After Daniel and Miyagi defeats the Cobra Kais, and after Miyagi humiliates their master, Kreese, all of his students desert him. Kreese decides to close the dojo, he then goes to to his friend, Terry, who is also the dojo's owner, to turn in the keys, and announces that he is leaving town. Terry decides to send him on a vacation, and while he's away, he'll get Kreese his revenge on Daniel and Miyagi. Part of his plan is to recruit a deadly karate fighter, Mike Barnes, to fight Daniel in the tournament. Mike terrorizes Daniel and his friend, Jessica. When Daniel's invited to participate in the Karate tournament that he won last year, Miyagi believes that it's not a priority. So Terry offers to train Daniel but in reality, he is putting Daniel through a grueling training regimen as part of his plan. Eventually all of the training that Terry puts Daniel through and Barnes' hounding, causes a rift between Daniel and Miyagi.