If a conflict arises between a Benihana Restaurant and a franchised or company-owned RA SUSHI or SAMURAI restaurant, is there a mechanism for resolving it?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
As disclosed in Item 1, certain of our subsidiaries operate restaurants offering similar goods and services under the RA SUSHI trademark. We also operate one competing business in Miami, Florida under the trademark SAMURAI®. The RA SUSHI concept offers sushi and a full menu of Pacific Rim dishes targeting a younger demographic in an environment featuring upbeat design elements. RA SUSHI restaurants may compete with BENIHANA Restaurants and with your Restaurant, may be located in your Restaurant Area, and may solicit or accept orders within your Restaurant Area. There are currently twenty RA SUSHI restaurants operating in the United States as of the date of this Disclosure Document. Neither we, nor our affiliates, currently plan to offer franchises for RA SUSHI or SAMURAI restaurants, or any other branded restaurant. However, we expressly reserve the right to do so in the future. There is no mechanism for resolving any conflicts that may arise between your BENIHANA Restaurant and franchised or company-owned RA SUSHI or SAMURAI restaurants. Any resolution of conflicts regarding location, customers, support, or services will be entirely within our business judgment.
Source: Item 12 — TERRITORY (FDD pages 47–49)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, there is no formal mechanism in place to resolve conflicts between a Benihana Restaurant and any franchised or company-owned RA SUSHI or SAMURAI restaurants. Benihana, through its subsidiaries, operates RA SUSHI restaurants, which offer similar goods and services, targeting a younger demographic. There are currently twenty RA SUSHI restaurants operating in the United States. Benihana also operates one SAMURAI restaurant in Miami, Florida. These restaurants may compete directly with a franchisee's Benihana Restaurant, even within the franchisee's designated Restaurant Area.
This lack of a conflict resolution mechanism means that any disputes regarding location, customers, support, or services will be resolved entirely at Benihana's discretion. This gives Benihana significant control over how such conflicts are handled, potentially to the disadvantage of the franchisee. Benihana expressly reserves the right to franchise RA SUSHI or SAMURAI restaurants in the future, further increasing the potential for conflicts.
For a prospective franchisee, this represents a notable risk. The franchisee could face direct competition from restaurants owned or franchised by Benihana offering similar products, with no guaranteed protection or recourse. The franchisee's success could be significantly impacted by decisions made by Benihana regarding these competing brands, highlighting the importance of carefully evaluating the potential for such conflicts in their specific market area. It is important to note that Benihana also has the right to own and operate, or license others to own and operate, competing restaurants other than a Benihana Restaurant at any location, regardless of the proximity to the franchisee's Restaurant, including but not limited to restaurants using the trademarks RA SUSHI and HARU.
Given this information, a prospective franchisee should carefully consider the potential impact of competition from RA SUSHI and SAMURAI restaurants and should seek clarification from Benihana regarding their strategy for managing potential conflicts. Understanding Benihana's approach to these situations is crucial for assessing the overall risk and opportunity associated with investing in a Benihana franchise.