After a transfer, does the Benihana franchisee remain primarily liable under the Agreement?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
arantee Franchisee's obligations under this Agreement by signing a Personal Guaranty substantially in the form of Exhibit B hereto.
- 11.4 BNC agrees not to unreasonably withhold its consent to any Disposition provided: (a) BNC has not exercised its right of first refusal granted in Section 11.5; (b) all of Franchisee's monetary obligations to BNC have been satisfied in full; (c) Franchisee releases any and all claims it may have against BNC, agrees to remain obligated under the non-competition and non-disclosure of confidential information covenants contained herein, and expressly agrees to remain primarily liable under this Agreement after the transfer for a period of three (3) years (or for the period in which Franchisee receives payment from the Transferee, if longer than three years); (d) BNC is paid an assignment fee of $10,000; (e) the Transferee (i) meets BNC's then-current criteria for new Franchisees, (ii) executes a written agreement assuming all of the Franchisee's obligations under this Agreement and a duplicate original thereof is delivered to BNC, (iii) is of good moral character and reputation, (iv) has a General Manager (who need not be a principal of the Transferee) who has completed the training course then in effect for prospective Franchisees, and (v) has provided BN
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a franchisee does remain primarily liable under the agreement after a transfer under specific conditions. Benihana must not have exercised its right of first refusal and all of the franchisee's monetary obligations to Benihana must be satisfied in full. The franchisee must also release any claims against Benihana and agree to remain obligated under non-competition and non-disclosure covenants.
Specifically, the franchisee expressly agrees to remain primarily liable under the Franchise Agreement after the transfer for three years. This liability period extends if the franchisee receives payments from the transferee for longer than three years, in which case the liability continues for the duration of those payments.
In addition to the liability clause, Benihana also requires an assignment fee of $10,000. The transferee must meet Benihana's current criteria for new franchisees, execute a written agreement assuming all of the franchisee's obligations, be of good moral character, have a General Manager who has completed the required training, and provide all relevant corporate or partnership documents to Benihana.