If a Benihana franchisee violates a governmental law while operating the restaurant, how long does the franchisee have to correct the violation after notification by the governmental body before Benihana issues a notice of default?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
- 13.2.19 Franchisee violates any governmental law, ordinance, rule, or regulation in connection with operating the Restaurant, and Franchisee fails to correct the violation within twenty (20) days after notification by the governmental body or authority.
The cure period for an act of default under this provision is five (5) days from notice by BNC to Franchisee, after expiration of the twenty (20) days from notification by the governmental body or authority; provided, however, the five (5) day cure period will be stayed if Franchisee raises a bona fide dispute as to the validity of the alleged violation of the legality of the law, ordinance, rule, or regulation at issue, and Franchisee takes action in an appropriate court or other forum to address the dispute.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, if a franchisee violates any governmental law, ordinance, rule, or regulation while operating the restaurant, the franchisee has 20 days after being notified by the governmental body or authority to correct the violation.
After this initial 20-day period, Benihana will issue a notice of default, and the franchisee then has five days from this notice to correct the violation. However, this five-day cure period can be stayed if the franchisee raises a legitimate dispute regarding the violation's validity or the legality of the law in question and takes action in court or another appropriate forum to address the dispute.
This means a Benihana franchisee must act quickly to address any legal violations to avoid being in default of the franchise agreement. If there is a valid legal challenge to the alleged violation, the franchisee can potentially extend the cure period while pursuing legal remedies.