What business processes were primarily impacted by the deficiencies in the aggregate that constitute a material weakness for Benihana?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
ignment.
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- Each party acknowledges that it has read and fully understands the terms of this Assignment and it voluntarily accepts those terms after having a reasonable opportunity to retain and confer with legal counsel. This Assignment is entered into after a full investigation by the parties, and the parties are not relying upon any statements or representations not contained in this Assignment.
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- The persons executing this Assignment on behalf of Assignee acknowledge their authority to do so.
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- The obligations of Assignor and Assignee under this Assignment are joint and several.
I HAVE READ THE ABOVE AGREEMENT AND UNDERSTAND ITS TERMS. I WOULD NOT SIGN THIS AGREEMENT IF I DID NOT UNDERSTAND AND AGREE TO BE BOUND BY ITS TERMS.
IN WITNESS WHEREOF, the undersigned have affixed their signatures hereto as of the day and date first above written.
| ● The following deficiencies in the aggregate constitute a material weakness: | |
| ● The Company’s redesign of certain controls throughout 2021 did not contemplate all the | |
| relevant design elements of control activities necessary to address the risks of material | |
| misstatement, as well as the completeness and accuracy over the information used in those | |
| controls. Additionally, certain controls were not executed as designed or were performed | |
| without sufficiently documented supporting evidence. The business processes impacted | |
| primarily consisted of payroll, accounts payable and property and equipment. |
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a material weakness was identified due to deficiencies in the company's controls. These deficiencies primarily impacted payroll, accounts payable, and property and equipment business processes. The redesign of certain controls throughout 2021 did not fully address the risks of material misstatement, affecting the completeness and accuracy of information used in these controls. Additionally, some controls were not executed as designed or lacked sufficient documented support.
Furthermore, Benihana did not design and maintain effective controls over user access to certain information systems. This lack of control could compromise the accuracy and completeness of data and financial reports generated by these systems. The FDD indicates that the company's business process controls, which rely on the integrity of data from these IT systems, could be adversely affected.
For a prospective franchisee, this means there is a risk that financial reporting and internal controls related to payroll, accounts payable, and asset management may not be entirely reliable. It is important for potential franchisees to understand the measures Benihana is taking to remediate these weaknesses and to ensure the accuracy and reliability of financial data used for decision-making. This also highlights the importance of adhering to and monitoring internal controls to safeguard against potential errors or misstatements in these critical business processes.