and wastage cost. Not maintaining the same quality and standards in food cooking. Not having units in business hubs. The continual betterment/innovation strategy as adopted by Benihana must have made the copiers left far behind.
Question 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. Yes, Franchising is a good strategy for business expansion. This helps the company grow globally with fewer stakes involved. We have examples of KFC, McDonalds and Pizza Hut, that grew exponentially with franchising. In the Benihana case, the franchising did not turn out successful because of following reasons:
Inexperienced Investors: The investors that bought these franchises had no prior restaurant experience. With no restaurant experience and running a restaurant franchise like Benihana, came to them as a hard nut to crack and they failed. Communication Barrier: As mentioned in the previous answer the success of the Benihana strongly depends upon the Japanese Chefs. If there is lack of communication between the American investors and Japanese Staff, the problems will increase and this will ultimately lead to ambiguity in operations and performances. Lack of Control: The franchising was done in the earlier stages of the incorporation of Benihana. At this time, they were inexperienced, how to design control for the franchises? They felt that it was more difficult to maintain control over the franchise than a company manager, which resulted in miscommunication and ended up in failures.
Further operational strategies that could be adopted by Benihana are as follows:
Use of Construction Material in USA: As seen in the survey that only 13% people recalled the Japanese environment so the company instead of importing the fixtures from Japan, use the material available in the US which will bring these costs down. Care has to be taken that the only the material has to be taken, the concept of Japanese history has to keep intact. Going Public: Going public will be a good option for raising funds and these fund can help the company grow very fast without the need of external financing (Debt). The problems are abiding by the government rules and regulations, shareholder satisfaction and all the important decisions are to be taken by the approval of Board of Directors. Expansion in the Overseas Markets: As mentioned in the case that Benihana Company was having discussions about franchising and expansions outside US (i.e. Mexico, Canada, UK and Japan). This will definitely boost the company’s overall sales revenue and brand equity. What has to be taken care of is the control procedures, that needs to be established for franchising or joint ventures. Moreover the country’s political, economical and social environmental factors are to be kept in mind. Diversification in Food Menu: Adding more items will add great diversification in the menu and that different age groups can be targeted. This will boost company sales but will also eliminate the waste advantage they had with fewer items in the menu. Quality and consistency in taste of foods with minimum waste has to be attained among all the Benihana Restaurants.
Recruitment of Local Labor: The Company should train the local labour as chefs and carpenters and will use them in their restaurants. This will eliminate the company excess cost of accommodation they gave to their Japanese Chefs. This will also eliminate the fear of shortage of Japanese labour as discussed in the case. The franchising will become more easy if American Trained Chefs (Hibachi Style) will work in these projects. This will remove the communication barrier between Franchise management and the chefs as well. The only disadvantage being the danger of loss of Pure Japanese Culture at Hibachi Table.
