Bhc 2025 Franchise FAQ - FDD Ninja

Question 1

What costs and expenses must the Bhc franchisee pay to the franchisor related to site design and review?

Accepted Answer

h it is located, and analyze area income figures, traffic patterns, visibility, population density, competition, zoning, parking, accessibility, and other related, relevant circumstances. Franchisor's final review and consent to

Source: Item 23 — Receipts (FDD pages 52–230)

Question 2

What is the estimated total initial investment range for a Bhc franchise?

Accepted Answer

#### **YOUR ESTIMATED INITIAL INVESTMENT: First Affiliate Franchised BHC Restaurant**

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#### **Item 7: Estimated Initial Investment:**

The first table in this Item 7 describes your estimated initial investment to commence operation of your Master Franchise Business in the Development Area. In addition, (i) given that you must establish and operate through an affiliate at least one (1) Affiliate Franchised BHC Restaurant within the Development Area pursuant to separate Franchise Agreement before you may grant subfranchises to third parties, and (ii) a second table in this Item 7 that describes your affiliate's estimated initial investment to establish and begin operation of the first Affiliate Franchised BHC Restaurant within the Development Area.

#### **YOUR ESTIMATED INITIAL INVESTMENT: (Master Franchise Business)**

Source: Item 7 — Estimated Initial Investment: (FDD pages 18–25)

Question 3

What experience does the Bhc management team have in the restaurant industry?

Accepted Answer

[Item 2: Business Experience]

The individuals at BHC who has management responsibility are as follows:

Chief Executive Officer: David Hosup Song

Mr. David Hosup Song has been BHC's Chief Executive Officer since December 2023 to current. Mr. Song has been with BHC Korea since 2023 where he served as the CEO of the overseas business department.

Managing Director / Head of US: Brian Shin.

Mr. Brian Shin has been BHC's Managing Director / Head of US since August 2024 to current. Prior to this, he was with Restaurant Brands International since 2017 and served in numerous roles, including Head of Franchising and Franchise Business Partner for Popeyes Louisiana Kitchen.

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- (v) Training Instructor: Brian Shin has been with BHC USA LLC since 2024 where he served as the Head of US for BHC-owned Restaurants.

The below training instructors we provide are starting their initial year with the Franchisor but will have had approximately 7-10 years of experience in the field with regard to each subject being taught.

Source: Item 2 — Business Experience (FDD page 11)

Question 4

What support does Bhc provide to Master Franchisees after they commence operations of their Master Franchisee Business?

Accepted Answer

you with lists of Supplies, including the Products, and Designated Suppliers, and sell Supplies to you.
- (2) After you commence operations of your Master Franchisee Business, we will:
  - (i) Provide opening support services to you immediately before the opening of your first Affiliate Franchised BHC Restaurant in the Development Area as described below.
  - (ii) Provide the initial training program described below to additional and replacement trainees for a fee.
  - (iii) Provide the Re-training Program described below to training supervisor or district manager of your Subfranchisees for a fee.
  - (iv) Review and discuss with you the annual business plan you submit.
  - (v) Provide periodic updates to the Manuals.
  - (vi) Provide you with updated lists of Approved Supplies and Designated Suppliers, and continue to sell Approved Supplies to you.
  - (vii) Evaluate your requests to approve Alternative Supplies and Alternative Suppliers.

#### (3) Pre-Opening Assistance for Affiliate Franchised BHC Restaurant

Before you open your Affiliate Franchised BHC Restaurant, we will:

- (i) Not assist your Affiliate Franchisee in locating a site and negotiating the purchase or lease of the site.
- (ii) Not provide assistance with conforming the premises to local ordinances and building codes and obtaining any required permits.
- (iii) Provide you with a general plan for the layout, constructing, remodeling, and furnishing your Affiliate Franchised BHC Restaurant.

Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, And Training (FDD pages 29–38)

Question 5

What is the total estimated guarantee amount for Bhc obligations unsatisfied as of December 31, 2024, for the years 2025-2029?

Accepted Answer

| obligations that are unsatisfied as of December 31, 2024. |  |
|---|---|
| 2025 | $             40,000 |
| 2026 | 40,000 |
| 2027 | 40,000 |
| 2028 | 40,000 |
| 2029 | 40,000 |

Source: Item 23 — Receipts (FDD pages 52–230)

Question 6

What was the total number of Bhc franchised restaurants opened across all states listed in the table between 2022 and 2024?

