What is Benihana's revenue generation model for managed or licensed restaurants and venues?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
For those restaurants and venues that are
managed or licensed, we generate management fee revenue based on top-line revenues and incentive fee revenue based on a percentage of the location's revenues and net profits.
Management agreements typically call for a management fee based on a percentage of revenue, a monthly marketing fee based on a percentage of revenues and an incentive fee based on a managed venue's net profits. Similarly, royalties from the licensee in license agreements are generally based on a percentage of the licensed restaurant's revenue. These management, license and incentive fees are recognized as revenue in the period the restaurant's sales occur. Initial licensing fees and upfront fees related to management and license agreements are recognized as revenue on a straight-line basis over the term of the agreement.
We evaluate the performance of our managed and licensed properties based on sales growth, a key driver for management and license fees, and on improvements in operating profitability margins, which, combined with sales, drives incentive fee growth.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the company generates revenue from managed or licensed restaurants and venues through a combination of fees and royalties. Management agreements typically include a management fee, a monthly marketing fee, and an incentive fee. The management fee and monthly marketing fee are calculated as a percentage of the venue's revenue. The incentive fee is based on a percentage of the managed venue's net profits.
Similarly, for licensed restaurants, Benihana collects royalties that are generally based on a percentage of the licensed restaurant's revenue. These management, license, and incentive fees are recognized as revenue in the period the restaurant's sales occur. Additionally, initial licensing fees and upfront fees related to management and license agreements are recognized as revenue on a straight-line basis over the term of the agreement.
Benihana evaluates the performance of managed and licensed properties based on sales growth and improvements in operating profitability margins. Sales growth is a key driver for management and license fees, while improvements in operating profitability margins, combined with sales, drive incentive fee growth. This approach aligns Benihana's financial interests with the success of the managed and licensed venues, incentivizing them to support and improve the performance of these locations.