What caused the increase in Benihana's general and administrative costs between 2020 and 2021?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
or 66.0%, to $144.5 million for 2021 from $87.0 million for 2020. Owned restaurant operating costs as a percentage of owned restaurant net revenue decreased 900 basis points from 63.7% in 2020 to 54.7% for 2021 due to leverage on higher average weekly sales and actively managing operating costs.
General and administrative. General and administrative costs increased $11.7 million, or 83.7% to $25.6 million for 2021 from $13.9 million for 2020. The increase was attributable to increased activity as restaurants resumed in-person dining compared to the prior year when significant cost savings measures were implemented as a result of COVID-19. Stock-based compensation increased $1.8 million to $3.6 million for 2021 compared to $1.8 million for 2020.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, general and administrative costs increased significantly between 2020 and 2021. Specifically, these costs rose by $11.7 million, which represents an 83.7% increase, reaching $25.6 million in 2021 compared to $13.9 million in 2020. This substantial increase is primarily attributed to the resurgence of in-person dining in Benihana restaurants as COVID-19 restrictions eased, contrasting with the cost-saving measures implemented during the prior year due to the pandemic. This indicates that as the business environment normalized, Benihana incurred higher administrative expenses related to supporting increased operational activity.
Another factor contributing to the increase in general and administrative costs was the rise in stock-based compensation. This expense increased by $1.8 million, totaling $3.6 million in 2021, compared to $1.8 million in 2020. This increase was driven by certain stock grants that vested based on stock price thresholds, as well as employer payroll taxes on stock option exercises and restricted stock vesting. This suggests that Benihana's employee compensation structure, particularly concerning stock-based incentives, played a role in the increased administrative costs.
Additionally, accruals for performance-based compensation increased by $1.6 million compared to 2020, further contributing to the rise in general and administrative expenses. While general and administrative costs increased significantly in absolute terms, as a percentage of revenues, these costs were 9.2% in 2021, slightly lower than the 9.8% in 2020. This indicates that while administrative expenses increased, revenue growth outpaced the increase in these costs, reflecting improved efficiency in managing administrative overhead relative to overall business activity.