What happens to a transfer of interest if the Benihana franchisee does not obtain BNC's written consent?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
Accordingly, neither Franchisee nor any individual, partnership, corporation, limited liability company or other legal entity that directly or indirectly owns any interest in the franchise granted in this Agreement, or in Franchisee if Franchisee is a corporation, limited liability company or partnership, shall sell, assign, transfer, convey, or give away any direct or indirect interest in the franchise granted under this Agreement or in any legal entity that owns such franchise rights (a "Disposition") without BNC's prior written consent. Any purported assignment or transfer, by operation of law or otherwise, not having the written consent of BNC required by this Section 11.2 shall be null and void.
- 11.2.1 Notwithstanding the foregoing, BNC's prior written consent is not required for a transfer of less than a 5% interest in a corporation registered under the Securities Exchange Act of 1934 ("publicly-held corporation").
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, if a franchisee attempts to sell, assign, transfer, convey, or give away any direct or indirect interest in the franchise without obtaining Benihana's prior written consent, the purported assignment or transfer will be considered null and void. This applies whether the transfer occurs by operation of law or otherwise.
This requirement underscores Benihana's control over who becomes a franchisee and ensures that new operators meet their standards. Benihana wants to approve any changes in ownership to protect its brand and the interests of other franchisees. The FDD does state an exception to this rule, specifying that Benihana's prior written consent is not required for a transfer of less than a 5% interest in a corporation registered under the Securities Exchange Act of 1934.
This provision means a Benihana franchisee must seek approval from Benihana before making any transfer of ownership. Failure to do so can result in the transfer being invalidated, potentially leading to legal and operational complications. Franchisees should be aware of this restriction and follow the proper procedures to obtain consent for any proposed transfer to avoid such consequences.