In a Benihana franchise agreement assignment, what does the Assignor guarantee regarding the Assignee's performance?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
commitments, duties and liabilities under the Franchise Agreement. Without limiting the foregoing, Assignor irrevocably and unconditionally guarantees to BNC (i) that Assignee will pay all amounts to be paid and otherwise comply with all provisions of the Franchise Agreement and any other agreement between Assignor and BNC or its affiliates concerning the operation of the Franchised Business, and (ii) that if Assignee defaults in making any such payments or complying with any such provisions, Assignor shall pay forthwith upon demand all amounts due and owing BNC and all damages that may arise as a result of any such non-compliance.
In the enforcement of any of its rights against Assignor, BNC may proceed as if Assignor was the primary obligor under the Franchise Agreement.
Assignor waives any right to require BNC to first proceed against Assignee or to proceed against or exhaust any security (if any) held by BNC or to pursue any other remedy available to it before proceeding against Assignor.
No dealing between BNC and Assignee shall exonerate, release, discharge or in any way reduce the obligations of Assignor hereunder, in whole or in part, and in particular and without limiting the generality of the foregoing, BNC may modify or amend the Franchise Agreement, grant any indulgence, release, postponement or extension of time, waive any term or condition of the Franchise Agreement, or any obligation of Assignee, take or release any securities or other guarantees for the performance by Assignee of any of its obligations, and otherwise deal with Assignee as BNC may see fit without affecting, lessening or limiting in any way the liability of Assignor.
Notwithstanding any assignment for the general benefit of creditors, bankruptcy, or other act of insolvency by Assignee, and notwithstanding any rejection, disaffirmance, or disclaimer of this Assignment or the Franchise Agreement, Assignor shall continue to be fully liable.
This Assignment is entered into in the State of Florida and shall be construed and interpreted in accordance with its laws, which laws shall control in the event of any conflict of law.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, if a franchisee (the Assignor) assigns their franchise agreement to another party (the Assignee), the Assignor provides a guarantee to Benihana. Specifically, the Assignor guarantees that the Assignee will fulfill all payment obligations and comply with all provisions outlined in the Franchise Agreement. This guarantee extends to any other agreements between the Assignor and Benihana or its affiliates concerning the operation of the franchised business.
This means that the original franchisee remains liable for the performance of the new franchisee. If the Assignee fails to make required payments or otherwise violates the Franchise Agreement, Benihana can demand immediate payment from the Assignor for all outstanding amounts and any damages resulting from the non-compliance. Benihana is entitled to treat the Assignor as the primary obligor under the Franchise Agreement, meaning they can pursue the original franchisee without first having to take action against the new franchisee.
The Assignor also waives any right to require Benihana to first pursue the Assignee or exhaust any security before seeking recourse from the Assignor. Furthermore, any dealings between Benihana and the Assignee, such as modifications to the Franchise Agreement or granting extensions of time, do not reduce the Assignor's obligations. Even in cases of bankruptcy or insolvency of the Assignee, the Assignor remains fully liable.
This guarantee is governed by Florida law, regardless of any conflict of law principles. This ensures that Benihana has a direct and continuing recourse to the original franchisee, providing an additional layer of security for Benihana in the event that the new franchisee fails to meet their obligations. Prospective franchisees should understand that assigning their franchise agreement does not fully release them from the responsibilities and liabilities associated with the franchise.