What must Benihana continue to do to maintain its current business and support projected growth?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
We recognized an $18.5 million gain on CARES Act Loan Forgiveness in 2021, partly offset by a $0.6 million loss on early debt extinguishment related to the partial paydown of our credit facility.
Our Growth Strategies and Outlook
Our growth model is primarily driven by the following:
Expansion of STK. We expect to continue to expand our operations domestically and internationally through a mix of owned, licensed and managed STK restaurants using a disciplined and targeted site selection process. We have identified over 75 additional major metropolitan areas across the globe where we expect we could grow our STK brand to 200 restaurants over the foreseeable future. We expect to open as many as five to six STKs annually, primarily through company-owned locations and management or licensing agreements, provided that we have sufficient interest from prospective licensees, acceptable locations and quality restaurant managers available to support that pace of growth.
In 2021, we opened an owned STK restaurant in Bellevue, Washington, two managed STK restaurants located in Scottsdale, Arizona and London, United Kingdom and one licensed STK restaurant located at the Los Cabos International Airport in San Jose del Cabo, Mexico. Additionally, we have under construction owned STK restaurants in Dallas, Texas and San Francisco, California and a managed STK restaurant in Stratford, United Kingdom.
Expansion of Kona Grill. We expect to expand our operations domestically using a disciplined and targeted site selection process. We believe we could grow the Kona Grill brand to 200 restaurants over the foreseeable future. We expect to open as many as three to five Kona Grills annually, primarily through company-owned locations, provided that we have acceptable locations and quality restaurant managers available to support that pace of growth.
Expansion through New F&B Hospitality Projects. We expect our F&B hospitality services business to be an important contributor of our growth and profitability, enabling us to generate management fee income with minimal capital expenditures. We believe we are well positioned to leverage the strength of our brands and the relationships we have developed with global hospitality providers to drive the continued growth of our F&B hospitality business. We continue to receive inbound inquiries regarding new opportunities globally, and we continue to work with existing hospitality clients to identify and develop
additional opportunities in their venues. We expect to enter into at least one to two new F&B hospitality agreements annually. In 2021, we opened Bao Yum, a new brand under ONE Hospitality, and commenced management of certain F&B hospitality management services at The Westminster London Hotel in London, United Kingdom. We also entered into a management agreement with Rivershore Bar & Grill in Oregon City, Oregon during 2021.
Increase Same Store Sales and Increase Our Operating Efficiency. In addition to expanding into new cities and hospitality venues, we intend to continue to increase revenue and profits in our existing operations through continued
focus on high-quality, high-margin food and beverage menu items.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the company's growth model is driven by several key strategies. These include expanding the STK brand both domestically and internationally through owned, licensed, and managed restaurants, with a target of reaching 200 STK restaurants in major metropolitan areas. Benihana aims to open five to six STKs annually, contingent on licensee interest, suitable locations, and the availability of qualified restaurant managers.
Another component of Benihana's growth strategy involves expanding the Kona Grill brand domestically, also with a target of 200 restaurants. The company plans to open three to five Kona Grills each year, primarily through company-owned locations, provided they can secure acceptable locations and qualified restaurant managers. Benihana also intends to grow through new Food and Beverage (F&B) hospitality projects, which are expected to contribute significantly to the company's growth and profitability by generating management fee income with minimal capital expenditure. The company aims to enter into one to two new F&B hospitality agreements annually.
In addition to expanding its brands, Benihana plans to increase revenue and profits in its existing operations by focusing on high-quality, high-margin food and beverage menu items. The company anticipates that its operating margins will improve through growth in same-store sales and a reduction in store-level operating expenses. Benihana also evaluates potential acquisition opportunities to further enhance its growth. However, the FDD notes that the unsuccessful implementation of these strategies, including opening new restaurants and attracting new F&B hospitality service opportunities, could negatively impact the company's operations. Benihana estimates opening seven to twelve new locations annually, focusing on licensing or management agreements, but there is no guarantee that they will achieve this rate of expansion.