Accepted Answer

| State | Year | BHC Restau rants Franch ised at Start of the Year | BHC Restaura nts Franchise d Opened | Terminatio ns | Non- Renewa ls | Reacquir ed by Franchis or | Ceased Operatio ns – Other Reasons | BHC Restaura nts Franchise d at End of the Year |
|---|---|---|---|---|---|---|---|---|
| CA | 2024 | 0 | 1 | 0 | 0 | 0 | 0 | 1 |
|  | 2023 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
|  | 2022 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Totals |  | 0 | 1 | 0 | 0 | 0 | 0 | 1 |

Source: Item 20 — BHC Restaurants and Franchisee Information (FDD pages 50–52)

Question 7

What was the total number of Bhc restaurants reacquired from franchisees across all states and years listed in the table?

Accepted Answer

| 0 | 0 | 0 |
| Totals |  | 0 | 1 | 0 | 0 | 0 | 0 | 1 |
**Table No. 4 Status of Company-Owned BHC Restaurants (Master Franchise Business)**

| State | Year | BHC Restaurants at Start of the Year | BHC Restaurants Opened | BHC Restaurants Reacquired from Franchisee | BHC Restaurants Closed | BHC Restaurants Sold to Franchisee | BHC Restaurants at End of the Year |
|---|---|---|---|---|---|---|---|
| CA | 2024 | 1 | 1 | 0 | 0 | 0 | 2 |
|  | 2023 | 0 | 1 | 0 | 0 | 0 | 1 |
|  | 2022 | 0 | 0 | 0 | 0 | 0 | 0 |
| Totals |  | 1 | 2 | 0 | 0 | 0 | 2 |
A list of the names of all franchisees and the addresses and telephone numbers of the franchises will be provided in Exhibit C to this disclosure document when applicable.

Source: Item 20 — BHC Restaurants and Franchisee Information (FDD pages 50–52)

Question 8

Besides individual restaurants, what type of chains will Bhc franchisees compete with in the fried chicken and sandwich market?

Accepted Answer

roducts and Services.**

The general market in which you will operate the business involves the operation of a master franchise business, which will be to operate a master franchise business offering and selling franchise through an affiliate and subfranchises of dine-in, carry-out and delivery fried chicken and sandwiches and other full service and quick serve restaurants that serve fried chicken and/or sandwiches. The BHC Restaurant will offer BHC Products and services to the general public throughout the year and compete with other fried chicken chains (local, regional, and national), restaurants, grocery Restaurants, and food service businesses. The market for BHC Products is all individuals within a reasonable proximity to the BHC Restaurant. This type of business is fully developed, does not involve sale primarily to a certain group and is not seasonal.

#### (v) **Industry Specific Laws or Regulations**

We know of no trade or license regulations which specifically affect the fried chicken and sandwiches industry. Laws exist in every state that govern the food-service industry (including health, sanitation, and safety regulations regarding food storage, preparation, and safety).

Source: Item 1 — The Franchisor, And Any Parents, Predecessors, And Affiliates (FDD pages 7–10)

Question 9

How does the MF Development Fee for Bhc in Item 5 compare to the other fees listed in Item 6?

Accepted Answer

e Subfranchisee is 7% of Gross Revenues. |

| Type of Fee                                              | Amount                                                                                                                                                                                                                                                                                                      | Due Date                                                    | Remarks                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|----------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Marketing and Promotion Fees                          | 2.5% of Gross Revenue                                                                                                                                                                                                                                                                                 | Same date as the Royalty Fee                             | Paid to BHC. However, we are not requiring this contribution at this time because we do not anticipate brand marketing until we have at least 50 BHC Restaurants in operation. Any expenses for local marketing must be paid by you directly to the vendors. We reserve the right to require payment of this fee (2.5% of Gross Revenue) once we have more than 50 BHC Restaurants in operation. |
| Product Purchases                                        | Will vary depending on BHC Products purchased and then-current pricing.                                                                                                                                                                                                                      | As incurred                                                 | You must purchase all BHC Products from us.                                                                                                                                                                                                                                                                                                                                                                                          |
| Compensation for Development Delays                | An amount up to the then-current BHC Initial Franchise Fee you are required to pay us for each Master Franchised BHC Restaurant multiplied by the number of Master Franchised BHC Restaurants short of the applicable Initial Development Quota | 7 days after receipt of our request for payment | If you fail to meet any of the Initial Development Quotas by the date specified in the Initial Development Schedule (as these terms are defined in Item 12 and section 3.6 of the MFA), we have the right to collect from you this amount to compensate us for you delay in development                                                                                                          |
| Site Design Review Fee                             | \$2,500                                                                                                                                                                                                                                                                                                     | Upon Submission of floor plan                         | Paid to Franchisor/Vendor. We will provide floor plan after we approve the site that you select.                                                                                                                                                                                                                                                                                                                               |
| Architectural Design Development and Permitting | \$15,000 to \$30,000                                                                                                                                                                                                                                                                                     | As arranged                                                 | Paid to vendors.                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Leasehold improvement                                 | \$200,000 to \$1,000,000                                                                                                                                                                                                                                                                                 | As arranged                                                 | Paid to v

