For a Benihana franchise, from whom must I obtain covenants not to compete?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
You must also obtain covenants not to compete, including covenants applicable on the termination of the person's relationship with you, from your General Manager and any of your other personnel who have received or will have access to our training before employment, and any holder of a beneficial interest in you (except for any limited partners). You must have all your management personnel sign covenants to maintain the confidentiality of information they receive or have access to based on their relationship with you (see Item 14). We reserve the right, in our discretion, to decrease the period of time or geographic scope of the non-competition covenants contained in the attachments or eliminate the non-competition covenants altogether for any party that must sign an agreement as described in this paragraph. (See Item 17.)
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, as a franchisee, you must obtain covenants not to compete from specific individuals associated with your franchise. These individuals include your General Manager, any other personnel who receive training from Benihana, and any holder of a beneficial interest in you, except for limited partners. These covenants are designed to protect Benihana's interests by preventing these individuals from competing with the franchise during and after their association with it.
The purpose of these covenants is to ensure that individuals with knowledge of Benihana's operations, training, and confidential information do not use that knowledge to benefit a competitor. This is a standard practice in franchising to safeguard the brand's competitive advantage and protect the franchisor's and other franchisees' investments. The agreement must specifically identify Benihana as a third-party beneficiary, giving Benihana the right to enforce the covenants independently.
Benihana retains the right to modify or eliminate these non-competition covenants. This flexibility allows Benihana to adjust the restrictions based on specific circumstances or changes in business strategy. As a franchisee, you must also ensure that all management personnel sign agreements to maintain the confidentiality of information they receive or have access to through their relationship with you. These measures collectively aim to protect Benihana's trade secrets and maintain the integrity of the Benihana system.