In addition to the Termination Fee, what other costs and expenses is a defaulting Benihana franchisee responsible for?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
s an association or connection with BNC constituting unfair competition.
- (i) Franchisee shall promptly pay all sums owing to BNC and its subsidiaries and affiliates.
- (j) If this Agreement is terminated as a result of any default under this Agreement, Franchisee shall promptly pay to BNC the Termination Fee (as defined in this Section) in addition to all damages, costs and expenses, including reasonable attorneys' fees, incurred by BNC as a result of the default, which obligation shall give rise to and remain, until paid in full, a lien in favor of BNC against any and all of the personal property, furnishings, equipment, signs, fixtures and inventory related to the operation of the Restaurant. The "Termination Fee" shall be equal to the aggregate Royalties paid during Franchisee's three (3) fiscal years immediately before the termination date. If Franchisee has not operated the Restaurant for three (3) fiscal years immediately before the termination date, the Termination Fee shall be equal to the Royalties paid for all full fiscal years completed prior to the termination date divided by the number of such full fiscal years and the result thereof multiplied by three (3).
- (k) Franchisee shall pay to BNC all damages, costs, and expenses, including reasonable attorneys' fees, incurred by BNC after termination or expiration of this Agreement in obtaining injunctive or other relief for the enforcement of any provisions of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a franchisee who defaults on their agreement is responsible for several costs beyond the Termination Fee. Specifically, the franchisee must cover all damages, costs, and expenses, including reasonable attorneys' fees, incurred by Benihana due to the default. This obligation creates a lien in favor of Benihana against the personal property, furnishings, equipment, signs, fixtures, and inventory related to the restaurant's operation until all amounts are paid in full.
Furthermore, if Benihana has to take legal action to enforce any part of the franchise agreement after termination or expiration, the franchisee is responsible for all resulting damages, costs, and expenses, including reasonable attorneys' fees. The franchisee is also obligated to make specific modifications and alterations to the Location and the Restaurant to distinguish the appearance of the Location and Restaurant from other Benihana Restaurants. If the franchisee fails to do so, Benihana has the right to enter the premises and make the changes at the franchisee's expense.
These financial responsibilities underscore the importance of adhering to the franchise agreement and highlight the potential financial risks associated with defaulting on the agreement. Prospective franchisees should carefully consider these potential costs and ensure they have sufficient capital and resources to meet their obligations under the franchise agreement. Understanding these terms is crucial for any potential Benihana franchisee to avoid significant financial liabilities in the event of a default.