Does the Benihana Franchise Agreement automatically renew upon the expiration of the Franchise Term?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
ARTICLE 17. EXPIRATION OF FRANCHISE TERM
17.1 This Agreement shall not automatically renew upon the expiration of the Franchise Term.
17.2 Franchisee shall have an option to acquire a new franchise agreement ("Successor Franchise Agreement") with respect to the Location for an additional period equal to the standard period of time offered to BNC franchisees at the time of the expiration of the Franchise Term.
Franchisee's right to enter a Successor Franchise Agreement shall exist if, and only if, each of the following terms and conditions has been met to the reasonable satisfaction of BNC:
(a) Franchisee, at the expiration of the Franchise Term and within the twenty-four (24) months prior thereto, shall not be or have been in default in the performance of any obligation under this Agreement whether or not any notice of default was provided to Franchisee;
(b) Franchisee shall have re-modeled or contracted to re-model the Restaurant, including building, signs, equipment, furnishings and décor, to an extent approved by BNC to reflect the then-current image of BENIHANA Restaurants;
(c) Franchisee shall have submitted a written application to BNC for a Successor Franchise Agreement at least three hundred and sixty-five (365) days prior to the expiration of the Franchise Term and shall have executed and returned to BNC for final approval and execution a Successor Franchise Agreement at least thirty (30) days prior to the expiration of the Franchise Term.
Any Successor Franchise Agreement issued to Franchisee shall be the then-current form of Franchise Agreement being offered to franchisees as of the date of the expiration of the Franchise Term.
The Successor Franchise Agreement may contain provisions, terms and conditions substantially different from those contained herein, including without limitation, different or increased Royalties, Advertising Contributions, operating standards, training or equipment requirements, duration or renewal terms;
(d) Franchisee meets all of BNC's then-existing legal, financial and operational standards applicable to new franchisees contained in the then-current form of franchise agreement and the thencurrent operating standards in effect for the BENIHANA System;
(e) Franchisee shall have submitted to BNC all information and documentation as reasonably requested by BNC as a prerequisite for the issuance of a franchise agreement as of the date of the expiration of the Franchise Term;
(f) Franchisee shall have tendered to BNC, in lieu of the Franchisee Fee specified in the Successor Franchisee Agreement, an administrative fee equal to twenty percent (20%) of the Franchise Fee in existence on the date of the expiration of the Franchise Term;
(g) Franchisee shall execute a general release, in the form BNC requires, of any and all claims in existence against BNC and its affiliates, successors and assigns, and their respective officers, directors,
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the Franchise Agreement does not automatically renew upon the expiration of the franchise term. However, Benihana franchisees do have the option to acquire a Successor Franchise Agreement for an additional term, which is equal to the standard period of time offered to new Benihana franchisees at the time of the expiration of the current franchise term.
To obtain a Successor Franchise Agreement, Benihana requires that franchisees meet certain conditions. These conditions include not being in default of any obligations under the existing agreement within 24 months prior to expiration, remodeling the restaurant to reflect the current Benihana image, and submitting a written application for a Successor Franchise Agreement at least 365 days before the expiration of the current term. The franchisee must also execute and return the Successor Franchise Agreement for final approval at least 30 days prior to the expiration of the Franchise Term.
Additionally, the franchisee must meet Benihana's legal, financial, and operational standards applicable to new franchisees and submit all required information and documentation. They must also pay an administrative fee equal to 20% of the then-current franchise fee, instead of the full franchise fee. Finally, the franchisee must execute a general release of any claims against Benihana.
It's important to note that the terms of the Successor Franchise Agreement may differ significantly from the original agreement, potentially including changes to royalties, advertising contributions, operating standards, training, equipment requirements, and the duration or renewal terms themselves. This means that while franchisees have an option to renew, the terms could be less favorable than their original agreement.