Does Benihana require a collateral assignment of the franchisee's lease rights, and if so, what exhibit in the Franchise Agreement outlines the form for this assignment?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
You must buy or lease the Location at your expense. If you lease the Location, you must obtain our prior written approval before entering into a lease agreement, and you must also provide us with a copy of your fully executed lease agreement immediately after signing. (Franchise Agreement, Section 2.11). We are not required and have no obligation to negotiate the terms of your lease. We may require the inclusion of certain provisions in the lease, including, but not limited to:
- (a) The requirement that you and your landlord sign and deliver to us a collateral assignment of your rights under the lease in the form attached to the Franchise Agreement as Exhibit D, under which you must, at our option, assign all of your rights under the lease to us or our designee upon termination or expiration of the Franchise Agreement.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 36–47)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, if a franchisee chooses to lease their restaurant location, Benihana may require a collateral assignment of the franchisee's rights under the lease. This means that as a condition of approving the lease, Benihana can demand that the franchisee and their landlord sign an agreement that gives Benihana the option to take over the lease if the Franchise Agreement is terminated or expires.
The specific form for this collateral assignment is included as Exhibit D to the Franchise Agreement. This exhibit likely contains the exact legal language that will be used to assign the lease rights to Benihana.
This requirement protects Benihana by ensuring they have control over the restaurant location if the franchisee defaults or the agreement ends. For a prospective franchisee, this means they need to carefully review Exhibit D and understand the circumstances under which Benihana could exercise its option to take over the lease. It also means the franchisee's landlord must be willing to sign the collateral assignment as part of the lease agreement.