What is the estimated minimum total initial investment for a Benihana franchise?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
NVESTMENT (FULL-SIZE RESTAURANT MODEL)**
| TYPE OF EXPENDITURE | AMOUNT | METHOD OF PAYMENT | WHEN DUE | TO WHOM PAYMENT IS TO BE MADE | |
|---|---|---|---|---|---|
| Initial Franchise Fee | $40,000 | Lump Sum | At signing of franchise agreement | Us | |
| Travel and Living Expenses while Training | $25,000 to $100,000 | As incurred | During Training | Airlines, hotels, and restaurants | |
| Real Estate Improvements (Excluding Purchase Real Estate) | $2,500,000 to $4,500,000 (Note 1) | (Note 1) | (Note 1) | (Note 1) | |
| Equipment, Furniture & Fixtures | $500,000 to $700,000 (Note 2) | Lump Sum | Prior to Opening | Vendors | |
| Opening Inventory | $40,000 to $60,000 (Note 3) | Lump Sum | Prior to Opening | Vendors | |
| Liquor License | $200 to $300,000 (Note 4) | Lump Sum | Prior to Opening | State Liquor Authority and/or owner of License | |
| Insurance | $50,000 (Note 5) | Lump Sum | Prior to Opening | Insurance carrier | |
| Additional Funds | $250,000 to $500,000 (Note 6) | As Incurred | As Incurred | Employees, utilities, suppliers | |
| TOTAL MINIMUM | $3,405,200 to $6,250,000 (Note 7) | # NOTES: |
(1) Real Estate and Real Estate Improvements: You must lease or purchase land and a building for the operation of the Restaurant. The typical BENIHANA Restaurant is composed of a building having an area of approximately 6,000-8,000 square feet situated on approximately 1−1/2 acres of land, located in a restaurant row or commercial area with
residential areas in close proximity. A BENIHANA Restaurant may be either a stand-alone unit, part of a commercial retail center, or located in an office building, hotel, or other commercial facility. The estimate of $2,500,000 to $4,500,000 is for the design and construction of a typical freestanding restaurant building and improvements. The cost of purchasing real estate is not included in the Real Estate Improvements estimate and varies significantly from location to location, It is estimated that the land purchased for a typical restaurant building will cost from $1,400,000 to $2,000,000.
If the entire improved premises can be leased, you may not have to incur some portion of the initial costs for real estate improvements. Rent will vary significantly from location to location. Many landlords require payment of the greater of a fixed base rent and a percentage rent based upon gross sales. Percentage rent normally ranges between 5% and 8% of gross sales.
Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 21–28)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the estimated minimum total initial investment varies depending on the restaurant model. For a full-size Benihana restaurant, the total minimum investment ranges from $3,405,200 to $6,250,000. This includes expenses such as the initial franchise fee ($40,000), travel and living expenses while training ($25,000 to $100,000), real estate improvements ($2,500,000 to $4,500,000), equipment, furniture and fixtures ($500,000 to $700,000), opening inventory ($40,000 to $60,000), liquor license ($200 to $300,000), insurance ($50,000), and additional funds ($250,000 to $500,000).
For a Concession Model Benihana restaurant, the total minimum investment ranges from $616,000 to $1,090,000. This includes the initial franchise fee of $40,000, travel and living expenses during training ranging from $25,000 to $50,000, real estate and improvements (leased) ranging from $176,000 to $415,000, equipment, furniture & fixtures ranging from $185,000 to $295,000, opening inventory of $40,000, $0 for a liquor license, insurance of $50,000, and additional funds ranging from $100,000 to $200,000.
Prospective franchisees should note that these are estimates, and the actual costs may vary based on factors such as location, the scope of leasehold improvements, and other variable expenses. Benihana does not offer direct or indirect financing for the initial investment, so franchisees must have sufficient capital or access to credit. It is advisable to review these figures with a business advisor and develop a detailed business plan before making a decision.
The FDD also indicates that the cost estimates for the Concession Model are based on limited information, as construction has only begun on one such Benihana restaurant as of the date of the disclosure document. This suggests a higher degree of uncertainty in the estimated costs for the Concession Model compared to the full-size restaurant model. Therefore, thorough independent investigation of local market conditions is crucial before committing to a Franchise Agreement for a Concession Model Benihana restaurant.