What constitutes a failure to perform a material term for Benihana franchisees regarding payments to suppliers?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
t use any menus, publicity, signs, decorations, furnishings, equipment, or other material using or displaying the Marks without BNC's prior written approval.
- 3.10 Franchisee must use or offer for sale at the Restaurant only those food and paper products, services, supplies, and packaging that BNC designates or approves in writing. All such products and services, including the method and manner of sale, distribution, and delivery of such products, must meet the BENIHANA Standards. Franchisee must maintain at all times a sufficient supply of approved products to meet the demand of Franchisee's customers at the Restaurant.
- 3.10.1 Franchisee must discontinue offering for sale any product, or using any supplies, paper products, or packaging, that BNC at any time and in its sole discretion, no longer approves for sale or use at the Restaurant.
- 3.11 Franchisee must, unless BNC specifically agrees otherwise in writing, acquire all products, supplies, equipment, and materials used for operating the Restaurant from suppliers designated or approved by BNC in writing. Franchisee acknowledges that BNC may designate itself as a supplier of any item.
- 3.11.1 If Franchisee wishes to purchase items from a supplier not previously approved by BNC, Franchisee must first submit to BNC a written request for approval of the
proposed supplier. The request must: (a) provide the name and address of the supplier; (b) provide all other information BNC may request (which may include reasonable financial, operational, and economic information regarding the supplier's business); and (c) identify the authorized products Franchisee wishes to purchase from such supplier.
- 3.11.2 In considering the request for approval, BNC may require that the supplier: (a) allow BNC to inspect the facility at which the supplier would produce or manufacture the product at issue; and (b) provide product samples to BNC or to a designated independent testing laboratory for testing prior to approval and use. Franchisee or the supplier will pay all costs of any product testing.
- 3.12 BNC's standards, specifications, and other criteria for supplier approval are subject to change at any time in BC's discretion and are part of the BENIHANA Confidential Information. BNC does not, under its standard operating procedures, disclose such standards, specifications or other criteria to franchisees, proposed suppliers, or approved suppliers except as is necessary under the circumstances.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a franchisee's failure to acquire products, supplies, equipment, and materials from designated or approved suppliers constitutes a failure to perform a material term of the franchise agreement. Benihana franchisees are obligated to purchase all products, supplies, equipment, and materials used for operating the Restaurant from suppliers designated or approved by Benihana in writing, unless Benihana specifically agrees otherwise in writing. Benihana may also designate itself as a supplier of any item.
If a Benihana franchisee wishes to purchase items from a supplier not previously approved by Benihana, the franchisee must submit a written request for approval. Benihana may require the supplier to allow inspection of their production facility and provide product samples for testing, with the franchisee or supplier bearing the costs of such testing. Benihana's standards for supplier approval are subject to change and are considered confidential information, not typically disclosed to franchisees or suppliers.
Benihana retains the right to derive revenue from franchisee purchases from designated or approved suppliers, including payments or other financial concessions. Benihana also has the right to designate geographical areas for purchasing programs, in which franchisees must participate if their restaurant falls within the designated area. Furthermore, Benihana can revoke approval of any supplier or product at any time with written notice, and the franchisee must immediately discontinue ordering from the disapproved supplier or selling the disapproved product.