Under what circumstances is Benihana or the franchisee excused from performing their obligations under the franchise agreement?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
- (t) Franchisee vacates, abandons, ceases to occupy, or loses its right to possession of the Restaurant or the Location. The cure period for an act of default under this provision is five (5) days after notice by BNC.
- (u) Franchisee abandons the franchise and franchise relationship with BNC. It shall be an abandonment of the franchise and franchise relationship with BNC if Franchisee ceases to do business at the Restaurant. The cure period for an act of default under this provision is five (5) days after notice by BNC.
- (v) Franchisee fails to comply with the restrictions on BENIHANA Confidential Information, or any covenants set forth in Article 18 or Article 6 of this Agreement, or if Franchisee misuses or make any unauthorized use of the Marks or any other identifying characteristics of the BENIHANA System, or otherwise materially impairs the goodwill associated therewith or BNC's rights therein. There shall be no cure period for an act of default under this provision.
- (w) Franchise sells, assigns, transfers, encumbers, or licenses any interest in this Agreement or in the franchise or Restaurant without the prior written consent of BNC and otherwise as permitted under this Agreement. There shall be no cure period for an act of default under this provision.
- (x) Franchisee violates any other obligation, provision, or condition of this Agreement, not specifically identified in this Article 13.
- (y) Franchisee commits three (3) or more acts of default under this Agreement within any consecutive twelve (12) month period, even if any of the three acts of default are cured by Franchisee. There shall be no cure period under this provision, so that if two prior defaults occur within a twelve (12) month period, this Agreement shall immediately terminate upon the occurrence of an a third act of default, and a notice of default delivered by BNC.
- (z) Franchisee, or any individual with an Ownership Interest in Franchisee, is convicted in a court of competent jurisdiction of (i) an offense punishable by a term of imprisonment in excess of one (1) year, or (ii) any offense for which a material element is fraud, dishonesty or moral turpitude. There shall be no cure period for an act of default under this provision.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a franchisee's failure to meet obligations under the franchise agreement can lead to termination of the agreement. Several specific instances can trigger this, some with a chance to correct the issue and others without.
Benihana outlines several scenarios where the franchisee is considered in default. These include vacating or abandoning the restaurant location, abandoning the franchise itself by ceasing business, or misusing Benihana's confidential information or trademarks. Other defaults include selling or transferring any interest in the agreement without prior written consent from Benihana, violating any other term of the agreement, or committing three or more defaults within a 12-month period.
Notably, some of these defaults, such as vacating the premises or abandoning the franchise, allow for a short cure period of five days after notice from Benihana. However, misusing confidential information, unauthorized transfer of the franchise, or repeated defaults within a year have no cure period, leading to immediate termination upon notice. Additionally, a conviction of the franchisee or any owner for offenses punishable by imprisonment for over a year, or any offense involving fraud, dishonesty, or moral turpitude, also results in immediate termination without a cure period. These stipulations highlight the importance of adhering to the franchise agreement and maintaining legal and ethical conduct to avoid losing the franchise.