What are the conditions that must be met for a Benihana franchisee to enter into a Successor Franchise Agreement?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
- 17.2 Franchisee shall have an option to acquire a new franchise agreement ("Successor Franchise Agreement") with respect to the Location for an additional period equal to the standard period of time offered to BNC franchisees at the time of the expiration of the Franchise Term.
Franchisee's right to enter a Successor Franchise Agreement shall exist if, and only if, each of the following terms and conditions has been met to the reasonable satisfaction of BNC:
(a) Franchisee, at the expiration of the Franchise Term and within the twenty-four (24) months prior thereto, shall not be or have been in default in the performance of any obligation under this Agreement whether or not any notice of default was provided to Franchisee;
(b) Franchisee shall have re-modeled or contracted to re-model the Restaurant, including building, signs, equipment, furnishings and décor, to an extent approved by BNC to reflect the then-current image of BENIHANA Restaurants;
(c) Franchisee shall have submitted a written application to BNC for a Successor Franchise Agreement at least three hundred and sixty-five (365) days prior to the expiration of the Franchise Term and shall have executed and returned to BNC for final approval and execution a Successor Franchise Agreement at least thirty (30) days prior to the expiration of the Franchise Term.
Any Successor Franchise Agreement issued to Franchisee shall be the then-current form of Franchise Agreement being offered to franchisees as of the date of the expiration of the Franchise Term.
The Successor Franchise Agreement may contain provisions, terms and conditions substantially different from those contained herein, including without limitation, different or increased Royalties, Advertising Contributions, operating standards, training or equipment requirements, duration or renewal terms;
(d) Franchisee meets all of BNC's then-existing legal, financial and operational standards applicable to new franchisees contained in the then-current form of franchise agreement and the thencurrent operating standards in effect for the BENIHANA System;
(e) Franchisee shall have submitted to BNC all information and documentation as reasonably requested by BNC as a prerequisite for the issuance of a franchise agreement as of the date of the expiration of the Franchise Term;
(f) Franchisee shall have tendered to BNC, in lieu of the Franchisee Fee specified in the Successor Franchisee Agreement, an administrative fee equal to twenty percent (20%) of the Franchise Fee in existence on the date of the expiration of the Franchise Term;
(g) Franchisee shall execute a general release, in the form BNC requires, of any and all claims in existence against BNC and its affiliates, successors and assigns, and their respective officers, directors,
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a franchisee has the option to acquire a Successor Franchise Agreement for their location, allowing them to continue operating under the Benihana brand for an additional term. However, this option is contingent upon meeting several conditions to Benihana's satisfaction.
First, the franchisee must not be in default of any obligations under the existing Franchise Agreement within the 24 months leading up to its expiration. The franchisee must remodel or contract to remodel the restaurant to reflect the current Benihana image, including the building, signs, equipment, furnishings, and décor. The franchisee must submit a written application for a Successor Franchise Agreement at least 365 days before the current term expires and return the executed agreement for approval at least 30 days prior to expiration.
Additionally, the franchisee must meet all of Benihana's then-existing legal, financial, and operational standards applicable to new franchisees. They must also provide all information and documentation reasonably requested by Benihana. Instead of the standard Franchise Fee, the franchisee must pay an administrative fee equal to 20% of the Franchise Fee in effect at the time of expiration. Finally, the franchisee must execute a general release of any claims against Benihana and its affiliates.
It's important to note that the Successor Franchise Agreement may have different terms and conditions than the original, including potentially higher royalties, advertising contributions, and different operating standards. Meeting these conditions does not guarantee renewal, as Benihana retains the right to assess the franchisee's compliance and the suitability of the location for continued operation.