Under what condition will the Benihana Franchise Agreement terminate automatically without further notice?

According to Benihana's 2024 Franchise Disclosure Document, the franchise agreement will terminate immediately upon the occurrence of a third act of default within a twelve-month period, provided that Benihana delivers a notice of default and termination to the franchisee. This is outlined in section 13.2.25 of the agreement. This termination occurs without any opportunity for the franchisee to cure the third default.

This provision means that Benihana franchisees must maintain strict compliance with the franchise agreement to avoid multiple defaults within a short timeframe. Even if a franchisee corrects the first two defaults, a third default within the same twelve-month window will trigger immediate termination. This is a stricter standard than many franchises, which usually allow a cure period for each default.

This immediate termination clause underscores the importance of operational consistency and adherence to Benihana's standards. Franchisees should ensure they have robust systems in place to prevent recurring defaults. The franchisee should also be aware that the definition of what constitutes a default is defined in Article 13 of the franchise agreement.

It is important to note that this clause does not apply to franchises sold in Wisconsin. For franchises sold in Wisconsin, Benihana is required to provide at least 90 days' prior written notice of termination and allow 60 days to rectify any claimed deficiency, according to the addendum to the franchise agreement for the state of Wisconsin.