What actions must a Benihana franchisee take regarding the Benihana System upon termination or expiration of the franchise agreement?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
- or more acts of default under this Agreement within any consecutive twelve (12) month period, even if Franchisee cures any of the three acts of default. There is no cure period under this provision, so that if two prior defaults occur within a twelve (12) month period, this Agreement will terminate immediately upon the occurrence of a third act of default and a notice of default and termination delivered by BNC to Franchisee.
- 13.2.26 Franchisee, or any individual with an Ownership Interest in Franchisee, is convicted in a court of competent jurisdiction of: (i) an offense punishable by a term of imprisonment in excess of one (1) year; or (ii) any offense for which a material element is fraud, dishonesty, or moral turpitude. There is no cure period for an act of default under this provision.
ARTICLE 14. OBLIGATIONS UPON TERMINATION OR EXPIRATION
- 14.1 Upon termination or expiration of this Agreement for any reason, all rights granted to Franchisee under this Agreement will immediately terminate, and Franchisee must strictly comply with the following obligations:
- 14.1.1 Franchisee must immediately cease operating the Restaurant or using the fixtures, displays, decorations, stationery, forms, advertising materials, and other articles used in connection with the Restaurant.
- 14.1.2 Franchisee must immediately and permanently cease using in any manner whatsoever: (i) any Confidential Information; (ii) the BENIHANA System, and any of BNC's methods, procedures, and techniques associated with the BENIHANA System; and (iii) the BENIHANA trade dress and distinctive forms, slogans, signs, symbols and devices associated with the BENIHANA System.
- 14.1.3 Franchisee must, within five (5) days of expiration or termination, deliver to BNC all manuals, including the Manual, and all other records, correspondence, and instructions containing Confidential Information, or other information relating to the operation of the Restaurant, all of which are acknowledged to be BNC's property, and Franchisee will not keep any copy or record of any of the foregoing, with the exception of Franchisee's copy of this
Agreement, any correspondence between the parties, and any other documents Franchisee reasonably needs for compliance with any provision of law.
- 14.1.4 Franchisee must immediately and permanently cease using in any manner the Marks, or any confusingly similar trademark, service mark, trade name, or insignia.
- 14.1.5 Franchisee must not directly or indirectly identify itself in any manner as a franchisee, or former franchisee, of BNC or as an authorized user of the BENIHANA System or the Marks.
- 14.1.6 Franchisee must furnish BNC with evidence satisfactory to BNC of Franchisee's compliance with Franchisee's obligations under Sections 14.1.3, 14.1.4, and 14.1.5 within seven (7) days after termination or expiration of this Agreement.
- 14.1.7 Franchisee must immediately make or cause to be made modifications and alterations to the Restaurant to distinguish the appearance of the Restaurant from that of other BENIHANA Restaurants, including all specific changes BNC may request for that purpose. Franchisee must furnish BNC with evidence satisfactory to BNC of Franchisee's compliance with this obligation within seven (7) days after termination or expiration of this Agreement.
- 14.1.7.1 If Franchisee fails to comply with the requirements of this Section 14.1.7, in addition to any other rights BNC has under this Agreement, BNC has the right to enter upon the premises where the Restaurant was operated, without being guilty of trespass or any other tort, for the purpose of making or causing to be made, at Franchisee's expense, the changes required by this Agreement.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Article 14 outlines the obligations of a franchisee upon termination or expiration of the franchise agreement. Benihana franchisees must cease operating the restaurant and discontinue using any fixtures, displays, decorations, stationery, forms, and advertising materials associated with the restaurant. Franchisees must also immediately stop using any confidential information, the Benihana System, and the trade dress associated with the Benihana System. Within five days of termination or expiration, franchisees must deliver all manuals and records containing confidential information to Benihana, retaining only their copy of the franchise agreement, correspondence, and documents needed for legal compliance.
Furthermore, franchisees must immediately and permanently cease using the Benihana marks and must not identify themselves as a current or former Benihana franchisee. Within seven days of termination or expiration, franchisees must provide Benihana with evidence of their compliance with these obligations. Franchisees are required to modify the restaurant to differentiate its appearance from other Benihana restaurants, providing evidence of these changes to Benihana within seven days. If a franchisee fails to make these required changes, Benihana has the right to enter the premises and make the changes at the franchisee's expense.
In addition, franchisees must promptly pay all sums owed to Benihana and its subsidiaries or affiliates and take necessary actions to cancel any assumed names containing Benihana marks. At Benihana's option, franchisees must assign their interest in the restaurant lease and telephone numbers to Benihana or its designee. These stringent requirements ensure that upon termination or expiration, the franchisee completely disassociates from the Benihana brand and system, protecting Benihana's brand integrity and confidential information.