Does Benihana require approval of the site and contract before a franchisee acquires the site for their Benihana Restaurant?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
You must obtain our approval of the site for your BENIHANA Restaurant before you acquire the site. You must also obtain our approval of any contract of sale or lease for the BENIHANA Restaurant before you sign the contract or lease. At our request, you and your landlord must sign a Collateral Assignment of Lease with us (Exhibit D to the Franchise Agreement) which assigns your lease to us under certain circumstances, including if your Franchise Agreement is terminated.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 28–33)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, franchisees must secure Benihana's approval of the restaurant site before acquiring it. Furthermore, Benihana requires approval of any contract of sale or lease before the franchisee signs it. This requirement ensures that the location and contractual terms align with Benihana's standards and protect its interests.
Benihana also stipulates that, upon request, the franchisee and their landlord must sign a Collateral Assignment of Lease, which assigns the lease to Benihana under specific conditions, such as the termination of the Franchise Agreement. This provision gives Benihana a degree of control over the restaurant location, even if the franchisee's agreement ends.
These stipulations are common in franchising, as they allow franchisors like Benihana to maintain brand consistency and protect their investment. By controlling site selection and lease terms, Benihana can minimize the risk of a franchisee operating in a location that does not meet its standards or having unfavorable lease conditions. Prospective franchisees should carefully review Exhibit D, referenced in the FDD, to fully understand the implications of the Collateral Assignment of Lease.