What obligation does a Benihana franchisee have regarding remodeling the restaurant to reflect the current image of Benihana Restaurants in order to qualify for a Successor Franchise Agreement?

According to Benihana's 2024 Franchise Disclosure Document, a franchisee seeking a Successor Franchise Agreement must remodel their restaurant to reflect the current image of Benihana restaurants. Specifically, the franchisee must remodel or contract to remodel the restaurant, including the building, signs, equipment, furnishings, and décor. This remodeling must be approved by Benihana National Corp. (BNC). This requirement is one of several conditions that must be met to BNC's satisfaction for the franchisee to be eligible for a Successor Franchise Agreement.

This requirement ensures that all Benihana restaurants maintain a consistent and up-to-date brand image. For a franchisee, this means they will likely need to invest a significant sum in renovations towards the end of their franchise term. The extent of the remodel is subject to BNC's approval, giving Benihana control over the brand's appearance. The franchisee should communicate with Benihana well in advance of the franchise term's expiration to understand the scope and cost of the required remodeling.

It is important to note that the Successor Franchise Agreement may contain terms and conditions substantially different from the original agreement, including potentially higher royalties, advertising contributions, and different operating standards. Meeting the remodeling requirement is only one step in securing a new franchise agreement, and the overall terms could change significantly. The franchisee must also meet all of BNC's then-existing legal, financial, and operational standards applicable to new franchisees.

In addition to the remodel, the franchisee must submit a written application for a Successor Franchise Agreement at least 365 days before the expiration of the current term and execute the new agreement at least 30 days prior to expiration. They must also pay an administrative fee equal to 20% of the then-current franchise fee, and execute a general release of claims against Benihana. These stipulations highlight the importance of proactive planning and financial readiness for franchisees considering renewing their agreement.