Is a Benihana franchisee required to participate in a purchasing program if Benihana establishes one in the area encompassing the restaurant during the franchise term?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
- 3.15 BNC has the right, in its discretion, to designate any geographical area for purposes of establishing a purchasing program ("Purchasing Program"). Franchisee must participate in any Purchasing Program existing in the area encompassing the Restaurant when Franchisee opens for business or that is established during the Franchise Term.
- 3.14 BNC has the right to derive revenue and other material benefits in consideration of purchases by Franchisee or other franchisees of BNC, including payments of other financial concessions from designated or approved suppliers.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, if Benihana establishes a purchasing program in the area encompassing a franchisee's restaurant, the franchisee must participate in it. Benihana has the discretion to designate any geographical area for establishing a purchasing program.
This means that Benihana franchisees do not have a choice about participating in a purchasing program if one is established for their area, and they must adhere to it from the time they open their restaurant or when the program is established during the franchise term. This could impact a franchisee's costs and potentially their profit margins, depending on the terms of the purchasing program.
Benihana also has the right to derive revenue and other material benefits from franchisee purchases through these designated or approved suppliers, including payments or other financial concessions. This is a common practice in franchising, where franchisors leverage the collective buying power of their franchisees to negotiate favorable terms with suppliers and generate revenue for themselves.