Question 10

What types of entities will a Bhc unit franchisee compete with to attract prospective franchisees?

Accepted Answer

The general market for unit franchisees is well developed. You will have to compete with brokers, franchisors, national chains and independently owned companies for prospective BHC franchisees.

Source: Item 1 — The Franchisor, And Any Parents, Predecessors, And Affiliates (FDD pages 7–10)

Question 11

Under what condition is a Bhc franchisee prohibited from altering or closing the bank account used for electronic funds transfers?

Accepted Answer

Franchisor requires payment of the Royalty and Marketing and Promotion Fees by electronic funds transfer ("EFT"), through the Automated Clearing House ("ACH") electronic network for financial transactions (or such other automatic payment mechanism Franchisor may designate) directly from Franchisee's account into Franchisor's operating account. Franchisee must (i) execute and deliver to Franchisor's bank required pre-authorized check forms and other instruments or drafts to enable Franchisor to draw directly from Franchisee's bank account all fees payable under the terms of this Agreement and (ii) open and maintain a single bank account for such payments (with overdraft protection from Franchisee's operating account) always keeping the minimum balance in such account as Franchisor may reasonably designate. Franchisee must not alter or close this account except upon Franchisor's prior written approval. Any failure by Franchisee to implement such EFT system in strict accordance with Franchisor's instructions will constitute a material breach of this Agreement.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 12

Under what condition is a Bhc Master Franchisee prohibited from altering or closing the bank account used for electronic funds transfer?

Accepted Answer

Master Franchisee must (i) execute and deliver to Franchisor's bank required pre-authorized check forms and other instruments or drafts to enable Franchisor to draw directly from Master Franchisee's bank account all fees payable under the terms of this Agreement and (ii) open and maintain a single bank account for such payments (with overdraft protection from Master Franchisee's operating account) always keeping the minimum balance in such account as Franchisor may reasonably designate. Master Franchisee must not alter or close this account except upon Franchisor's prior written approval. Any failure by Master Franchisee to implement such EFT system in strict accordance with Franchisor's instructions will constitute a material breach of this Agreement.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 13

According to the Bhc franchise agreement, what happens to the Franchise Agreement if the MFA (presumably Master Franchise Agreement) is terminated prior to its expiration for cause?

Accepted Answer

The initial term of this Agreement (applicable solely to the Franchised BHC Restaurant franchised hereunder) commences on the Effective Date and expires on the 10th anniversary of the Effective Date, unless sooner terminated pursuant to the provisions of this Agreement. If this Agreement is executed pursuant to a Multi-Unit Master Franchise Agreement ("MFA") or Multiple Target Reservation Agreement ("MTRA") between Franchisor and Franchisee, the term of this Agreement will be subject to provisions of the MFA or MTRA. Any failure to comply with the obligations set forth in the MFA or MTRA will result in cross-default in the Franchise Agreement. If the MFA or MTRA is terminated prior to its expiration for cause, all Franchise Agreement will be automatically terminated.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 14

According to the Bhc Franchise Agreement, what happens to the Franchise Agreement if the Multi-Unit Master Franchise Agreement or Multiple Target Reservation Agreement is terminated for cause before its expiration?

Accepted Answer

The initial term of this Agreement (applicable solely to the Franchised BHC Restaurant franchised hereunder) commences on the Effective Date and expires on the 10th anniversary of the Effective Date, unless sooner terminated pursuant to the provisions of this Agreement. If this Agreement is executed pursuant to a Multi-Unit Master Franchise Agreement ("MFA") or Multiple Target Reservation Agreement ("MTRA") between Franchisor and Franchisee, the term of this Agreement will be subject to provisions of the MFA or MTRA. Any failure to comply with the obligations set forth in the MFA or MTRA will result in cross-default in the Franchise Agreement. If the MFA or MTRA is terminated prior to its expiration for cause, all Franchise Agreement will be automatically terminated.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 15

According to the FTC's Franchise Rule, under what circumstance is a Bhc franchisor permitted to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned BHC Restaurants?

