After termination or expiration of the Benihana Franchise Agreement, what costs and expenses is the franchisee obligated to pay to BNC?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
(k) Franchisee shall pay to BNC all damages, costs, and expenses, including reasonable attorneys' fees, incurred by BNC after termination or expiration of this Agreement in obtaining injunctive or other relief for the enforcement of any provisions of this Agreement.
(i) Franchisee shall promptly pay all sums owing to BNC and its subsidiaries and affiliates.
(j) If this Agreement is terminated as a result of any default under this Agreement, Franchisee shall promptly pay to BNC the Termination Fee (as defined in this Section) in addition to all damages, costs and expenses, including reasonable attorneys' fees, incurred by BNC as a result of the default, which obligation shall give rise to and remain, until paid in full, a lien in favor of BNC against any and all of the personal property, furnishings, equipment, signs, fixtures and inventory related to the operation of the Restaurant.
The "Termination Fee" shall be equal to the aggregate Royalties paid during Franchisee's three (3) fiscal years immediately before the termination date.
If Franchisee has not operated the Restaurant for three (3) fiscal years immediately before the termination date, the Termination Fee shall be equal to the Royalties paid for all full fiscal years completed prior to the termination date divided by the number of such full fiscal years and the result thereof multiplied by three (3).
- (e) Franchisee shall immediately make or cause to be made such modifications and alterations to the Location and the Restaurant to distinguish the appearance of the Location and Restaurant from other BENIHANA Restaurants and shall make such specific additional changes thereto as BNC may request for that purpose.
If Franchisee fails or refuses to comply with the requirements of this Section 14.1 (e), in addition to any other rights BNC has under this Agreement, BNC shall have the right to enter upon the premises where the Restaurant was operated, without being guilty of trespass or any other tort, for the purpose of making or causing to be made such changes as may be required, at Franchisee's expense, which expense Franchisee agrees to pay upon demand.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, upon termination or expiration of the Franchise Agreement, a franchisee is obligated to cover several costs and expenses. If the agreement is terminated due to a default by the franchisee, Benihana requires the franchisee to promptly pay a Termination Fee, in addition to all damages, costs, and expenses, including reasonable attorneys' fees, incurred by Benihana because of the default. This obligation creates a lien in favor of Benihana against the personal property related to the restaurant's operation until the amount is paid in full. The Termination Fee is equal to the aggregate Royalties paid during the three fiscal years immediately before the termination date. If the restaurant has not been operated for three fiscal years, the Termination Fee is calculated by dividing the Royalties paid for all full fiscal years by the number of those years and then multiplying the result by three.
Additionally, the franchisee is responsible for all damages, costs, and expenses, including reasonable attorneys' fees, that Benihana incurs after the termination or expiration of the agreement while enforcing any of its provisions through injunctive or other relief. The franchisee must also promptly pay all sums owed to Benihana, its subsidiaries, and affiliates.
Furthermore, the franchisee is responsible for the expense of modifications and alterations to the Location and the Restaurant to distinguish its appearance from other Benihana Restaurants. If the franchisee fails to make these changes, Benihana has the right to enter the premises and make the changes at the franchisee's expense, which the franchisee agrees to pay upon demand. These financial obligations are in addition to the operational requirements such as ceasing restaurant operations, discontinuing use of Benihana's trademarks and confidential information, and canceling assumed names containing Benihana's marks.