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Benihana (BNHNA)Stock (Casual & Upscale Restaurants Industry, Food & Beverage Industry)
 Benihana, like many other restaurants, is vulnerable to a weakened economy, which reduces the amount of consumer disposable income and leads consumers to eat out less frequently. These factors led to Benihana's 2% decrease in revenue during Q4 2008, which reached $69.8 million in Q4 2008, compared to $71.2 million in Q4 2007. Furthermore, comparable restaurant sales decreased an average 2.2% across Benihana's restaurants during Q4 2008[3]. However, Benihana's particular niche is growing - Asian restaurants grew at 11.6% during 2007, outpacing most other cuisine categories[4], and Benihana earned a record $297 million in revenue in the fiscal year ending March 30, 2008.[5]
[edit] Business Overview   Benihana is one of the largest Asian restaurant chains in the United States by revenue and restaurant locations[9]. The company operates 88 restaurants across the United States[10]. Benihana's core restaurants continue to be its "Benihana" teppanyaki-style Japanese restaurants, which account for approximately 74% of the company's revenue. Benihana also operates two other Japanese food concepts, RA Sushi restaurants and an upscale Japanese fusion and sushi restaurant, Haru[11]. The graphs to the right illustrate the company's division of revenue by restaurant concept and restaurant location by geographic region. [edit] Business Segments[edit] Benihana (74% of Revenue, 83% of Operating Income)Benihana restaurants offer casual Japanese dining in an entertaining atmosphere. Chefs prepare steak, chicken and seafood on a teppanyaki grill, or flat iron grill, placed at the center of the customers' table.
[edit] RA Sushi (14% of Revenue, 3% of Operating Income)Benihana's RA Sushi offers sushi and Pacific rim dishes in an upbeat, trendy atmosphere. RA caters to a younger demographic than its other restaurants and is usually located in areas with a nightlife component like malls or shopping centers in order to reach their target consumers more easily[18].
[edit] Haru (12% of Revenue, 14% of Operating Income)Benihana's Haru concept offers high quality Japanese fusion dishes, including sushi and sashimi, crab dumplings, and tempura. Haru operates exclusively in urban settings, with seven locations in New York City, one in Boston and one location in Philadelphia[23].
[edit] Financial AnalysisBenihana's revenue has increased an average of 9.5% since fiscal 2006. Revenue totaled approximately $297 million and the company had a 7.24% operating margin in fiscal 2008[29], up 8% from $273 million in 2007. This can be attributed to new restaurant openings and an increase in comparable restaurant sales[30]. Although Benihana's restaurants suffered an average 2.5% decrease in dine-in guest counts, or amount of customers per day, increases in comparable restaurant sales and average check per person helped the company increase its revenue (see above)[31]. For example, Benihana's teppanyaki restaurants suffered a 5.5% decrease in dine-in guest counts, which was offset by a 9.5% increase in average check per person[32]. In 2006 the company decided to launch a renovation program for its core Benihana restaurants, with work being performed on 20-25 restaurants by 2009. The renovations, which cost approximately $2 million for each location, reflect Benihana's stated focus on building a stronger core brand as it seeks to maintain a strong position in the growing American appetite for Japanese cuisine[33]. These renovation costs, coupled with rising costs of food commodities, contributed to Benihana's decrease in net income in 2008, which reached approximately $13 million, compared to approximately $14.5 million in 2007 and 2006[34]. The graph below illustrates Benihana's revenue and net income during fiscal 2007 and 2008. [edit] Key Trends and Forces[edit] Weak Economy Slows Restaurant Traffic and SalesThe subprime lending crisis during 2007 drastically weakened the U.S. economy, meaning American consumers have less disposable income. This has in turn led to lower revenues for the restaurant dining sector as people save money and eat at home. The Technomic 2007 Restaurant Industry Study showed a decrease in restaurant dining as restaurant sales growth in 2007 decreased by 1%, to 5.1% and attributed poor economic conditions as the cause for restaurants to reduce funding for expansion by an average of 1.4% during 2007[35]. Benihana's relatively high prices further hurt sales in a weak economy because customers will steadily gravitate towards cheaper alternatives, like P.F.Chang's China Bistro (PFCB), where the average check per person is approximately $20[36], compared to $27.63 at Benihana restaurants. Additionally, increases in oil prices have also negatively impacted restaurant traffic since traveling to restaurants is also now more expensive. As previously mentioned, Benihana restaurants suffered a 5.5% decrease in dine-in guest counts, while RA and Haru's dine-in guest counts decreased by 3.0% and 3.6% respectively during its fiscal 2008[37]. Although Benihana seemed to maintain strong financial performance during the weakening economy, comparable restaurant sales slipped 2.2% in Q4 2008, but still increased a total of 2.4% in the fiscal year ending March 30, 2008.[38][39] [edit] Rising Food Wholesale Prices Raise Restaurant Operating ExpensesDuring 2007, wholesale foods reached their highest prices in 27 years.[40] This contributed to Benihana's 10.2% increase in operating expenses during 2008, which totaled approximately $279 million and outpaced the company's 8.1% increase in revenue[41]. In order to offset increases in food prices, most notably beef, chicken and seafood, Benihana raised its teppanyaki menu prices by 7% and its RA and Haru menu prices by 3% in fiscal 2008[42]. In order to reduce its vulnerability to increasing commodity prices, Benihana routintely enters into non-cancellable supply agreements for the purchase of many beef and seafood items at fixed prices for up to twelve months[43]. [edit] Rising Popularity of Asian Cuisine and Convenience Trends Spurs GrowthAs of 2008, Americans buy a meal or a snack from casual, upscale, and fast food restaurants an average of 5.8 times a week, spending about $1,100 on food away from home each year[44]. Furthermore, revenues in the restaurant industry are expected to increase 4% in 2008, totaling $558 billion[45]. The emerging popularity of exotic cuisines and prominence of off-premise (takeout, delivery and curbside pick-up) options at many restaurants nationwide are contributing to this growth. As previously mentioned, Asian restaurants grew 11.6% in revenue during 2007, outpacing most other cuisine categories and 54% of respondents to a 2008 Restaurant Association Survey stated that they would use delivery-options if offered at restaurants. The company plans to capitalize on this increase in demand through significant expansion for its restaurants, particularly its Benihana teppanyaki and RA Sushi concepts during 2008-2009, which each have seven new restaurants in development across the United States[46]. Also, Benihana's Haru restaurants offer high quality Japanese fusion and sushi dishes with delivery or take-out options, a significant advantage in its convenience-oriented urban settings[47]. [edit] CompetitionThe casual and upscale restaurant industry is comprised mainly of small, locally owned restaurants with only one or two locations[48]. Benihana also competes with several large national chains, including P.F.Chang's China Bistro (PFCB), Kona Grill (KONA) and BUCA (BUCA).
 Benihana2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References
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