If a new partner, shareholder, or member joins a Benihana franchise, what obligation do they have regarding the Franchise Agreement?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
This Guaranty is incorporated and made a part of a Franchise Agreement between FRANCHISEE and Benihana National Corp., a Delaware corporation, whose principal office address is 21500 Biscayne Boulevard, Suite 900, Aventura, Florida 33180 (hereinafter referred to as "FRANCHISOR") on the date specified above, and it will be attached to the Franchise Agreement.
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- Acknowledgments. GUARANTOR acknowledges and agrees that FRANCHISOR has entered into the Franchise Agreement with FRANCHISEE solely on the condition that each owner of FRANCHISEE be personally obligated and jointly and severally liable with FRANCHISEE (and with each other owner of FRANCHISEE) for the performance of each and every obligation of FRANCHISEE (and its owners) under the Franchise Agreement, any amendments or modifications to the Franchise Agreement, any extensions or renewals of the Franchise Agreement, and under each and every agreement ancillary to the Franchise Agreement, including any lease, that has been or hereafter may be entered by FRANCHISEE with FRANCHISOR (all of the aforementioned agreements are collectively referred to as the "BENIHANA Agreements").
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- GUARANTOR's Covenants, Representations and Guaranty. In consideration of and as an inducement to the execution of the Franchise Agreement by FRANCHISOR, Guarantor hereby personally, irrevocably and unconditionally:
- (a) represents and warrants to FRANCHISOR that the exhibits/attachments to the Franchise Agreement are accurate and complete;
- (b) agrees to guarantee the prompt payment and performance of all of FRANCHISEE's Obligations (as hereinafter defined) to FRANCHISOR and FRANCHISOR's successors and assigns; and
- (c) agrees to be personally bound by, and personally liable for the breach of each and every provision in the Franchise Agreement and each and every provision in any of the BENIHANA Agreements, as if GUARANTOR were the FRANCHISEE.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, any new owner of a Benihana franchise must personally guarantee the franchisee's obligations under the Franchise Agreement. Specifically, the franchisor requires each owner to be personally obligated and jointly and severally liable with the franchisee. This means that each owner is responsible for the full performance of the franchise's obligations.
This obligation extends to the Franchise Agreement itself, any amendments or modifications to it, any extensions or renewals, and any ancillary agreements, including leases. These agreements are collectively referred to as the "BENIHANA Agreements." The new owner, as a guarantor, must agree to be personally bound by and liable for any breaches of these agreements, as if they were the franchisee themselves.
This requirement protects Benihana by ensuring that all owners of the franchise are fully invested in its success and are personally accountable for upholding the terms of the Franchise Agreement. For a prospective franchisee, this means that bringing in a new partner or shareholder requires that person to also take on significant personal liability. It is important for potential franchisees to fully understand these obligations and ensure that any new owners are aware of and willing to accept these responsibilities.