Can Benihana own, operate, or license competing restaurants (other than Benihana) near a franchisee's location, including RA® Sushi restaurants?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
- 1.6 Franchisee expressly acknowledges that the franchise granted under this Agreement is nonexclusive and that any geographic limitation on BNC's rights to use or license the Marks under this Agreement relates solely to the operation of a BENIHANA Restaurant at the Location.
- 1.7 Nothing in this Agreement is intended to or shall limit in any way any rights of BNC or its affiliates to: (i) own and operate, or license others the right to own and operate, competing restaurants other than a BENIHANA Restaurant at any location, regardless of the proximity to the Restaurant, including but not limited to restaurants using the trademark RA® Sushi; (ii) own and operate, or license others the right to own and operate, BENIHANA Restaurants, including another business similar to the Restaurant outside the Restaurant Area, even if such BENIHANA Restaurants compete with the Restaurant or draw customers from the Restaurant Area; (iii) engage, directly or indirectly, at wholesale, retail or otherwise, in the production, distribution, license and/or sale of any product or service under the Marks, or other marks, anywhere, regardless of the proximity to, or the competitive impact on, the Restaurant, through alternative channels of distribution (by way of example only, grocery stores, conveniences stores, internet sales, catalog sales, telemarketing or other direct marketing); (iv) license others to use the BENIHANA System and the Marks for the operation of BENIHANA Restaurants within Special Distribution Opportunities (as defined below); (v) advertise and promote the BENIHANA System within the Restaurant Area; and (vi) purchase, acquire, be acquired by, merge or affiliate with or engage in any transaction with other businesses (whether or not these businesses are competitive with the Restaurant), including competing franchise systems with units operating in the Restaurant Area, and to convert and operate, or license others the right to operate these units under the Marks and the BENIHANA System.
- 1.8 For purposes of this Agreement, "Special Distribution Opportunities" shall mean captive venue locations, generally available only in connection with third-party food service provision contracts, including, without limitation, restaurants or other retail locations at airports and other public transportation facilities, turnpikes and toll-roads, entertainment and sports complexes, hotels, casinos, convention centers, and military facilities.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the franchise granted to a franchisee is nonexclusive, meaning Benihana retains significant rights regarding competing businesses. Benihana can operate or license others to operate competing restaurants, including RA® Sushi restaurants, regardless of their proximity to a franchisee's Benihana location. This includes the right to establish Benihana restaurants that might compete with or draw customers away from a franchisee's location, provided they are outside the franchisee's specified Restaurant Area.
This lack of exclusivity extends to various channels of distribution. Benihana reserves the right to engage in the production, distribution, licensing, and sale of any product or service under its trademarks through alternative channels like grocery stores, internet sales, or direct marketing, irrespective of the impact on the franchisee's restaurant. Additionally, Benihana can license others to operate Benihana Restaurants within Special Distribution Opportunities, such as airports, transportation facilities, entertainment complexes, hotels, casinos, convention centers, and military facilities.
Furthermore, Benihana maintains the right to advertise and promote the Benihana system within the franchisee's Restaurant Area and to engage in transactions with other businesses, including those that compete with the franchisee's restaurant. This includes the ability to convert and operate, or license others to operate, competing franchise systems under the Benihana brand. These provisions highlight the non-exclusive nature of the franchise agreement and the broad rights retained by Benihana, which could potentially impact a franchisee's business.