What interest rate does Benihana charge on overdue payments?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
n the day each such payment is due.
- (2) Interest, payable upon demand, begins from the date of the non-payment or underpayment to the date of payment at a rate of 18% per annum or the maximum rate allowed by applicable law, if that maximum legal is less than 18% per annum.
ITEM 7. ESTIMATED INITIAL INVESTMENT
We estimate that you will incur initial investment costs in the ranges described below, depending on whether you are developing either a full-size or Concession Model BENIHANA® Restaurant.
YOUR ESTIMATED INITIAL INVESTMENT (FULL-SIZE RESTAURANT MODEL)
| TYPE OF EXPENDITURE | AMOUNT | METHOD OF PAYMENT | WHEN DUE | TO WHOM PAYMENT IS TO BE MADE | |
|---|---|---|---|---|---|
| Initial Franchise Fee | $40,000 | Lump Sum | At signing of franchise agreement | Us | |
| Travel and Living Expenses while Training | $25,000 to $100,000 | As incurred | During Training | Airlines, hotels, and restaurants | |
| Real Estate Improvements (Excluding Purchase Real Estate) | $2,500,000 to $4,500,000 (Note 1) | (Note 1) | (Note 1) | (Note 1) | |
| Equipment, Furniture & Fixtures | $500,000 to $700,000 (Note 2) | Lump Sum | Prior to Opening | Vendors | |
| Opening Inventory | $40,000 to $60,000 (Note 3) | Lump Sum | Prior to Opening | Vendors | |
| Liquor License | $200 to $300,000 (Note 4) | Lump Sum | Prior to Opening | State Liquor Authority and/or owner of License | |
| Insurance | $50,000 (Note 5) | Lump Sum | Prior to Opening | Insurance carrier | |
| Additional Funds | $250,000 to $500,000 (Note 6) | As Incurred | As Incurred | Employees, utilities, suppliers | |
| TOTAL MINIMUM | $3,405,200 to $6,250,000 (Note 7) | # NOTES: |
(1) Real Estate and Real Estate Improvements: You must lease or purchase land and a building for the operation of the Restaurant. The typical BENIHANA Restaurant is composed of a building having an area of approximately 6,000-8,000 square feet situated on approximately 1−1/2 acres of land, located in a restaurant row or commercial area with
residential areas in close proximity. A BENIHANA Restaurant may be either a stand-alone unit, part of a commercial retail center, or located in an office building, hotel, or other commercial facility. The estimate of $2,500,000 to $4,500,000 is for the design and construction of a typical freestanding restaurant building and improvements. The cost of purchasing real estate is not included in the Real Estate Improvements estimate and varies significantly from location to location, It is estimated that the land purchased for a typical restaurant building will cost from $1,400,000 to $2,000,000.
If the entire improved premises can be leased, you may not have to incur some portion of the initial costs for real estate improvements.
Source: Item 6 — OTHER FEES (FDD pages 18–21)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, overdue payments are subject to an interest rate. Benihana charges interest on overdue amounts at a rate of 18% per annum. However, if the maximum interest rate allowed by applicable law is less than 18% per annum, Benihana will charge that lower legal maximum rate. This interest begins accruing from the date of non-payment or underpayment until the date the payment is made.
This policy means that if a Benihana franchisee fails to make timely payments for any fees owed to the company, they will incur interest charges on the outstanding balance. The interest rate is a fixed percentage, but it is also capped by any legal restrictions on interest rates in the relevant jurisdiction. Franchisees need to be aware of this interest charge, as it can increase the total amount owed to Benihana if payments are not made on time.
In addition to the general interest charge, the FDD specifies that an 18% interest rate also applies to underpayments discovered during an audit. Specifically, if an audit reveals that a Benihana franchisee has understated their Gross Sales by 3% or more in any report, the franchisee will be responsible for the cost of the audit, plus 18% interest on the underpayment calculated from the date the underpayment occurred. This underscores the importance of accurate financial reporting and timely payments to avoid additional financial penalties.
Furthermore, Benihana's FDD states that in any legal actions between Benihana and the franchisee, Benihana can recover any amount due or in default, along with interest and the costs of the legal action, including reasonable attorneys' fees. This provision highlights the potential financial consequences of failing to meet payment obligations and the importance of resolving any payment disputes promptly to avoid further legal costs.