Can BNC independently debit payments due from a Benihana franchisee's bank account?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
s Agreement, "Gross Sales" means all revenue from the sale of products and services and all other income of every kind and nature related to the Restaurant, whether for cash, trade or barter, by redemption of gift certificates or cards, credit transactions, or otherwise,
regardless of collection, including, without limitation, all revenues derived from catering services, guest parking charges, receipts from mail or telephone orders received at or filled from the Restaurant, deposits not refunded to purchasers, orders taken at the Restaurant that may be filled elsewhere, and payments to Franchisee by any concessionaire, franchisee, or person otherwise in the Restaurant with BNC's approval. "Gross Sales" does not include sales taxes collected by Franchisee from customers for payment to the appropriate taxing authority.
- 7.8 If Franchisee fails to send to BNC a Gross Sales Statement in any month, BNC will, to the extent permitted by applicable law, be entitled to debit Franchisee's business operating account for one hundred twenty percent (120%) of the most recent Royalty and Advertising Contributions paid under this Agreement. If the Royalty and Advertising Contributions debited are less than the Royalty and Advertising Contributions actually owed to BNC (once Franchisee's actual Gross Sales have been determined), Franchisee must pay, and BNC is authorized to debit Franchisee's account for, the balance due. If the Royalty and Advertising Contributions debited are more than the Royalty and Advertising Contributions actually owed to BNC (once Franchisee's actual Gross Sales have been determined), BNC will credit the excess amount debited against the amount BNC otherwise would debit from Franchisee's account during the following month.
- 7.9 Any payment not received by BNC when due under this Agreement will bear interest from the due date until payment at a rate of interest (calculated on a daily basis based upon a 365-day year) equal to the lesser of 18% per annum or the maximum allowed by law (as of the date of non-payment).
ARTICLE 8. BOOKS, RECORDS, AND REPORTS
- 8.1 Franchisee must, on the fifteenth (15th) day of each month (or the next business day if the fifteenth day is Saturday, Sunday, or holiday), deliver to BNC a written statement of Gross Sales for the preceding calendar month ("Gross Sales Statement").
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana has the right to debit payments directly from a franchisee's bank account under certain circumstances. Specifically, if a franchisee fails to send a Gross Sales Statement in any month, Benihana can debit the franchisee's business operating account for 120% of the most recent Royalty and Advertising Contributions paid under the agreement. If the debited amount is less than what is actually owed, Benihana is authorized to debit the account for the balance due. Conversely, if the debited amount exceeds what is owed, Benihana will credit the excess amount against the following month's debit.
Additionally, if any report submitted to Benihana shows payments due, Benihana has the independent right to immediately debit the franchisee's bank account for the payments due, along with interest calculated at 18% per annum or the maximum rate permitted by law, whichever is less, from the date the amount was due until it is debited or paid. Furthermore, if an inspection, review, or audit reveals an understatement of 3% or more in any report, the franchisee must pay, and Benihana may independently debit from the franchisee's bank account, an amount to cover all costs and expenses incurred by Benihana in connection with the inspection, review, or audit.
To facilitate these transactions, the franchisee must sign and deliver an authorization to Benihana, allowing them to automatically debit the franchisee's business operating account for Royalties, Advertising Contributions, and any other amounts due under the agreement. The franchisee must ensure that adequate funds are available for withdrawal by electronic transfer on each due date. This level of control over a franchisee's finances is common in franchising, as it ensures timely payments and accurate reporting, which are crucial for maintaining the brand's financial health and consistency.