Accepted Answer

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned BHC Restaurants, if there is a reasonable basis for the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing BHC Restaurant you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

We do not make any representation about a franchisee's future financial performance or the past financial performance of company-owned or franchised BHC Restaurants. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing BHC Restaurant, however, we may provide you with the actual records of that BHC Restaurant. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor's management by contacting the Franchise Development Department at 3435 Wilshire Blvd., Suite 460, Los Angeles, CA 90010, 323-424-3733, the Federal Trade Commission, and the appropriate state regulatory agencies.

Source: Item 19 — Financial Performance Representations (FDD page 49)

Question 16

According to the Bhc Multi-Unit Master Franchise Agreement, what amount in controversy determines whether the Streamlined or Comprehensive Arbitration Rules and Procedures of JAMS apply?

Accepted Answer

| Provision | Section in | Summary |
|---|---|---|
|  | Multi-Unit Master Franchise Agreement | (if the amount in controversy is less than $250,000 - https://www.jamsadr.com/rules-streamlined- arbitration/) or its Comprehensive Arbitration Rules and Procedures (if the amount in controversy is $250,000 or more - https://www.jamsadr.com/rules- comprehensive-arbitration/). Or, if the parties mutually agree, the dispute may be submitted to arbitration conducted by and before another mutually acceptable arbitrator. |
| w. Choice of forum | 14.1, 14.2 | Mediation and arbitration proceedings will take place in Los Angeles County, California. Any litigation proceedings will take place in an appropriate court in California. |
| x. Choice of law | 16.13 | California law governs the arbitration of disputes under the MFA. |

Source: Item 17 — Renewal, Termination, Transfer, And Dispute Resolution (FDD pages 43–49)

Question 17

Besides franchise renewal, under what other conditions might Bhc require modifications and expenditures related to the Franchised Bhc Restaurant?

Accepted Answer

- (a) Franchisor requires Franchisee to maintain and periodically refurbish the Franchised BHC Restaurant to conform to the then- current building design, Trade Dress, and color schemes then applicable for a Franchised BHC Restaurant. Such maintenance and refurbishment may require expenditures by Franchisee on, among other things, structural changes, installing new equipment, remodeling, redecoration and modifications to existing improvements and such modifications as may be necessary to comply with System-wide standards then in effect for Franchised BHC Restaurants or to accommodate new BHC Products. Accordingly, Franchisee must (i) maintain all equipment used at the Franchised BHC Restaurant on an as needed basis, (ii) immediately and completely resolve to Franchisor's satisfaction any maintenance deficiencies Franchisor identifies and (iii) make all upgrades to equipment and any technology used in Franchised BHC Restaurant that Franchisor may require.
- (b) Franchisor may periodically require Franchisee to update the Trade Dress used at the Franchised BHC Restaurant. Such updates will be contained in the Operations Manual or otherwise provided to Franchisee in writing. Such updates may require Franchisee to install new color schemes, logos, signage, or other visual elements. Franchisor anticipates that such Trade Dress updates will be required no more frequently than once every five years.
- (c) Franchisee will always be required to make upgrades and refurbishments to the Franchised BHC Restaurant before renewing the Franchise pursuant to section 5.2(f) of this Agreement. Otherwise, Franchisor will only require the types of modifications and expenditures described in sections 8.5(a) and 8.5(b) if Franchisor makes a good faith determination that the Franchised BHC Restaurant is substantially inconsistent with prevailing System-wide standards (including the Trade Dress, safety issues regarding customers and employees, the overall condition of the Franchised BHC Restaurant, or the type, quality or condition of the equipment needed to adequately prepare, promote and sell BHC Products) and that, as a result of its appearance or condition, the Franchised BHC Restaurant is either (i) not adequately positioned to promote and sell BHC Products as then required or (ii) damaging the integrity of the BHC image, brand or Marks.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 18

What is the condition for a Bhc franchisee to receive reimbursement for defending Bhc's marks?

Accepted Answer

While we are not required to defend you against a claim against your use of our Marks, we will reimburse you for your liability and reasonable costs in connection with defending our Marks. To receive reimbursement, you must have notified us immediately when you learned about the infringement or challenge.

Source: Item 14 — Patents, