Under what conditions will Benihana not unreasonably withhold consent to a Disposition of a Minority Ownership Interest?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
anchisee is a corporation, limited liability company or partnership) may, without BNC's prior written consent as provided in this Agreement, sell, assign, transfer, convey, or give away any direct or indirect interest in the franchise license or in Franchisee (a "Disposition"). Any purported Disposition, by operation of law or otherwise, made without BNC's written consent required by this Section 11.2 is null and void.
- 11.3 If Franchisee is an entity, any assignment, sale, pledge, or transfer of any ownership interest in Franchisee ("Ownership Interest") will be a Disposition requiring BNC's prior written consent. Unless otherwise agreed by BNC, any new owner of an Ownership Interest will be required to personally guarantee Franchisee's obligations under this Agreement by signing a Personal Guaranty in the form attached hereto as Exhibit B.
- 11.4 BNC will not unreasonably withhold its consent to a Disposition of any Ownership Interest held by an owner of less than fifty percent (50%) of Franchisee (a "Minority Ownership Interest") provided that all of the following conditions are met:
- (a) Franchisee's monetary obligations to BNC have been satisfied in full;
- (b) the seller of the Minority Ownership Interest releases all claims against BNC, agrees to remain obligated under the non-competition and non-disclosure of confidential information covenants in this Agreement, and expressly agrees to remain primarily liable under this Agreement for two years after the transfer;
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana will not unreasonably withhold consent to a Disposition of a Minority Ownership Interest if certain conditions are met. A Minority Ownership Interest is defined as any ownership stake less than 50% of the franchise.
These conditions include the franchisee fully satisfying all monetary obligations to Benihana. Additionally, the seller of the Minority Ownership Interest must release all claims against Benihana, agree to remain obligated under the non-competition and non-disclosure covenants, and expressly agree to remain primarily liable under the Franchise Agreement for two years after the transfer. Benihana also requires payment of an assignment fee of $1,000.
Furthermore, the franchisee must provide Benihana with copies of all relevant corporate or partnership documents that evidence the restrictions on further transfer imposed by the agreement. The new owner of the Minority Ownership Interest must also meet specific criteria, including demonstrating good moral character and reputation, meeting Benihana's current criteria for minority owners, executing a written agreement assuming all obligations of the seller, and signing a personal guaranty of the franchisee's obligations as required by Benihana.