Can Benihana purchase, merge, or affiliate with other businesses, including competing franchise systems, even if they operate in the Restaurant Area of my Benihana franchise?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
We and our affiliates have the right 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 your Restaurant, including but not limited to restaurants using the trademarks RA SUSHI and HARU; (ii) own and operate, or license others the right to own and operate, BENIHANA Restaurants outside the Restaurant Area, even if these BENIHANA Restaurants might 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, your 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.
Source: Item 12 — TERRITORY (FDD pages 47–49)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana and its affiliates have extensive rights regarding business operations and competitive ventures, some of which directly impact a franchisee's territory. Benihana retains the right to purchase, acquire, merge, or affiliate with other businesses, including competing franchise systems, regardless of whether these businesses operate within a franchisee's Restaurant Area. This clause gives Benihana considerable latitude to alter the competitive landscape, even within an area a franchisee might expect to be somewhat protected.
Benihana also has the right to own and operate, or license others to operate, competing restaurants other than a Benihana Restaurant at any location, irrespective of their proximity to a franchisee's restaurant. This includes restaurants using trademarks like RA Sushi and HARU. Furthermore, Benihana can engage in the production, distribution, and sale of any product or service under their trademarks through various channels, such as grocery stores or internet sales, without regard to the impact on a franchisee's restaurant. These activities can occur within or outside the Restaurant Area, and Benihana is not obligated to compensate franchisees for exercising these rights.
These provisions highlight the limited territorial protection offered to Benihana franchisees. While a franchisee is granted a Restaurant Area, Benihana retains significant control over competitive activities within and around that area. A prospective franchisee should carefully consider these factors and evaluate the potential impact of competition from Benihana's other ventures and affiliates. Understanding the scope of these rights is crucial for assessing the risks and opportunities associated with investing in a Benihana franchise.