What representation does the Benihana franchisee make regarding the account identified for automatic debit entries?

The 2024 Benihana Franchise Disclosure Document outlines the circumstances under which Benihana National Corp. (BNC) can debit a franchisee's bank account. If an inspection, review, or audit reveals that a Benihana franchisee understated any payments in a report submitted to BNC, BNC has the right to immediately debit the amount understated from the franchisee's bank account. This debit will also include interest from the date the amount was due until it is debited or paid. The interest rate is set at 18% per annum, or the maximum rate permitted by law, whichever is less.

Furthermore, if the understatement in any report is 3% or more, Benihana can debit the franchisee's bank account for not only the monies owed with interest but also for any and all costs and expenses incurred by BNC in connection with the inspection, review, or audit. These costs may include travel, lodging, wages, and reasonable accounting and legal costs. These remedies are in addition to any other remedies BNC may have under the Franchise Agreement.

This clause in the Benihana franchise agreement allows Benihana to directly recover underreported payments and associated costs from the franchisee's account, subject to certain conditions. It is important for prospective franchisees to understand the implications of this clause, including the potential for unexpected debits and the importance of accurate reporting. Franchisees should maintain meticulous records and ensure accurate reporting to avoid such situations. This type of clause is not uncommon in franchise agreements, as it provides franchisors with a mechanism to ensure accurate financial reporting and compliance.