Under what conditions will the Benihana franchise agreement terminate automatically without further notice?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
mental body or authority; provided, however, the five (5) day cure period will be stayed if Franchisee raises a bona fide dispute as to the validity of the alleged violation of the legality of the law, ordinance, rule, or regulation at issue, and Franchisee takes action in an appropriate court or other forum to address the dispute.
- 13.2.20 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 to Franchisee.
- 13.2.21 Franchisee abandons the franchise relationship with BNC. It is an abandonment of the 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 to Franchisee.
- 13.2.22 Franchisee fails to comply with the restrictions on BENIHANA Confidential Information, or any covenants set forth in Article 6 or Article 18 of this Agreement, Franchisee misuses or makes any unauthorized use of the Marks or any other identifying characteristics of the BENIHANA System, or Franchisee otherwise materially impairs the goodwill associated the Marks or BNC's rights in the Marks. There is no cure period for an act of default under this provision.
- 13.2.23 Franchisee or its principals sell, assign, transfer, encumber, or license any
interest in Franchisee, in this Agreement, in the franchise license, or in the Restaurant without BNC's prior written consent and otherwise as permitted under this Agreement. There is no cure period for an act of default under this provision.
- 13.2.24 Franchisee violates any other obligation, provision, or condition of this Agreement not specifically identified in this Article 13.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the franchise agreement can terminate automatically under specific conditions, without Benihana needing to provide a cure period. These conditions include failing to comply with restrictions on Benihana's confidential information or misusing the brand's trademarks, selling or transferring any interest in the franchise without prior written consent from Benihana, committing three or more acts of default within a 12-month period, or if the franchisee or any individual with ownership interest is convicted of an offense punishable by imprisonment exceeding one year or any offense involving fraud, dishonesty, or moral turpitude.
For a prospective Benihana franchisee, this means that certain actions can lead to immediate termination of the franchise agreement. It is crucial to adhere strictly to the terms and conditions outlined in the agreement to avoid such termination. The absence of a cure period for these specific defaults underscores the importance of compliance.
Notably, the addendum for franchises sold in Wisconsin provides franchisees in that state with specific protections, including a 90-day written notice of termination and a 60-day period to rectify any claimed deficiency, except in cases of nonpayment, where a 10-day notice is required. This highlights the importance of understanding any state-specific regulations that may modify the standard franchise agreement. Franchisees should be aware of all the ways the agreement can be terminated to ensure they do not inadvertently breach the contract.