What is the duration of the Benihana franchise term, assuming it is not terminated early?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
ation"), using the Marks and the BENIHANA System solely in accordance with the BENIHANA Standards and the particular terms of this Agreement.
- 1.3 Unless sooner terminated in accordance with the provisions of this Agreement, this Agreement and the franchise and license granted hereunder shall be for a period ending fifteen (15) years from the date the Restaurant opens for business to the public (the "Franchise Term"). Franchisee agrees to operate the Restaurant in accordance with this Agreement at the Location for the entire Franchise Term.
- 1.3.1 Notwithstanding anything in Section 1.3 above, after the first five years of the Franchise Term, BNC will have the opti
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the franchise agreement lasts for fifteen years. Specifically, the agreement extends for a period ending fifteen years from the date the restaurant opens for business to the public. Benihana requires the franchisee to operate the restaurant at the specified location for the entire duration of this franchise term.
However, there is a condition that could lead to early termination. Benihana retains the option to terminate the franchise agreement after the first five years if the restaurant's average monthly sales fall below $400,000 for any six-month period. This clause introduces a performance-based risk for the franchisee, where failure to meet a certain sales threshold could result in the termination of the agreement, even before the full fifteen-year term has elapsed.
This type of agreement, with a defined term and performance-based termination clauses, is fairly standard in the franchise industry. It balances the franchisee's need for a long-term business operation with the franchisor's interest in maintaining brand standards and profitability across all locations. Prospective Benihana franchisees should carefully consider the sales targets and market conditions to assess their ability to meet the required performance levels and avoid early termination of their franchise agreement.