For a Third-Party Disposition of a Controlling Ownership Interest, what conditions must be satisfied to Benihana's satisfaction for Benihana to consent?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
ve (45) days from BNC's acceptance.
- 11.5.4 If BNC waives its right of first refusal, BNC will, within fifteen (15) days after the expiration of the thirty-day period set forth in Subsection 11.5.2 above, advise Franchisee whether BNC consents to the Third-Party Disposition. If BNC consents to the Third-Party Disposition, then Franchisee may conclude the sale to the Proposed Transferee on the terms and conditions of the written agreement submitted to BNC.
- 11.5.5 A change of any material terms of an agreement for a Third-Party Disposition, including but not limited to price, payment terms, interest being transferred by Franchisee, or the identity of the Proposed Transferee or any holder of any Ownership Interest in the Proposed Transferee, is deemed a new offer, subject to BNC's right of first refusal contained herein.
- 11.6 BNC agrees not to unreasonably withhold its consent to any Third-Party Disposition of a Controlling Ownership Interest provided: (a) BNC has not exercised its right of first refusal granted under Section 11.5; (b) all of Franchisee's monetary obligations to BNC have been satisfied in full; (c) Franchisee releases all claims it may have against BNC and agrees to remain obligated under the non-competition and non-disclosure of confidential information covenants in this Agreement; (d) Franchisee expressly agrees to remain primarily liable under this Agreement for three (3) years after the Third-Party Disposition; (e) BNC is paid an assignment fee of $10,000; and (e) the Proposed Transferee: (i) is of good moral ch
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana's consent to a Third-Party Disposition of a Controlling Ownership Interest is contingent upon several conditions being met to their satisfaction. These conditions ensure that Benihana maintains control over who operates their franchises and that their financial interests are protected.
First, Benihana must not have exercised its right of first refusal. The franchisee must have satisfied all monetary obligations to Benihana in full and must release all claims against Benihana, while remaining obligated under non-competition and non-disclosure agreements. The franchisee must also agree to remain primarily liable under the Franchise Agreement for three years after the Third-Party Disposition. Additionally, Benihana must be paid an assignment fee of $10,000.
Furthermore, the proposed transferee must meet specific criteria. They must be of good moral character and reputation and meet Benihana's current standards for new franchisees, including completing all required training. The transferee must also execute a written agreement assuming all of the franchisee's obligations, provide personal guaranties from all principals designated by Benihana, have a General Manager who has completed the required training, and provide copies of all relevant corporate or partnership documents evidencing transfer restrictions. If all these conditions are not met to Benihana's satisfaction, Benihana has the right to refuse consent to the Third-Party Disposition.