Fin40

Posted on February 13, 2017

Finance Assignment Help 40

 
Benihana of Tokyo
 
In 1964, “Rocky” Aoki opened the first Benihana restaurant. By 1972, Rocky went from a humble restaurant with capacity for 40 people in New York City and zero profits to president of 15 restaurants nationwide with revenues generated of over $12M annually. Of these restaurants, 9 were properties of Benihana located in New York (3), San Francisco, Chicago, Encino and Marina del Rey (CA), Portland (OR) and Honolulu. 5 restaurants were franchises in Boston, Fort Lauderdale, Beverly Hills, Seattle and Harrisburg (PA). The final restaurant was a partnership with the Hilton Hotels Corporation in Las Vegas. What was the concept behind the success of Benihana?
 
Benihana Concept
 
In 1972, Benihana was a restaurant specializing in serving meat, but with a different concept: the food was prepared in front of the client, by Japanese chefs, and the decoration a faithful reproduction of Japanese restaurant décor. Rocky adopted the “hibachi” style of dining, thereby eliminating the need for a conventional kitchen. This also provided clients with greater service and attention while maintaining personnel costs between 10-12% of total sales (food and drinks). It minimized flow time, resulting in higher client turnover rate. This concept also allowed to increase the proportion of space of the restaurant for the dining area. Of the total surface space of the facility, only 22% was used for support areas such as food preparation, cold storage and dry storage of materials, personnel dressing rooms and office space. Normally, a restaurant needs to dedicate 30% of the total surface space to those support areas.
 

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Rocky also found a way to cut down on food waste by reducing the menu to three main dishes: steak, chicken, and shrimp. By doing this, he was able to reduce the costs of foods to 30-35% of the purchase costs of foods. He also reduced waste to virtually nonexistent. This method allowed for lower overhead costs.
 
Finally, Rocky placed much emphasis on history and authenticity. All the decorative elements of a Benihana restaurant come from Japan, from antique Japanese houses, that had been carefully dismantles and shipped in parts to the US, where two specialized Japanese carpenters would reassemble them.
 
Is Benihana a successful operation? How successful?
 
The first restaurant opened by Rocky on the West Side of New York was so successful that he recovered his investment in six months. In 1966, Rocky inaugurated the second restaurant three blocks away on the East Side to accommodate the overflow from the first restaurant. This second restaurant, called Benihana East, rapidly acquired its own clientele and also prospered. In 1967, Barron Hilton, who had eaten at a Benihana, contacted Rocky and proposed the opening of a restaurant in Marina Towers in Chicago. Rocky went to Chicago and en route to the Towers, an available locale caught his attention. Rocky stopped and met with the owner and signed a lease the following day, and thereby passed on the Marina Towers proposal.
 
The restaurant in Chicago obtained instant success and generated revenues of approximately $1.3M annually. From there, a fourth restaurant was opened in San Francisco, and the fifth in Las Vegas. Rocky explored Franchises, but after six licenses decided to move away from franchises. Rocky found it more difficult to control a franchise and to keep the Benihana way in each of the franchises. By 1972, there were 15 Benihana restaurants nationwide with a gross revenue of over $12M annually.
 
P&L Statement for Benihana Chicago

Revenues:​​​​
Food ​​​​$
Beverage $
Total Revenue $

Cost of goods sold (COGS):
Food ​​​​
Beverage ​
Total COGS

Gross Profit $2,000,000

Expenses:
Employee Labor
Advertising
Management
Rent​

Total expenses

Net Profit $
 
Q1. Prepare an operating statement (P&L statement) for the Chicago restaurant based on the operating information in the case. But assume the total revenues for the restaurant are $ 2 million for the year?

 

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