What is the potential liability for Benihana if they are not using an approved chip-and-pin point-of-sale device?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
We estimate that approximately 80% of our sales are by credit or debit cards. Other restaurants and retailers have experienced security breaches in which credit and debit card information has been stolen. We may in the future become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and we may also be subject to lawsuits or other proceedings relating to these types of incidents. Further, in 2015, the major credit card networks shifted the liability associated with EMV (Europay/Mastercard/Visa) chip card technology to the merchants. With this liability shift, any restaurant or merchant that is not using an approved chip-and-pin point-of-sale device would be liable for counterfeit or fraudulent charges.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, if a Benihana restaurant does not use an approved chip-and-pin point-of-sale device, the restaurant would be liable for counterfeit or fraudulent charges. This is due to a shift in liability implemented by major credit card networks in 2015 related to EMV (Europay/Mastercard/Visa) chip card technology.
This means that if a Benihana franchisee chooses not to use an approved chip-and-pin system, they will be financially responsible for any losses resulting from fraudulent credit or debit card transactions. Given that approximately 80% of Benihana's sales are processed through credit or debit cards, this liability could potentially be significant.
For a prospective franchisee, this highlights the importance of adhering to Benihana's technology standards and using approved point-of-sale systems. While there may be upfront costs associated with implementing and maintaining these systems, the potential financial risk of not doing so could be substantial, making it a critical consideration for managing business operations and protecting against financial losses.