Who is responsible for attorneys' fees in an arbitration between Benihana and the franchisee?

According to Benihana's 2024 Franchise Disclosure Document, in most arbitration cases between Benihana and a franchisee, each party is responsible for covering their own attorneys' fees, expert witness fees, and other associated costs. This arrangement means that regardless of the arbitration's outcome, both Benihana and the franchisee will bear their individual expenses related to legal representation and expert consultation.

This policy can have significant financial implications for franchisees. If a franchisee enters into an arbitration with Benihana, they should be prepared to fund their own legal defense, which can be a substantial expense. This is a notable factor to consider when evaluating the potential costs and risks associated with investing in a Benihana franchise.

However, there are exceptions where the franchisee may be required to pay Benihana's legal fees. For example, if Benihana seeks injunctive relief against a franchisee for violations of Article 6 (regarding the Marks) or Article 18 (trade secrets and restrictive covenants) of the franchise agreement, the franchisee may be responsible for Benihana's court costs and reasonable attorney's fees. Additionally, if the franchise agreement is terminated due to the franchisee's default, the franchisee will be liable for all damages, costs, and expenses, including reasonable attorneys' fees, incurred by Benihana as a result of the default and termination. These exceptions highlight situations where a franchisee could face significant financial burdens beyond their own legal costs.