Under what conditions does Benihana charge a termination fee?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
| NAME OF FEE | AMOUNT | DUE DATE | REMARKS |
|---|---|---|---|
| Agreement, we have the right to pay them for you and you must reimburse us for the cost of the insurance purchased plus a 5% administrative fee. | |||
| Termination Fee | Aggregate royalties paid during your three fiscal years immediately before the termination date, plus all damages, costs and expenses, including reasonable attorneys’ fees | Date of termination | If the Franchise Agreement is terminated as a result of any default under the Franchise Agreement. |
| Inspection & Testing | Cost of inspection and cost of test | On demand | If you request us to evaluate a product or supplier that we have not previously approved, you must pay us an inspection fee of $350 plus the costs of shipping the proposed product sample to us. |
Source: Item 6 — OTHER FEES (FDD pages 18–21)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, a termination fee is charged if the Franchise Agreement is terminated due to any default by the franchisee under the Franchise Agreement. The amount of the termination fee is based on the aggregate royalties paid during the three fiscal years immediately before the termination date. In addition to the aggregate royalties, the franchisee is responsible for all damages, costs, and expenses, including reasonable attorneys’ fees. The termination fee is due on the date of termination.
This means that if a Benihana franchisee violates the terms of their agreement and Benihana terminates the agreement as a result, the franchisee will owe a significant termination fee. This fee is designed to compensate Benihana for losses incurred due to the franchisee's default and the early termination of the agreement. The inclusion of attorney's fees indicates that Benihana intends to pursue legal action to recover these costs if necessary.
Prospective Benihana franchisees should carefully review the Franchise Agreement to understand what constitutes a default and the potential financial consequences of such a default leading to termination. Understanding these terms is crucial to avoiding situations that could lead to the assessment of a termination fee. Franchisees should also factor in the potential for this fee when assessing the overall financial risks and obligations associated with the franchise.