The chain believes it has room for 400 restaurants in the U.S.

Benihana CEO Thomas Baldwin likes to use the word “iconic” when describing his restaurant chain.

The company was founded 60 years ago by Japanese-born Rocky Aoki and now has 104 restaurants and nearly 90 percent brand recognition from Americans. It also operates Japanese concepts RA Sushi and Samurai.

There are no national competitors, Baldwin said. There are some regional competitors here and there, but nobody equivalent to Benihana, a group and leadership team that “define the category and own the category,” he explained. The awareness goes back decades. Baldwin pointed out Benihana was once featured on the popular sitcom “Friends,” and was used in an eight-minute segment on “Jimmy Kimmel Live” where Kimmel and his partner, Guillermo, served as chefs in a Southern California-based restaurant. All of this was unsolicited media attention.

“Benihana defines experiential dining,” Baldwin said earlier this month at the ICR Conference. “We are teppanyaki. We’re sushi, we own Japanese, we own teppanyaki, we own experiential.”

The future of the brand is uncertain. In July 2023, Reuters reported that private equity firm Angelo Gordon & Co. was considering a sale of the restaurants. The company purchased Benihana for $296 million in 2012. At the time, it valued the restaurant at roughly $600 million, including debt. Multiple sources told Reuters Piper Sandler Companies is working with the company on a sales process. However, finalization of a deal isn’t guaranteed. 

Benihana earned $516 million in revenue and $67 million in EBITDA during the last 12 months ending Q3. Also, same-store sales were up 30 percent versus pre-COVID. The chain, which centers around chefs serving food in front of customers, is mostly a celebratory occasion, with guests coming 2.2 times per year. AUV is about $6.5 million, and restaurant-level margin 20 percent. Some higher-performing locations include Miami, $11.3 million; San Diego, $11.1 million; Burlingame, California, $11.1 million; Orlando, $11.1 million; Las Vegas, $10 million; New York City, $8.9 million; Dallas, $8.5 million; and Farmington Mills, Michigan, $7.4 million.

The company is spread across 24 states, with a strong concentration in California, Texas, and Florida. Those are growth areas for Benihana, as well as Arizona, Nevada, and the upper Midwest. There’s opportunity to grow along the 1-95 corridor in hot spots like Boston and the Mid-Atlantic that have densely populated areas and favorable economic indicators. In partnership with consumer intelligence agency Buxton, Benihana found that it has a total addressable market of 400 restaurants in the U.S.

The brand will begin with a cluster model and branch out from there.

“It’s quite logical—marketing synergies, distribution synergies, management, synergies, people that recognize our brand and frequent a brand,” Baldwin says. “That’s the way we think. That’s the way we operate.”

In the past 10 years, Benihana has opened 10 restaurants; these latest units earn $7 million in AUV and bring 32 percent cash-on-cash returns. Going forward, the company expects to pick up the pace. There are currently 12 restaurants in the development pipeline, and the chain plans to grow at a pace of four to 10 stores annually in the coming years. As for existing locations, Benihana has spent $12 million on 11 major remodels in the past six years. Additionally, the company added 42 teppanyaki tables across the system, which brought forth $10 million in sustainable, incremental revenue. The cash-on-cash return on those tables is more than 50 percent.

In total, roughly $130 million of capital has been used in the past eight years, including remodels and maintenance, strategic capacity expansions, and new restaurant builds. These expenditures were funded by free cash flow. The restaurant base maintains a portfolio of long-term leases with limited near-term maturities; the average remaining effective lease for a Benihana and RA Sushi store is about 15 years.

In addition to freestanding outposts, urban locales, and prominent strip malls, Benihana has a healthy stadium footprint. The chain deploys a fast-casual model inside Yankee Stadium, Hard Rock Stadium in Miami, the Footprint Center in Phoenix, and Dignity Health Sports Park in Los Angeles.

“So they’re all profitable,” Baldwin says. “And yet 9 million fans in those arenas see our brand. We opened in Hard Rock Stadium several years ago. We did so well that they actually asked us to take a second location on another level. So we love the brand, and it’s really in sync with who our fans are and their fans are.”

Benihana has two dayparts—77 percent dinner and 23 percent lunch. Eighty-nine percent of sales are dine-in, and 11 percent are off-premises. Food mixes 87 percent and drinks account for 13 percent of sales. For RA Sushi, dinner, dine-in, and food mix 80 percent. On a dollar basis, off-premises represents $50 million in sales. It was $3 million to $4 million when Baldwin joined the company in 2016.

Sixty-two percent of customers are millennials, followed by 18 percent baby boomers, 12 percent Gen X, and 8 percent Gen Z. In terms of household incomes, 25 percent of guests are between $100,000 and $150,000. The next ranges are fewer than $50,000, 24 percent; more than $150,000, 19 percent; $50,000 to $75,000, 16 percent; and $75,000 to $100,000, 15 percent.

“We’re proud of what the team has done,” Baldwin said. “We’re proud of the brand, and I’ve been given a gift to be the chief executive of this brand. And we make decisions not only for the next three hours or the next three days and the next three months, but really the next three decades. I have to respect the next few buyers of this company and the next few builders of this company and my successors in the future. That’s who we are. It’s all about our culture of respect for each other and our brand.”

Chain Restaurants, Feature, Growth, Benihana