What were the COVID-19 related expenses for Benihana for the year ended December 31, 2021?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
under dispute with landlords.
Agreement restructuring. Agreement restructuring expense for both 2021 and 2020 was $0.5 million, related to the restructuring of agreements with our management and license partners. We do not expect to incur additional agreement restructuring expenses going forward.
COVID-19 related expenses. COVID-19 related expenses were $5.8 million and $5.5 million for 2021 and 2020, respectively, composed primarily of sanitation, supplies and safety precautions taken to prevent the spread of COVID-19.
Pre-opening expenses. Pre-opening expenses for 2021 were $1.0 million, related to the STK Bellevue restaurant which opened in July 2021 and non-cash pre-open rent for STK Dallas and STK San Francisco which are currently under construction. Pre-opening expenses for 2020 were $0.2 million.
Interest expense, net of interest income. Interest expense, net of interest income was approximately $3.8 million and $5.3 million for 2021 and 2020, respectively.
Loss on early debt extinguishment. During August 2021, we entered into the Third Amendment to the credit and guaranty agreement with Goldman Sachs Bank USA ("Credit Agreement") and made a $22.2 million pre-payment on the term loan. We recognized a loss on early debt extinguishment of $0.6 million for the year ended December 31, 2021.
Provision (benefit) for income taxes. The provision for income taxes for 2021 was $1.6 million compared to a benefit for income taxes of $5.4 million for 2020.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, COVID-19 related expenses for the year ended December 31, 2021, were $5.8 million. These expenses primarily covered sanitation, supplies, and safety precautions implemented to prevent the spread of COVID-19. This figure indicates the financial impact of the pandemic on Benihana's operations during that period.
For a prospective franchisee, understanding these costs is crucial as it provides insight into the potential ongoing expenses related to health and safety measures, especially if similar health crises were to occur in the future. While the worst of the pandemic may be over, being aware of the costs associated with maintaining a safe environment for both customers and staff can aid in financial planning and risk assessment.
Furthermore, the FDD reveals that COVID-19 related expenses decreased to 2.1% of total costs and expenses in 2021, compared to 0.8% in 2022, and the actual expenses decreased from $5,821 in 2021 to $2,534 in 2022 (in thousands). This trend suggests that Benihana adapted its operations and potentially reduced these specific costs as the pandemic situation evolved. Franchisees should inquire about current health and safety protocols and associated costs to better understand the ongoing financial implications.