Under what financial condition can Benihana terminate the Franchise Agreement after the first five years?

According to Benihana's 2024 Franchise Disclosure Document, Benihana has the option to terminate the Franchise Agreement after the first five years of the franchise term if the average monthly sales for any prior six-month period are below $400,000. Benihana must provide the franchisee with ten days' notice of termination.

This condition means that a Benihana franchisee must maintain a certain level of sales to keep the franchise agreement in good standing. If sales drop below the specified threshold, Benihana can terminate the agreement, potentially resulting in the franchisee losing their investment and the right to operate the Benihana restaurant.

This type of clause is not uncommon in franchise agreements, as franchisors want to ensure that franchisees are performing adequately to maintain the brand's reputation and profitability. Prospective franchisees should carefully consider this sales threshold and evaluate their ability to meet or exceed it before investing in a Benihana franchise. Franchisees should also consider what factors might cause sales to dip below this level and how they might mitigate those risks.