How is the Benihana termination fee calculated?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
| NAME OF FEE | AMOUNT | DUE DATE | REMARKS |
|---|---|---|---|
| Agreement, we have the right to pay them for you and you must reimburse us for the cost of the insurance purchased plus a 5% administrative fee. | |||
| Termination Fee | Aggregate royalties paid during your three fiscal years immediately before the termination date, plus all damages, costs and expenses, including reasonable attorneys’ fees | Date of termination | If the Franchise Agreement is terminated as a result of any default under the Franchise Agreement. |
| Inspection & Testing | Cost of inspection and cost of test | On demand | If you request us to evaluate a product or supplier that we have not previously approved, you must pay us an inspection fee of $350 plus the costs of shipping the proposed product sample to us. |
Source: Item 6 — OTHER FEES (FDD pages 18–21)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the termination fee is calculated based on the aggregate royalties paid during the three fiscal years immediately preceding the termination date. In addition to the royalty payments, the fee includes all damages, costs, and expenses, including reasonable attorneys’ fees incurred by Benihana. This fee is due on the date of termination.
This termination fee applies if the Franchise Agreement is terminated due to any default by the franchisee under the Franchise Agreement. This means that if a franchisee fails to meet their obligations as outlined in the agreement, leading to termination, they will be responsible for paying this potentially substantial fee.
For a prospective Benihana franchisee, it's crucial to understand the implications of this termination fee. It highlights the importance of adhering to the terms of the Franchise Agreement to avoid default and the associated financial penalties. Franchisees should carefully review the conditions under which termination can occur and the potential costs involved, including not only the accumulated royalties but also any additional damages and legal fees.