After Daniel and Miyagi defeats the Cobra Kais, and after Miyagi humiliates their master, Kreese. All of his students desert him and he hasnt had any new ones. Kreese decides to close the dojo, he then goes to to his friend, Terry, who is also the dojos owner, to turn the keys, and announces that he is leaving town. Terry decides to send him on a vacation and before he leaves, he tells Kreese that he is going to get Daniel and Miyagi. Part of his plan is to recruit a deadly karate fighter, Mike Barnes to fight Daniel in the tournament, he then pretends to be a friend of Kreese, who wants to apologize for Kreese disgraceful behavior. When Daniels invited to participate in the Karate tournament that he won last year, Miyagi believes that its not a priority. So Terry offers to train Daniel but in reality, he is putting Daniel through a gruelling training regimen as part of his plan. And Daniels constantly being hounded by Barnes. Eventually all of the training that Terry puts Daniel through and Barnes hounding, causes a rift between Daniel and Miyagi.