Under the Benihana Franchise Agreement assignment, what obligation does the Assignor undertake regarding the operation of the Franchised Business?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
commitments, duties and liabilities under the Franchise Agreement. Without limiting the foregoing, Assignor irrevocably and unconditionally guarantees to BNC (i) that Assignee will pay all amounts to be paid and otherwise comply with all provisions of the Franchise Agreement and any other agreement between Assignor and BNC or its affiliates concerning the operation of the Franchised Business, and (ii) that if Assignee defaults in making any such payments or complying with any such provisions, Assignor shall pay forthwith upon demand all amounts due and owing BNC and all damages that may arise as a result of any such non-compliance.
In the enforcement of any of its rights against Assignor, BNC may proceed as if Assignor was the primary obligor under the Franchise Agreement.
Assignor waives any right to require BNC to first proceed against Assignee or to proceed against or exhaust any security (if any) held by BNC or to pursue any other remedy available to it before proceeding against Assignor.
No dealing between BNC and Assignee shall exonerate, release, discharge or in any way reduce the obligations of Assignor hereunder, in whole or in part, and in particular and without limiting the generality of the foregoing, BNC may modify or amend the Franchise Agreement, grant any indulgence, release, postponement or extension of time, waive any term or condition of the Franchise Agreement, or any obligation of Assignee, take or release any securities or other guarantees for the performance by Assignee of any of its obligations, and otherwise deal with Assignee as BNC may see fit without affecting, lessening or limiting in any way the liability of Assignor.
Notwithstanding any assignment for the general benefit of creditors, bankruptcy, or other act of insolvency by Assignee, and notwithstanding any rejection, disaffirmance, or disclaimer of this Assignment or the Franchise Agreement, Assignor shall continue to be fully liable.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, an assignor in a franchise agreement assignment undertakes significant obligations to ensure the continued performance of the franchise. Specifically, the assignor irrevocably guarantees that the assignee will fulfill all payment obligations and comply with all provisions of the Franchise Agreement. This guarantee extends to any other agreements between the assignor and Benihana or its affiliates concerning the operation of the franchised business. Should the assignee default on payments or fail to comply with any provisions, the assignor is obligated to immediately pay all amounts due to Benihana and cover any damages resulting from the non-compliance.
Benihana retains the right to proceed directly against the assignor as if they were the primary obligor under the Franchise Agreement, without needing to first pursue the assignee. The assignor waives any right to require Benihana to initially target the assignee or exhaust any available security before seeking recourse from the assignor. This means Benihana has considerable latitude to enforce its rights against the assignor in case of any default by the assignee.
Furthermore, any dealings or modifications to the Franchise Agreement between Benihana and the assignee do not release the assignor from their obligations. Benihana can modify or amend the Franchise Agreement, grant indulgences, release postponements, waive terms, or take securities from the assignee without diminishing the assignor's liability. Even in situations of bankruptcy or insolvency of the assignee, the assignor remains fully liable, ensuring Benihana's interests are protected regardless of the assignee's financial status. This comprehensive set of obligations underscores the significant risk and responsibility the assignor retains even after transferring the franchise rights.