Is Benihana allowed to purchase, acquire, merge, or affiliate with other businesses, including competing franchise systems, even if they operate in the Benihana restaurant's area?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
- 1.7 Nothing in this Agreement is intended to or shall limit in any way any rights of BNC or its affiliates to: (i) own and operate, or license others the right to own and operate, competing restaurants other than a BENIHANA Restaurant at any location, regardless of the proximity to the Restaurant, including but not limited to restaurants using the trademark RA® Sushi; (ii) own and operate, or license others the right to own and operate, BENIHANA Restaurants, including another business similar to the Restaurant outside the Restaurant Area, even if such BENIHANA Restaurants compete with the Restaurant or draw customers from the Restaurant Area; (iii) engage, directly or indirectly, at wholesale, retail or otherwise, in the production, distribution, license and/or sale of any product or service under the Marks, or other marks, anywhere, regardless of the proximity to, or the competitive impact on, the Restaurant, through alternative channels of distribution (by way of example only, grocery stores, conveniences stores, internet sales, catalog sales, telemarketing or other direct marketing); (iv) license others to use the BENIHANA System and the Marks for the operation of BENIHANA Restaurants within Special Distribution Opportunities (as defined below); (v) advertise and promote the BENIHANA System within the Restaurant Area; and (vi) purchase, acquire, be acquired by, merge or affiliate with or engage in any transaction with other businesses (whether or not these businesses are competitive with the Restaurant), including competing franchise systems with units operating in the Restaurant Area, and to convert and operate, or license others the right to operate these units under the Marks and the BENIHANA System.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana has broad rights to engage with other businesses, even those that compete with its franchisees. Specifically, Benihana can purchase, acquire, merge, or affiliate with other businesses, including competing franchise systems, regardless of whether these businesses operate in the Benihana restaurant's area.
This clause emphasizes the non-exclusive nature of the franchise agreement, clarifying that the geographic limitations only apply to the operation of another Benihana restaurant at the franchisee's specific location. Benihana retains the right to operate or license others to operate competing restaurants (excluding other Benihana restaurants) at any location, irrespective of proximity to the franchisee's restaurant. This includes restaurants using trademarks like RA® Sushi.
For a prospective franchisee, this means that Benihana could potentially own or partner with businesses that directly compete with their franchise, even within the same area. While the franchisee is granted a specific territory, Benihana's ability to diversify and engage with other ventures could impact the franchisee's market share and profitability. It is important for potential franchisees to consider this non-exclusivity and competitive potential when evaluating the Benihana franchise opportunity.