Can Benihana require specific provisions in a franchisee's lease agreement?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee shall acquire or lease the Location at Franchisee's expense. If Franchisee leases the Location, Franchisee must obtain BNC's prior written approval before entering into a lease agreement. Franchisee shall provide BNC with a copy of Franchisee's fully executed lease agreement immediately after signing. BNC is not required and has no obligation to negotiate the terms of Franchisee's lease. BNC
may require the inclusion of certain provisions in the lease, including, but not limited to:
(a) The requirement that Franchisee and Franchisee's landlord execute and deliver to BNC a collateral assignment of Franchisee's rights under the lease in the form attached to this Agreement as Exhibit D, pursuant to which Franchisee must, at BNC's option, assign all of Franchisee's rights under the lease to BNC or its designee upon termination or expiration of this Agreement.
(b) A provision which restricts the use of the premises solely to the operation of a BENIHANA Restaurant.
(c) A provision which prohibits Franchisee from subleasing or assigning all or any part of Franchisee's occupancy rights, or extending the term of or renewing the lease, without BNC's prior written consent.
(d) A provision giving BNC the right to enter the premises to make modifications necessary to protect the Marks or the BENIHANA System, or to cure any default under this Agreement.
(e) A provision requiring the landlord to provide BNC with written notice of any defaults by Franchisee under the lease simultaneously with the issuance of any such notices to Franchisee.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana may require the inclusion of certain provisions in the lease agreement between the franchisee and their landlord. This is to ensure the protection of Benihana's interests and the integrity of the Benihana system. Before entering into a lease agreement, a franchisee must obtain Benihana's prior written approval and provide them with a copy of the fully executed lease agreement immediately after signing. However, Benihana is not obligated to negotiate the terms of the franchisee's lease.
These provisions can include a collateral assignment of the franchisee's rights under the lease to Benihana, which allows Benihana to take over the lease if the franchise agreement is terminated or expires. Benihana may also require that the lease restricts the use of the premises solely to the operation of a Benihana Restaurant.
Furthermore, Benihana may require a provision that prohibits the franchisee from subleasing or assigning their occupancy rights, or extending or renewing the lease, without Benihana's prior written consent. Benihana may also require the right to enter the premises to make modifications necessary to protect their marks or the Benihana system, or to address any default under the franchise agreement. Finally, Benihana may require the landlord to provide them with written notice of any defaults by the franchisee under the lease, simultaneously with the issuance of such notices to the franchisee.
These requirements are fairly common in franchising, as they allow the franchisor to maintain control over the location and ensure that the franchisee is complying with the terms of the franchise agreement. A prospective Benihana franchisee should carefully review these requirements and discuss them with their landlord before signing a lease agreement.