Does the Bft cross-default clause apply to affiliates of the developer?

According to Bft's 2025 Franchise Disclosure Document, the cross-default clause does apply to the developer's affiliates. Specifically, if the developer or any of its affiliates defaults on any agreement with Bft or its affiliates, Bft has the option to consider this a default under the Multi-Unit Agreement. This clause also extends to the owners of the developer. This provision gives Bft significant leverage over the developer and its related parties.

For a prospective Bft developer, this means that any financial or contractual issues with other Bft franchises or related businesses could trigger a default, even if the developer is otherwise in good standing under the Multi-Unit Agreement. This could include defaults on loans, supply agreements, or other franchise agreements. The cross-default provision is not uncommon in franchising, as it protects the franchisor's system-wide interests by ensuring that all related entities adhere to their contractual obligations.

The franchisee should carefully review all agreements they or their affiliates have with Bft to fully understand the scope of the cross-default provision. It is also important to maintain open communication with Bft regarding any potential financial difficulties to mitigate the risk of triggering a default. This clause highlights the importance of ensuring that all related business entities are financially stable and compliant with their respective agreements with Bft.

It is important to note that Bft has the option to trigger the cross-default, meaning they are not obligated to do so. However, the existence of this clause provides Bft with considerable discretion in how they manage their relationship with the developer and its affiliates. Franchisees should seek legal counsel to fully understand the implications of this clause and to assess the potential risks involved.