What is the potential radius of the Restaurant Area granted to a Benihana franchisee?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
Except as expressly provided in this Item 12, we do not offer you an exclusive or protected territory.
During the term of your franchise agreement, if you are in full compliance with the Franchise Agreement, we will not operate or license any person or entity other than you to operate a BENIHANA Restaurant at any location that is within the "Restaurant Area" identified in the Contract Data Sheet attached to your Franchise Agreement. For franchises offered under this Disclosure Document, the restaurant area granted may be a zero to threemile radius from the franchisee's BENIHANA Restaurant, depending on market circumstances. You may face competition from other BENIHANA franchisees and company-owned restaurants located outside of the Restaurant Area, from businesses that we own, from other channels of distribution, and from competitive brands operated or controlled by us or our affiliates or parents.
Source: Item 12 — TERRITORY (FDD pages 47–49)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, franchisees may be granted a Restaurant Area, but it is not an exclusive or protected territory. The radius of this Restaurant Area can range from zero to three miles from the franchisee's Benihana Restaurant, depending on market circumstances. This means that the size and shape of the territory is not fixed and is subject to Benihana's discretion based on factors like population density and competition.
Even within the Restaurant Area, Benihana retains significant rights. Benihana can operate or license other businesses, including restaurants that do not feature teppanyaki or hibachi-style cooking, such as Asian-style fast food and sushi restaurants like RA Sushi. These other businesses can use Benihana's trademarks and trade names (excluding "BENIHANA" or "BENIHANA OF TOKYO") and sell food products within the Restaurant Area. Benihana also reserves the right to engage in alternative channels of distribution, such as internet sales or grocery stores, within the Restaurant Area.
Prospective franchisees should be aware that Benihana and its affiliates can operate competing restaurants outside the Restaurant Area, even if those restaurants draw customers from within the franchisee's area. Additionally, Benihana is not obligated to pay the franchisee if it exercises any of its rights within the Restaurant Area. This lack of exclusivity and the potential for competition from both within and outside the Restaurant Area are important factors for potential franchisees to consider.
Given the variability in territory size and the potential for internal competition, prospective franchisees should carefully evaluate the specific market circumstances and negotiate the terms of their Franchise Agreement to ensure a viable business opportunity. It is crucial to understand the competitive landscape and the potential impact of Benihana's retained rights on the profitability of the franchise.