Under what condition will Benihana not operate or license another Benihana Restaurant within the Restaurant Area?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
During the term of your franchise agreement, if you are in full compliance with the Franchise Agreement, we will not operate or license any person or entity other than you to operate a BENIHANA Restaurant at any location that is within the "Restaurant Area" identified in the Contract Data Sheet attached to your Franchise Agreement. For franchises offered under this Disclosure Document, the restaurant area granted may be a zero to threemile radius from the franchisee's BENIHANA Restaurant, depending on market circumstances. You may face competition from other BENIHANA franchisees and company-owned restaurants located outside of the Restaurant Area, from businesses that we own, from other channels of distribution, and from competitive brands operated or controlled by us or our affiliates or parents.
As described previously in this Disclosure Document, we and BOT have established BENIHANA Restaurants and franchises using the Marks in various locations in the United States and elsewhere. We will continue to open and operate company-owned restaurants and to license others to operate franchises. You do not receive the right to acquire additional franchises within your Restaurant Area. We and our affiliates may operate, or license third parties the right to operate, other types of restaurants within the Restaurant Area (i.e., other than those featuring the teppanyaki or hibachi style of cooking) including, without limitation, Asian-style fast food and sushi restaurants, RA SUSHI restaurants, and bars, or other businesses which may use our trademarks or trade names (but not the names BENIHANA or "BENIHANA OF TOKYO") and may sell or license others to sell food products using such trademarks or trade names on a wholesale or retail basis in the Restaurant Area.
Source: Item 12 — TERRITORY (FDD pages 47–49)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana will not operate or license another Benihana restaurant within a franchisee's designated "Restaurant Area" if the franchisee is in full compliance with the Franchise Agreement. The Restaurant Area for franchises offered under the 2024 Disclosure Document may range from zero to three miles in radius from the franchisee's Benihana Restaurant, depending on market circumstances. This provides a limited degree of territorial protection, but it is contingent on the franchisee's adherence to the agreement.
However, the FDD also clarifies that this territorial protection is not absolute. Benihana retains the right to operate or license other types of restaurants, including Asian-style fast food, sushi restaurants like RA Sushi, and bars, within the Restaurant Area. These establishments may use Benihana's trademarks or trade names, excluding "Benihana" or "Benihana of Tokyo." Additionally, Benihana and its affiliates can engage in the production, distribution, and sale of any product or service under their marks through alternative channels like grocery stores or internet sales, regardless of the impact on the franchisee's restaurant.
Furthermore, Benihana can operate or license Benihana Restaurants outside the Restaurant Area, even if they compete with or draw customers from the franchisee's location. Benihana also has the right to license the Benihana System and Marks for operations within Special Distribution Opportunities, such as airports, transportation facilities, entertainment complexes, hotels, casinos, convention centers, and military facilities. These exceptions significantly limit the scope of the territorial protection, as Benihana can introduce competing concepts and sales channels within or near the franchisee's territory.
Prospective franchisees should be aware that the territorial protection offered by Benihana is conditional and subject to numerous exceptions. The franchisee's compliance with the Franchise Agreement is crucial for maintaining even this limited protection. The presence of other Benihana-related businesses and alternative distribution channels within or near the Restaurant Area could impact the franchisee's revenue and market share. It is important for potential franchisees to carefully consider these factors and conduct thorough market research before investing in a Benihana franchise.