Under what conditions can Benihana unreasonably withhold consent to a franchise disposition?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
arantee Franchisee's obligations under this Agreement by signing a Personal Guaranty substantially in the form of Exhibit B hereto.
- 11.4 BNC agrees not to unreasonably withhold its consent to any Disposition provided: (a) BNC has not exercised its right of first refusal granted in Section 11.5; (b) all of Franchisee's monetary obligations to BNC have been satisfied in full; (c) Franchisee releases any and all claims it may have against BNC, agrees to remain obligated under the non-competition and non-disclosure of confidential information covenants contained herein, and expressly agrees to remain primarily liable under this Agreement after the transfer for a period of three (3) years (or for the period in which Franchisee receives payment from the Transferee, if longer than three years); (d) BNC is paid an assignment fee of $10,000; (e) the Transferee (i) meets BNC's then-current criteria for new Franchisees, (ii) executes a written agreement assuming all of the Franchisee's obligations under this Agreement and a duplicate original thereof is delivered to BNC, (iii) is of good moral character and reputation, (iv) has a General Manager (who need not be a principal of the Transferee) who has completed the training course then in effect for prospective Franchisees, and (v) has provided BNC with copies of all relevant corporate or partnership documents which shall, among other things, evidence the restrictions on transfer imposed by this Agreement. If any
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, Benihana agrees not to unreasonably withhold its consent to a franchise disposition if certain conditions are met. These conditions include Benihana not exercising its right of first refusal, the franchisee satisfying all monetary obligations to Benihana, and the franchisee releasing all claims against Benihana while remaining obligated under non-competition and non-disclosure agreements for a period of three years or the period in which the franchisee receives payment from the transferee, whichever is longer.
Additional conditions include the payment of a $10,000 assignment fee to Benihana. The transferee must also meet Benihana's then-current criteria for new franchisees, execute a written agreement assuming all of the franchisee's obligations, be of good moral character and reputation, have a General Manager who has completed the required training course, and provide Benihana with all relevant corporate or partnership documents.
If any of these conditions are not met to Benihana's satisfaction, Benihana has the right to refuse consent to the disposition. This means that if a franchisee fails to meet any of the specified requirements, Benihana is within its rights to deny the transfer, regardless of whether the reason for dissatisfaction is considered reasonable by an outside party. This clause gives Benihana significant control over who becomes a new franchisee and ensures compliance with their standards and financial interests.