What standards must a Benihana franchisee meet to qualify for a Successor Franchise Agreement?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
(a) Franchisee, at the expiration of the Franchise Term and within the twenty-four (24) months prior thereto, shall not be or have been in default in the performance of any obligation under this Agreement whether or not any notice of default was provided to Franchisee;
(b) Franchisee shall have re-modeled or contracted to re-model the Restaurant, including building, signs, equipment, furnishings and décor, to an extent approved by BNC to reflect the then-current image of BENIHANA Restaurants;
(c) Franchisee shall have submitted a written application to BNC for a Successor Franchise Agreement at least three hundred and sixty-five (365) days prior to the expiration of the Franchise Term and shall have executed and returned to BNC for final approval and execution a Successor Franchise Agreement at least thirty (30) days prior to the expiration of the Franchise Term.
Any Successor Franchise Agreement issued to Franchisee shall be the then-current form of Franchise Agreement being offered to franchisees as of the date of the expiration of the Franchise Term.
The Successor Franchise Agreement may contain provisions, terms and conditions substantially different from those contained herein, including without limitation, different or increased Royalties, Advertising Contributions, operating standards, training or equipment requirements, duration or renewal terms;
(d) Franchisee meets all of BNC's then-existing legal, financial and operational standards applicable to new franchisees contained in the then-current form of franchise agreement and the thencurrent operating standards in effect for the BENIHANA System;
(e) Franchisee shall have submitted to BNC all information and documentation as reasonably requested by BNC as a prerequisite for the issuance of a franchise agreement as of the date of the expiration of the Franchise Term;
(f) Franchisee shall have tendered to BNC, in lieu of the Franchisee Fee specified in the Successor Franchisee Agreement, an administrative fee equal to twenty percent (20%) of the Franchise Fee in existence on the date of the expiration of the Franchise Term;
(g) Franchisee shall execute a general release, in the form BNC requires, of any and all claims in existence against BNC and its affiliates, successors and assigns, and their respective officers, directors,
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a franchisee seeking a Successor Franchise Agreement must meet several standards. The franchisee must not be in default of any obligations under the existing agreement within 24 months before the expiration of the franchise term. The franchisee needs to have remodeled or contracted to remodel the restaurant to reflect Benihana's current image, with approval from Benihana.
To begin the process, the franchisee must submit a written application for a Successor Franchise Agreement to Benihana at least 365 days before the current term expires and must execute and return the agreement for final approval at least 30 days before the expiration. The Successor Franchise Agreement will be based on the then-current form offered to new franchisees and may contain substantially different terms, including changes to royalties, advertising contributions, operating standards, training, equipment requirements, and the duration or renewal terms.
The franchisee must also meet all of Benihana's then-existing legal, financial, and operational standards applicable to new franchisees. They must provide all information and documentation reasonably requested by Benihana as a prerequisite for issuing a franchise agreement. In place of the standard franchise fee, the franchisee must pay an administrative fee equal to 20% of the franchise fee in effect on the expiration date of the current term. Finally, the franchisee must execute a general release of any claims against Benihana and its affiliates.
Prospective franchisees should note that the terms of the Successor Franchise Agreement can differ significantly from the original agreement. This includes potential increases in fees and changes to operating standards, which could impact the profitability and operational requirements of the franchise. Franchisees should carefully review these potential changes and assess their ability to meet the new requirements before seeking a Successor Franchise Agreement.