For how long after the expiration or termination of the Benihana franchise term are the franchisee and its principals restricted from diverting business or customers?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
18.5 Franchisee and its principals covenant that, during the Franchise Term and for a period of two (2) years after the expiration or termination hereof, neither Franchisee nor any principal will directly or indirectly:
(a) divert or attempt to divert any business or customer of the Restaurant to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the BENIHANA System;
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a franchisee and its principals are restricted from diverting business or customers for a period of two years after the expiration or termination of the franchise agreement. Specifically, the franchisee and its principals cannot directly or indirectly divert or attempt to divert any business or customer of the Benihana restaurant to any competitor. They are also prohibited from performing any action that could be injurious or prejudicial to the goodwill associated with the Benihana marks and system.
This restriction is designed to protect Benihana's brand and customer base. It prevents a former franchisee from leveraging their knowledge and relationships gained during the franchise term to unfairly compete with Benihana. The FDD also states that if the franchisee violates these post-term covenants, the two-year period will be extended to begin on the date the franchisee first complies with the covenants. This ensures that Benihana receives the full benefit of the post-term covenant period without interference from the franchisee.
In addition to not diverting customers, the franchisee is also restricted from employing or seeking to employ anyone who is, or has been within one year prior to the expiration or termination, employed by Benihana, its affiliates, or any other Benihana franchisee. Furthermore, the franchisee cannot own, maintain, operate, or have any direct or indirect interest in any restaurant or food service business that is or holds itself out to the public as a Japanese teppanyaki style or sushi restaurant within 150 kilometers of the Benihana location.
These restrictions are typical in franchise agreements to protect the franchisor's investment in its brand and system. Prospective Benihana franchisees should carefully consider these post-term obligations and how they might impact their future business endeavors after leaving the Benihana system. The franchisee acknowledges that the length and term of the geographical restrictions are fair and reasonable and do not impose a greater restraint than is necessary to protect the goodwill associated with the Marks or other business interests of BNC.