After the Benihana franchise term expires or terminates, in what geographic area is the franchisee prohibited from owning or operating a competing Japanese teppanyaki or sushi restaurant?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
independent right to enforce them. Franchisee shall provide BNC with a copy of all executed covenants within five days after hiring any such General Manager and/or employees.
- 18.4 Franchisee covenants that, during the Franchise Term and for a period of two (2) years after the expiration or termination hereof, Franchisee shall not, directly or indirectly:
- (a) divert or attempt to divert any business or customer of the Restaurant to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the BENIHANA System;
- (b) employ or seek to employ any person (or induce such person to leave his or her employment) who is, or has within the one (1) year prior to any such expiration or termination been, employed by BNC, any of its affiliates, including, without limitation the "Haru," or "RA" Restaurants ("Affiliated Company"), or any other franchisee operating under the BENIHANA System;
- (c) own, maintain, operate or have any direct or indirect interest in any restaurant or food service business that is or holds itself out to the public as a Japanese teppanyaki style or sushi restaurant or food service (a "Competing Business") in the same county in which the Restaurant is or was located; or
- (d) own, maintain, operate or have any direct or indirect interest in any Competing Business which business is, or is intended to be, located within a five (5) mile radius of any BENIHANA Restaurant, or any other restaurant which is owned, operated, or franchised by BNC, Benihana of Tokyo, Benihana, Inc. or any Affiliated Company.
- 18.5 Franchisee understands and acknowledges that BNC shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in Section 18.4, or any portion thereof, without Franchisee's consent, effective immediately upon Franchisee's receipt of written notice thereof; and Franchisee agree that Franchisee shall comply forthwith with any covenant as so modified.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, for two years after the franchise term expires or terminates, a franchisee is restricted from operating a competing Japanese teppanyaki or sushi restaurant within specific geographic boundaries. This restriction applies in the same county where the Benihana Restaurant was located, or within a five-mile radius of any Benihana Restaurant, or any other restaurant owned, operated, or franchised by BNC, Benihana of Tokyo, Benihana, Inc., or any affiliated company.
This non-compete clause prevents former franchisees from directly competing with Benihana shortly after their franchise agreement ends, protecting Benihana's market share and brand reputation. The clause covers not only restaurants directly branded as Benihana but also those affiliated with the company, broadening the scope of protection.
However, Benihana retains the right to modify the scope of this covenant at its discretion, potentially reducing the restricted area. This modification becomes effective immediately upon the franchisee receiving written notice. This clause highlights the franchisor's control and the franchisee's obligation to comply with any changes to the non-compete agreement.
Failure to comply with these non-compete terms can result in irreparable injury to Benihana, entitling them to seek legal remedies such as specific performance or an injunction, without needing to demonstrate actual damage or post a bond. The franchisee is also responsible for covering all court costs and reasonable attorney's fees incurred by Benihana in enforcing these restrictions.