As with McDonald’s and Burger King, Benihana’s operations are central to its enterprise strategy. It is the operations strategy that makes it possible for the following contrasts in costs between Benihana and a typical restaurant:
Benihana Typical Restaurant
Labor costs, percent of sales 10 – 12 30 – 35
Food costs, percent of food sales30 – 35 38 – 48
Beverage costs, percent of
Beverage sales 20 25 – 30
Rent, percent of sales 5 – 7 5 – 9
These costs are the major ones involved in operating a restaurant, and if revenues are comparable to the typical restaurant, it is obvious that a Benihana restaurant would be more profitable. The other side of the enterprise strategy coin provides the market differentiation that maintains the steady flow of customers to a limited menu, with customers wiling to pay reasonably high prices. This involves the advertising and promotion of the knife show, the exotic Japanese environment, native Japanese chefs, and the like. The focus of our interest, though, is the operations strategy and, particularly, the methods by which low costs are achieved.
Benihana has positioned itself a little above the diagonal line shown in Figure compared with the typical restaurant. If compared with McDonald’s and Burger King, it would be below the diagonal, offering somewhat more flexibility and quality than Burger king. The objective, form an operations strategy perspective, is to emphasize low costs and speed of service. The service time is about one hour – nothing like the service times of McDonald’s and Burger King which is short compared with the typical restaurant and is controlled and quite consistent. If the service time were too fast, customers might be dissatisfied, but here low service time is closely related to the low cost objectives of good facility utilization.
The low cost operations strategy is implemented by a coordinated system design that has the following dimensions:
1) Functions of waiter and chef are combined in a relatively low skilled job since the menu is simple and limited.
2) Wages are lower because of imported native Japanese chefs and other workers and because all direct laborers are tipped employees
3) Productivity is high because of communal dining and the pacing of the chef to achieve high table turnover.
4) Food costs are lower because the limited menu reduces waste and provides opportunities for purchasing discounts.
5) Beverage costs are lower because the alcohol ingredients of the exotic drinks promoted on the menu (rum, gin, and vodka) are relatively inexpensive and the drink prices are relatively high.
6) Ret costs are relatively lower because the system design utilizes practically the entire restaurant as revenue producing space since no separate kitchen is required.
The implementing of Benihana’s positioning as a low cost, high quality restaurant has been very cleverly accomplished. Unlike McDonald’s and Burger King, Benihana cannot make the trade off between cost and the quality of service – the customers are paying relatively high prices. The personalized service, food quality, and the exotic environment seem to provide an acceptable balance for the methods used to cut costs and speed service to achieve high table turnover.
Process Flow and Technology:
The process flow begins with the bar as a staging area to assemble groups of eight guests to be seated. The flow times are balanced so that time is allowed to serve two drinks. The limited menu makes ordering simple and fast, there being few decisions to be made.
The teppanyki cooking technology is flexible and can be used to cook all the items. The chef / waiter need not be a highly trained chef because of the limited menu and the simple grilling process used to cook everything.
The combination of communal dining with strangers, attention riveted on the display of knifes-man-ship – no deep, time consuming conversations are possible – low cooking time, and fast pacing by the chef all contribute to a one hour service tem and a high table turnover. The result is that the design of the process flow and technology employed help implement the low cost operations strategy.