What happens to the post-term covenant period for a Benihana franchise if the franchisee violates the covenant after the agreement expires, terminates, or transfers?

According to Benihana's 2024 Franchise Disclosure Document, if a franchisee violates the post-term covenant after the franchise agreement expires, terminates, or is transferred, the two-year post-term covenant period will be extended. Specifically, the extension means that the two-year period will not begin until the date the franchisee first complies with the covenant.

This provision ensures that Benihana receives the full benefit of the post-term covenant, preventing franchisees from circumventing the restrictions by initially violating them and then complying only after some time has passed. The post-term covenant typically restricts the franchisee from engaging in competitive activities within a certain geographic area for a specified period after the franchise agreement ends.

For a prospective Benihana franchisee, this means that any violation of the post-term covenant will effectively pause the clock on the restricted period. If a franchisee were to breach the covenant shortly after the agreement's termination, the two-year restriction might extend significantly beyond the initial termination date, depending on when the franchisee ceases the violating behavior. This clause is designed to protect Benihana's business interests and goodwill by ensuring that former franchisees do not unfairly compete using knowledge gained during their time with the franchise.