What is included in the 'additional funds' estimate for opening a Benihana restaurant, and for how long after opening is it intended to cover operating expenses?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
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- (6) The additional funds estimate is only the funds needed for opening expenses and working capital to operate for three months after opening. This estimate on our management's business experience, our operating history, and that of our predecessors and
affiliates. The actual amount of additional funds you will need depends on a variety of factors, including: your management skill, experience, and business acumen; local economic conditions; the local market for the goods and services provided; the number of customers served and other variable expenses. The estimate of additional funds does not include any allowance for an owner's draw or operating losses after the initial phase. You may have to put additional cash into the business, but we cannot estimate or promise when or whether your Restaurant or any other BENIHANA Restaurant will achieve positive cash flow or profits. You must have additional sums available, whether in cash or through credit lines, or have other assets that you may liquidate or borrow against to cover personal living expenses and any operating losses after the initial phase of operations.
- (7) We do not offer you or other franchisees any financing, directly or indirectly, in connection with the initial investment.
- (8) You should review these figures carefully with a business advisor and develop a business plan and financial projections before making any decision to purchase a franchise for a BENIHANA Restaurant.
Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 21–28)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the 'additional funds' estimate covers the expenses associated with opening the restaurant and the working capital required to sustain operations for the first three months. This estimate is based on Benihana's management's business experience, operating history, and that of its predecessors and affiliates.
However, the actual amount of additional funds a franchisee will need can vary significantly. Factors influencing this amount include the franchisee's management skills, experience, and business acumen, as well as local economic conditions and the specific market for Benihana's goods and services. The number of customers served and other variable expenses also play a role in determining the necessary funds.
It's important to note that the estimate of additional funds does not include any allowance for an owner's draw or potential operating losses after the initial three-month period. Benihana emphasizes that franchisees may need to inject additional cash into the business and cannot guarantee when or if a restaurant will achieve positive cash flow or profits. Franchisees are expected to have additional funds available, either in cash, credit lines, or other liquid assets, to cover personal living expenses and any operating losses beyond the initial phase. Benihana does not offer any direct or indirect financing to franchisees in connection with the initial investment.