For how long after the expiration or termination of the Benihana franchise term are franchisees and their principals prohibited from diverting business or customers to a competitor?
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;
(b) employ or seek to employ any person (or induce such person to leave his or her employment) who is, or has within the one (1) year prior to such expiration or termination been, employed by BNC, any of its affiliates, including, without limitation HARU® or RA SUSHI® Restaurants ("Affiliated Company"), or any other franchisee operating under the BENIHANA System;
(c) 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 or food service (a "Competing Business") within 150 kilometers of the Location; or
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, franchisees and their principals are subject to certain restrictive covenants both during the franchise term and after its expiration or termination. Specifically, they are prohibited from diverting business or customers to a competitor for a period of two years following the expiration or termination of the franchise agreement. This restriction is designed to protect Benihana's goodwill and customer base.
During this two-year period, neither the franchisee nor any principal can directly or indirectly attempt to divert business or customers from the Benihana restaurant to any competitor. This includes any action that could be considered injurious or prejudicial to the goodwill associated with the Benihana brand and system. Additionally, franchisees are restricted from employing or seeking to employ anyone who is or has been employed by Benihana, its affiliates, or other Benihana franchisees within one year prior to the termination or expiration.
Furthermore, for two years after the franchise term ends, franchisees and their principals are restricted from owning, maintaining, operating, or having any interest in a competing Japanese teppanyaki or sushi restaurant within 150 kilometers (approximately 93 miles) of the Benihana location. Benihana emphasizes that these restrictions are fair and reasonable to protect its brand and business interests, and that compliance will not cause undue hardship to the franchisee. The FDD also states that if a franchisee violates these post-term covenants, the two-year period will be extended to begin on the date the franchisee complies with the covenants, ensuring Benihana receives the full benefit of the post-term covenant period.