Operations Management Case Study Report Case: Benihana of Tokyo UNDER THE GUIDANCE OF: Contents PDF

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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 ...

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Operations Management Case Study Report Case: Benihana of Tokyo

PREPARED BY: Dhruv Gupta Gunjan Kalita Jigyasa Gautam Kishlay Saurabh Naveen Malik Navpreet Singh Sachdeva

13DM066 13DM075 13DM086 13DM092 13DM112 13DM113

UNDER THE GUIDANCE OF: Prof. A.K.Dey

Contents Page No 3 4 6 6 6 6 7 7 8

Activity Diagram Summary Strategy Initial Strategy Operational Marketing Strategy Competitive Priorities Low Cost Distinctive Service

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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 pe so . This a a ge e t also helped i edu i g the total spa e of the Ba k of the house unit from 30% to 22%. In addition to this he reduced food storage and wastage by reducing the e u to o ly th ee si ple Middle A e i a e t ees a d as a le to ut food osts 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 • Food cost low relative to the industry • Beverages cost lower than the industry • Minimum wastage • Minimum back space • Low labour cost

• • • •

Site selection Japanese interior Japanese chefs Clientele all income groups - Large potential market • Training - skilled labour • 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 Be iha a’s U“P lie i thei se i es hi h a e u i ue to the

a d a ’t e easily epli ated.

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 t ai ed, skilled a d oti ated hef’s 3 y fo al apprenticeship, they are given 3-6 months course in English and also American manners and training of the chefs used continuously. 4. Clie tele all i co e groups’ large pote tial arket: 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

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