After the Benihana franchise term expires or terminates, for how long is the franchisee prohibited from diverting business or customers?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
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;
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a franchisee is restricted from diverting business or customers for a period of two years following the expiration or termination of the franchise agreement. Specifically, the franchisee is prohibited from directly or indirectly diverting or attempting to divert any business or customer of the Benihana restaurant to a competitor. This includes any action that could be injurious or prejudicial to the goodwill associated with the Benihana brand and system.
This restriction also extends to employing or seeking to employ anyone who is currently or has been employed by Benihana, its affiliates, or other Benihana franchisees within one year prior to the expiration or termination. This prevents a former franchisee from poaching employees who have knowledge of the Benihana system or relationships with its customers.
These post-term covenants are designed to protect Benihana's brand, customer relationships, and employee base. For a prospective franchisee, this means that upon leaving the Benihana system, they will be unable to operate a competing business or solicit Benihana's employees or customers for two years. This is a fairly standard practice in franchising to protect the brand and other franchisees in the system.