Besides reimbursement for inspection costs, what other remedies does Benihana retain if an understatement is discovered?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
- 8.5.2 If an inspection, review, or audit discloses an understatement in any report of 3% or more, Franchisee must also pay, and BNC independently may debit from Franchisee's bank account, an amount to reimburse BNC for all costs and expenses incurred by BNC in connection with the inspection, review, or audit, including, without limitation, travel, lodging, wages, and reasonable accounting and legal costs.
- 8.5.3 The foregoing remedies are in addition to any other remedies BNC may have under this Agreement.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, if an inspection, review, or audit reveals an understatement of 3% or more in any report, Benihana has the right to debit the franchisee's bank account for the payments due, in addition to requiring the franchisee to pay the amount owed. Interest will accrue on the underpaid amount from the date it was originally due until it is paid, at a rate of 18% per annum, or the maximum rate permitted by law, whichever is less.
This means that Benihana franchisees must ensure the accuracy of their financial reporting. Underreporting by 3% or more can trigger not only an immediate debit of the underpaid amount plus interest, but also reimbursement of Benihana's inspection costs. The interest rate of 18% per annum could substantially increase the amount owed.
Benihana also retains other remedies beyond the specific actions related to underreporting. These remedies are in addition to those specified in the agreement, providing Benihana with broad latitude in addressing such issues.