The potential of Benihana Express keeps growing, according to The ONE Group Hospitality CEO Manny Hilario.
The company has spent the past few months building the foundation for the concept after purchasing a Miami Benihana Express from an exiting franchisee. The restaurant is producing more than $1 million in annual revenue, closer to $1.2 million according to Hilario, from an 800- to 1,000-square-foot footprint. Food costs run near 20 percent and labor near 25 percent, allowing the format to deliver prime margins above 50 percent. Development costs are projected at roughly $500 per square foot.
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The economics create a different growth path from a traditional Benihana, where the teppanyaki experience requires considerably more space and specialized labor. Express keeps recognizable menu items but packages them for convenience and off-premises occasions.
“Our positioning of the concept is that we can bring the great craveable food of the Benihana model, which we all get a lot of great feedback from customers on particularly the fried rice and some of the items that we have on the menu,” Hilario said during The ONE Group’s second-quarter earnings call. “So it’s a premium experience on a to-go basis.”
The ONE Group hasn’t provided a potential U.S. unit count for Express, but Hilario described the opportunity as sizable. Its footprint opens a much larger pool of potential real estate, and the absence of teppanyaki chefs simplifies staffing and training.
The company has also spent the months since acquiring the Miami restaurant working on branding, prototypes, and store designs that can be presented to prospective franchisees. Interest has started coming in, Hilario said.
Benihana Express has a company-owned restaurant under construction in Denver and a licensed location in the Florida Keys in development, with openings expected by year-end. Franchisees are expected to pay a 6 percent royalty and contribute another 2 percent toward marketing under future agreements.
“I think that everything that we need from product to design to operational model, we’ve defined all that,” Hilario said. “Now it’s just a matter of bringing in the right franchisees and selling those franchisees to people.”
The traditional Benihana business gives The ONE Group a strong base from which to pursue that expansion.
Benihana same-store sales increased 0.8 percent in Q2, and transactions were positive. Restaurant-level margin expanded 90 basis points to 18.9 percent, making Benihana the company’s most profitable segment on that measure. The results came despite extreme temperatures in certain markets that hurt restaurant traffic and required additional spending to increase air-conditioning capacity.
The ONE Group is also using Benihana as a destination for underperforming restaurants elsewhere in its portfolio. In July, it completed the conversion of a Kona Grill in Riverton, Utah, into a Benihana, following a similar conversion in Scottsdale, Arizona, last year.
The Scottsdale conversion continues to produce higher revenue and what the company characterized as a healthy return on investment. Six RA Sushi and Kona Grill restaurants had previously been temporarily closed for conversion through January.
Across The ONE Group, consolidated comps increased 0.9 percent, including positive transaction growth in each segment. Revenue declined 3.3 percent to $200.5 million, driven mainly by planned Kona Grill and RA Sushi closures. Restaurant-level operating profit reached $32.4 million, or 16.4 percent of company-owned restaurant revenue, a 110-basis-point improvement.
STK was a source of sales strength. U.S. same-store sales increased 3.2 percent and segment restaurant-level margin expanded 130 basis points to 17.4 percent. The company relocated its original downtown New York City STK in July, later than planned because of delays securing inspections.
The ONE Group increased marketing spending during the FIFA World Cup after televised matches competed with prime dining occasions. The company said traffic momentum improved after the tournament ended.
Consumer behavior also strengthened the case for The ONE Group’s value-and-premium strategy. STK’s $3, $6, $9 Happy Hour and Weeknight Date Night target lower-priced occasions, with premium steak and seafood positioned for celebrations and customers willing to spend more. Mother’s Day, Father’s Day, and graduation season performed well across the portfolio.
The company expects full-year revenue of $805 million to $820 million and same-store sales growth of 1 to 2 percent. Adjusted EBITDA is projected at $95 million to $105 million. It lowered expected net capital expenditures to roughly $30 million and plans six to 10 openings.
Source: Fsrmagazine.com
