Upon termination or expiration of the Benihana franchise agreement, is the franchisee required to assign the restaurant's lease to Benihana, and under what condition?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
specific changes BNC may request for that purpose. Franchisee must furnish BNC with evidence satisfactory to BNC of Franchisee's compliance with this obligation within seven (7) days after termination or expiration of this Agreement.
- 14.1.7.1 If Franchisee fails to comply with the requirements of this Section 14.1.7, in addition to any other rights BNC has under this Agreement, BNC has the right to enter upon the premises where the Restaurant was operated, without being guilty of trespass or any other tort, for the purpose of making or causing to be made, at Franchisee's expense, the changes required by this Agreement.
- 14.1.8 Franchisee must promptly pay all sums owing to BNC and its subsidiaries and affiliates.
- 14.1.9 Franchisee must take all actions necessary to cancel any assumed names or equivalent registrations containing any of the Marks.
- 14.1.10 Franchisee must: (i) at BNC's option, assign to BNC, or its designee, any interest Franchisee has in any lease for the Location and the Restaurant; and (ii) take all steps necessary to assign to BNC or its designee the telephone numbers used in connection with operating the Restaurant as provided in the Conditional Assignment of Telephone Numbers attached as Exhibit C hereto.
- 14.2 If Franchisee continues to operate, or subsequently begins to operate any other business at the Location, Franchisee must not use any reproduction, counterfeit, copy, or colorable
imitation of the Marks or the BENIHANA trade dress, either in connection with such other business or the promotion thereof, and Franchisee must not use any designation of origin or description or representation that falsely suggests or represents an association or connection with BNC constituting unfair competition.
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, upon termination or expiration of the franchise agreement, the franchisee may be required to assign their interest in the restaurant lease to Benihana or its designee, but this is at Benihana's option.
This requirement is often part of the initial agreement, where Benihana may stipulate that the franchisee's lease includes a collateral assignment to Benihana. This collateral assignment, detailed in an exhibit to the franchise agreement, allows Benihana to take over the lease if the agreement terminates or expires. The landlord also acknowledges that if the Franchise Agreement is terminated or expires, or if the Tenant defaults under the Lease, Tenant shall, at Benihana's option, assign to Benihana any and all interest Tenant has in the Lease, including any renewal rights.
If Benihana elects to accept the assignment of the lease, they must notify the landlord in writing within 30 days of the termination or expiration of the franchise agreement or upon receiving notice of the franchisee's default under the lease. Benihana must then execute and deliver a lease to the landlord with the same terms and conditions as the original lease, and take possession of the premises within 30 days of notifying the landlord, at which point they will begin paying rent. However, Benihana's leasehold interest will not be subject to any default claims between the landlord and the franchisee.
The landlord consents to this assignment, and Benihana has the right to further assign the lease or sublease the premises to a third party, provided the landlord's consent is not unreasonably withheld. If the landlord refuses to consent to the assignment or sublease, Benihana has no further obligations under the lease. This ensures Benihana can maintain control over the restaurant location and continue operations or re-franchise the location as needed.