Does Benihana have the obligation to purchase insurance if the franchisee fails to do so?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
If Franchisee fails to obtain or maintain in force any insurance required under this Agreement, BNC shall have the right, but not the obligation, to purchase such insurance and, if BNC does so, Franchisee shall promptly pay to BNC upon demand 105% of the cost of the insurance purchased by BNC to reimburse BNC for the insurance cost and its administrative expense related to Franchisee's failure to comply with this Section 12.3.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana does not have the obligation to purchase insurance if the franchisee fails to maintain the required insurance coverage. However, Benihana retains the right to purchase the insurance if the franchisee does not comply with the insurance requirements outlined in the franchise agreement.
If Benihana chooses to purchase insurance on behalf of the franchisee, the franchisee is required to promptly reimburse Benihana for the costs. This reimbursement includes 105% of the insurance cost, which covers Benihana's administrative expenses related to securing the insurance due to the franchisee's non-compliance.
This clause ensures that Benihana can protect its interests and maintain compliance with its own insurance obligations, while also holding the franchisee accountable for maintaining the required insurance coverage. The additional 5% charge serves as a deterrent for franchisees to neglect their insurance responsibilities and compensates Benihana for the added administrative burden.