Service Operations Management

Benihana of Tokyo Case analysis

Faculty: Prof. Narain Gupta

By Group 1 Lokesh Kumar - 30 Shijo Joshua - 51 Abhijeet Kumar-02 Marri Vivekanand Yadav-32

Customer Need & Service Concept

Customer Needs Americans enjoyed eating in exotic surroundings They were deeply mistrustful of exotic foods People very much enjoy watching their food prepared

Service Concept (Q1) Steak House with a difference Food is cooked in front of the customer Cooked only by Oriental Japanese chefs Authentic Japanese country inn dcor by Japanese carpenter

Benihana Competitive advantages

Hibachi table concept Reduced cost of labour(10%-12% of sales) Increased dining space (by 8%)

Historical Japanese Authenticity

Limited Menu (reduced food costs to 30%) Increased bar/lounge area

Hibachi table concept

Benihana Competitive advantages

High traffic site: location Specialized training of chefs (3 yr apprenticeship) Paternal attitude towards employees(low turnover)

Effective Bonus plan

Creative & Extensive advertising (8%-10% of sales) Simple management structure

Future Expansion Strategies

Franchising : Problems: The franchises are businessmen and does not know restaurant business The franchisee could not honor Japanese staff More profitable to own and operate than to franchise. Deals with hotels: Problems: Clear and strict agreements are required, so that they are not at the mercy of hotel management.

Future Expansion Strategies

Own and Operate by themselves : Problems: Limited to opening only 5 units per year - only 2 Japanese carpenter crew (can be overcome by using other materials ,not 100% authentic) Constraints in staff : requires 30 people Cost factor:$300000 per new unit. Investment by International banking Organisation: Problems: Must give up large amount of control and autonomy.

Prinicpal areas of growth

United states: Primary marketing areas Secondary marketing areas Suburbia Further penetration into existing markets

Overseas: JV with Royal York Hotel, Canada New unit in Mexico city, or build and operate new unit in the hotel to be built JV with David Paradine limited in Great Britain. .

Diversification plans
Producing a line of Japanese foods under the Benihana label Targeting young customers Japanese quick service operation( Chinese- Japanese operation) at gas stations Taking over a chain of beer halls in Japan.

Process flow of Benihana (Q2)

Pine & Gilmore Economic Progressio

Economy
Offering Function Nature of offering Key attribute Method of supply Seller Buyer

Agrarian
Commodities Extract Fungible Natural Stored in bulk Trader Market

Industrial
Goods Make Tangible Standardize Inventoried Manufacturer User

Service
Services Deliver Intangible Customize Delivered on demand Provider Client

Experience
Experiences Stage Memorable Personal Revealed over time Stager Guest

Factors of demand

Characteristics

Features

Benefits

sensations

Operating Statistics for a Typical Service Restaurant (Q3) Sales Food Beverage Total Sales Cost of sales Food cost (% of food sales) Beverage cost (% of beverage sales) Cost of total sales Gross profit Operating expenses Controllable expense Payroll Employee benefits Employee meals Laundry, linen, uniforms Replacements Supplies (guest) Menus and printing extermination, equipment rental) Music and entertainment (where applicable) Advertising and promotion Utilities Management salary Administration expense (including legal and accounting) Repairs and maintenance Occupation expense rent Taxes (real estate and personal property) Insurance Interest Depreciation Franchise royalties (where applicable)

Ranges (%) 70 80 20 30 100 100

avg 75 25 100

Chicago Unit % 70 30 100

38 25 35 65

48 30 45 55

43 27.5 40 60

30 20 27 73

30 3 1 1.5 0.5 1 0.25 1 0.5 0.75 1 2 0.75 1

35 5 2 2 1 1.5 0.5 2 1 2 2 6 2 2

32.5 4 1.5 1.75 0.75 1.25 0.375 1.5 0.75 1.375 1.5 4 1.375 1.5

10 1.75 0.75 1.25 0.375 1.5 0.75 10 1.5 4 1.375 1.5

44.25
4.5 0.5 0.75 0.3 2 3 11.05 55.3 Gross profit Total operating expenses Net profit before income tax 65 55 10 9.5

64
9 1.5 1 1 4 6 22.5 86.5 55 65 -10 0.5

54.125
6.75 1 0.875 0.65 3 4.5 16.775 70.9

34.75
5 1 0.875 0.65 3 10.525 45.275 73 45 28

Benihana Cost structure compared to typical sit down restaurant(Q4)

Cost Food cost(% of food sales) Beverages cost(% of beverages sales) Labor cost out of operating expenses Management Salaries Rent out of operating Expense Space occupancy promotional and Advertisemet cost

Typical rest.. 38-48% 25-30%

Benihana 30% 20%

30-42%
2-6% 4.5-9% 30%

10%
4% 5-7% 22%

.75-2%
lower

10%
Higher

Construction cost

Service Characteristics (Q5)

Perishability: Unoccupied seats, food ,unused manpower Inseparability: Both customer and service provider must be present Simultaneity: Service is delivered an consumed simultaneously Variability: Limited, but customized Intangibility: Food is tangible, but experience & ambience is intangible

Recommendations
Go public: To raise Capital Large scale training of staff Stop import of Japanese dcor and use local material and carpenter Increase of Bar/Lounge space Happy hours for young generation. Dont diversity into mass production(leads to brand dilution) No franchisee and No small units at gas stations