For a Benihana franchise, who are considered 'Controlling Principals'?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
As described in Item 1, we have identified certain persons under the Franchise Agreement that we refer to in this Disclosure Document as your Principals. Your Principals may include a spouse, if any Principal is a married individual. Your Principals as to a business entity include those officers and directors (including the officers and directors of your owners, if applicable) we designate as your Principals, all holders of an ownership interest in you and in any entity that directly or indirectly controls you, and any other person or entity controlling, controlled by, or under common control with you. If we designate certain of your Principals as Controlling Principals, they must sign the Agreement and agree to be individually bound by certain obligations under the Agreements, including confidentiality and non-competition covenants, and they must personally guarantee your performance under the Franchise Agreement. We typically designate your principal equity owners and executive officers, as well as any other affiliated entities that operate Restaurants, as Controlling Principals.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 57–58)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Controlling Principals are specifically designated by Benihana and have significant obligations. These individuals must sign the Franchise Agreement and are legally bound by its terms, including confidentiality and non-competition clauses. They also must guarantee the franchisee's performance under the Franchise Agreement.
Benihana typically identifies principal equity owners and executive officers as Controlling Principals. This designation extends to affiliated entities that operate Benihana Restaurants, ensuring that those with the most significant financial and operational control are directly accountable to the franchise agreement.
For a prospective Benihana franchisee, this means that if you are a principal equity owner or an executive officer, you will likely be designated as a Controlling Principal. This designation carries the responsibility of personally guaranteeing the franchise's performance and adhering to strict confidentiality and non-competition terms. It is important to understand these obligations fully before entering into a franchise agreement with Benihana.