Under what conditions will BNC refrain from operating or licensing others to operate a Benihana Restaurant within the Restaurant Area during the Franchise Term?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
1.5 During the Franchise Term, if Franchisee is in full compliance with the provisions and conditions of this Agreement, and subject to BNC's rights set forth in Section 1.6 of this Agreement, BNC will not operate or license any person or entity other than Franchisee to operate, a BENIHANA Restaurant at any location within the "Restaurant Area" specified in the Contract Data Sheet attached to this Agreement.
1.6 Nothing in this Agreement limits in any way any rights of BNC or its affiliates to: (i) own, operate, or license to others the right to own and operate, competing restaurants other than a BENIHANA Restaurant at any location, including within the Restaurant Area, including but not limited to restaurants using the trademarks RA® SUSHI or HARU®; (ii) own, operate, or license to others the right to own and operate, BENIHANA Restaurants outside the Restaurant Area, even if those BENIHANA Restaurants compete with the Restaurant or draw customers from the Restaurant Area; (iii) directly or indirectly, produce, distribute, sell (at wholesale, retail or otherwise), or license the sale of any product or service using the Marks, or other marks, through alternative channels of distribution (including, by way of example only, grocery stores, convenience stores, internet sales, catalog sales, telemarketing or other direct marketing) regardless of the proximity to, or the competitive impact on, the Restaurant; (iv) license others to use the BENIHANA System and the Marks for the operation of BENIHANA Restaurants within Special Distribution Opportunities (as defined below), including within the Restaurant Area; (v) advertise and promote the BENIHANA System within the Restaurant Area; or (vi) purchase, acquire, be acquired by, merge or affiliate with, or engage in any transaction with other businesses (whether or not these businesses are competitive with the Restaurant), including competing franchise systems with units operating in the Restaurant Area, and to convert and operate, or license others the right to operate these units under the Marks and the BENIHANA System.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana will not operate or license others to operate a Benihana Restaurant within the franchisee's Restaurant Area during the Franchise Term if the franchisee is in full compliance with the franchise agreement. This is subject to Benihana's rights as outlined in Section 1.6 of the agreement. The Franchise Term is defined as fifteen years from the restaurant's opening date. The Restaurant Area is specified in the Contract Data Sheet attached to the agreement.
However, the agreement also stipulates several exceptions to this exclusivity. Benihana retains the right to operate or license competing restaurants (excluding other Benihana restaurants) within the Restaurant Area, including brands like RA® SUSHI or HARU®. They can also operate or license Benihana restaurants outside the Restaurant Area, even if those restaurants draw customers from the franchisee's area.
Furthermore, Benihana can produce, distribute, sell, or license the sale of any product or service using the Benihana trademarks through alternative channels of distribution, such as grocery stores or internet sales, regardless of their proximity to the franchised restaurant. Benihana also reserves the right to license others to operate Benihana restaurants within Special Distribution Opportunities, even within the Restaurant Area. They can also advertise and promote the Benihana system within the Restaurant Area and engage in transactions with other businesses, including competitors.
In practical terms, while a Benihana franchisee is granted a specific Restaurant Area, this protection is limited and subject to numerous exceptions that allow Benihana to compete through other channels and brands. A prospective franchisee should carefully consider these limitations and understand that Benihana retains significant flexibility to operate or license competing businesses, even within the franchisee's defined area.