What potential impact could outbreaks of viruses or diseases have on Benihana's business?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
ons and other segments of the industry may harm our ability to maintain acceptable levels of revenue growth, limit our development of new restaurants or concepts, or force us to close one or more of our restaurants or F&B hospitality services operations.
We may also need to evolve our concepts to compete with popular new restaurant or F&B hospitality services operation formats, concepts or trends that emerge from time to time, and we cannot provide any assurance that any changes we make to any of our concepts in response will be successful or not adversely affect our profitability.
Health and Safety
Health concerns arising from outbreaks of flu viruses or other diseases, or regional or global health pandemics could severely affect our business.
The United States and other countries have experienced, or may experience in the future, outbreaks of viruses, such as coronavirus, norovirus, Avian Flu or "SARS," H1N1 or "swine flu," or other diseases such as bovine spongiform encephalopathy, commonly known as "mad cow disease." If a virus is transmitted by human contact, our employees or customers may become infected, or may choose, or be advised, to avoid gathering in public places, any of which may adversely affect the guest traffic at our restaurants and the ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. We also may be adversely affected if jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures or impose restrictions on operations. Even if such measures are not implemented and a virus or other disease does not spread significantly, the perceived risk of infection or significant health risk may adversely affect our business.
To the extent that a virus or disease is food-borne, or perceived to be food-borne, future outbreaks may adversely affect the price and availability of certain food products and cause our customers to eat less of such products. For example, health concerns relating to the consumption of beef or to specific events such as the outbreak of "mad cow disease" may adversely impact sales of our beef-related menu items. In addition, public concern over "avian flu" may cause fear about the consumption of chicken, eggs and other products derived from poultry. The inability to serve beef or poultry-based products would restrict our ability to provide a variety of menu items to our customers. If we change our menu in response to such concerns, we may lose customers who do not prefer the new menu, and we may not be able to sufficiently attract new customers to produce the revenue needed to restore the profitability of our restaurant operations. We also may generate different or additional competitors for our intended customers as a result of such a menu change and may not be able to successfully compete against such competitors.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the franchise acknowledges that health concerns stemming from outbreaks of viruses, diseases, or global health pandemics could significantly harm their business. These potential outbreaks include viruses like coronavirus, norovirus, Avian Flu or "SARS," and H1N1 or "swine flu," as well as diseases like bovine spongiform encephalopathy, or "mad cow disease." If these viruses are transmitted through human contact, Benihana's employees or customers could become infected, or they might choose to avoid public gatherings, which could reduce guest traffic and make it difficult to adequately staff restaurants or receive timely deliveries.
Additionally, Benihana could be negatively affected if governmental jurisdictions impose mandatory closures, request voluntary closures, or place restrictions on operations. Even if such measures aren't implemented, the perceived risk of infection or significant health risk could still adversely affect the business. If a virus or disease is food-borne or perceived as such, it could negatively impact the price and availability of certain food products, causing customers to consume less of those products. For instance, health concerns related to beef consumption or specific events like the outbreak of "mad cow disease" could decrease sales of beef-related menu items. Similarly, public concern over "avian flu" could create fear about consuming chicken, eggs, and other poultry-derived products.
If Benihana is unable to serve beef or poultry-based products, it would limit their ability to offer a diverse menu. If the restaurant changes its menu in response to these concerns, it risks losing customers who dislike the new menu and may struggle to attract enough new customers to restore profitability. Such menu changes could also lead to new competitors emerging, making it harder for Benihana to compete effectively. Benihana incurred COVID-19 related costs of $2.5 million and $5.8 million in 2022 and 2021, respectively. The document states that while operational changes have been made to adhere to government requirements on safety and sanitation, there is no guarantee that these changes will be effective in keeping employees and customers safe.