Benihana (Nasdaq: BNHNA) is a nationwide casual & upscale restaurant chain with a Pan-Asian menu. Benihana's primary revenue source is its namesake Benihana teppanyaki restaurants, known for chefs that prepare meals on a grill directly in front of customers. Benihana operates 97 restaurants nationwide, including 63 Benihana teppanyaki restaurants, nine Haru sushi restaurants, and 25 RA Sushi Bar restaurants. In addition, 22 franchised Benihana teppanyaki restaurants are operating in the U.S., Latin America and the Caribbean. Benihana's restaurants create the largest chain of Japanese restaurants in the nation and one of the most geographically extensive restaurant chains in the U.S..
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. Operating margins for the restaurant industry are also susceptible to fluctuations in prices of commodities, which include beef and seafood as well as other items necessary to operate such as electricity or other energy supplies. Despite a weak economy, Benihana's total restaurant sales increased 5.2% to $77.4 million in the fourth quarter of fiscal 2010 compared to the year-ago period.
Benihana is one of the largest Asian restaurant chains in the United States by revenue and restaurant locations. Benihana's core restaurants continue to be its "Benihana" teppanyaki-style Japanese restaurants, which account for approximately 68% 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.
Fourth Quarter 2010 Results
Benihana's total restaurant sales increased 5.2% to $77.4 million during the fourth quarter of 2010. Income from operations of $2.9 million compared to $1.7 million in the year-ago quarter. Net income of $1.4 million, or $0.09 in diluted earnings per share, compared to net income of $0.9 million, or $0.06 in diluted earnings per share in the year-ago quarter.
For the fiscal year 2010, total restaurant sales increased 2.6% to $311.8 million, the eighteenth consecutive year with a total sales increase. Income from operations (excluding impairment charges) of $4.6 million compared to $11.6 million in 2009. Benihana opened one new Benihana teppanyaki restaurant in Orlando, Florida, during the year and closed two Benihana teppanyaki restaurants in Washington, DC and Tucson, AZ. The company opened three new RA Sushi restaurants in Atlanta, GA, Leawood, KS and Houston, TX.
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.
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.
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.
due primarily to a 13.1% decrease in dine-in guest counts offset by a 4.0% increase in the average per person dine-in guest check.
The subprime lending crisis drastically weakened the U.S. economy, meaning American consumers had less disposable income. Benihana's relatively high prices further hurt sales in a weak economy because customers steadily gravitate towards cheaper alternatives, like P.F.Chang's China Bistro (PFCB), where the average check per person is approximately $20, 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.
In response to rising seafood and beef prices, Benihana's operating expenses increased by 10.2% during 2008, which totaled approximately $279 million and outpaced the company's 8.1% increase in revenue. 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. In order to reduce its vulnerability to increasing commodity prices, Benihana routinely enters into non-cancellable supply agreements for the purchase of many beef and seafood items at fixed prices for up to twelve months.
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. 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. Benihana plans to capitalize on this increase in demand through significant expansion for its restaurants, particularly its Benihana teppanyaki and RA Sushi concepts. 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.
The casual and upscale restaurant industry is comprised mainly of small, locally owned restaurants with only one or two locations. Benihana also competes with several large national chains, including P.F.Chang's China Bistro (PFCB), Kona Grill (KONA) and BUCA (BUCA).
|Company||Revenue (Millions)||Total Number of Restaurant Locations||Comparable Restaurant Sales Growth||Average Check Size Per Person||Net Income (Loss) (thousands)|
|P.F.Chang's China Bistro (PFCB)||$1,100||316||N/A||$20-$21 (P.F. Chang's China Bistro); $8.50-$9.50 (Pei Wei)||$32,000|
|Kona Grill (KONA)||$72.3||18||2.7%||$24||(669)|