What expenses are considered direct operating expenses for a Benihana franchise?

According to Benihana's 2024 Franchise Disclosure Document, direct operating expenses for owned restaurants include several categories of supplies and fees. These consist of items such as paper products, smallwares, china, silverware, and glassware necessary for serving customers. Additionally, direct operating expenses cover cleaning supplies to maintain the restaurant's hygiene, credit card fees associated with processing payments, and linen costs for tablecloths, napkins, and other textiles.

Benihana measures these direct operating expenses as a variable expense, meaning they fluctuate in proportion to the restaurant's net revenues. This implies that as sales increase, the expenses for these supplies and fees will also likely increase, and vice versa. This approach allows Benihana to assess the efficiency of its operations and manage costs effectively in relation to revenue generation.

For a prospective Benihana franchisee, understanding these direct operating expenses is crucial for financial planning and management. Franchisees should anticipate these variable costs and factor them into their budget projections. Monitoring these expenses closely can help franchisees identify opportunities to optimize spending and improve profitability. For example, negotiating better rates with suppliers or implementing strategies to reduce waste can positively impact the bottom line.