What is the typical lease term Benihana seeks for its restaurant locations?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
We typically seek to lease our restaurant locations for periods of 10 to 20 years under operating lease arrangements, with a limited number of renewal options. Our rent structure varies, but our leases generally provide for the payment of both minimum and contingent rent based on sales, as well as other expenses related to the leases such as our pro-rata share of common area maintenance, property tax and insurance expenses. Many of our lease arrangements include the opportunity to secure tenant improvement allowances to partially offset the cost of developing and opening the related restaurants. Generally, landlords recover the cost of such allowances from increased minimum rents. However, there can be no assurance that such allowances will be available to us on each project that we select for development.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana typically seeks to lease its restaurant locations for periods of 10 to 20 years under operating lease arrangements, with a limited number of renewal options. The rent structure varies, but leases generally provide for the payment of both minimum and contingent rent based on sales, as well as other expenses related to the leases such as a pro-rata share of common area maintenance, property tax, and insurance expenses.
Many lease arrangements include the opportunity to secure tenant improvement allowances to partially offset the cost of developing and opening the related restaurants. Landlords generally recover the cost of such allowances from increased minimum rents. However, there is no assurance that such allowances will be available on each project that Benihana selects for development.
For a prospective franchisee, this indicates that securing a long-term lease is a standard practice for Benihana restaurants, which can provide stability but also represents a long-term financial commitment. The inclusion of contingent rent based on sales means that rent expenses can fluctuate with business performance, potentially offering some relief during slower periods but also increasing costs during successful times. The possibility of tenant improvement allowances can help reduce initial capital expenditures, but these are not guaranteed and may affect minimum rent payments.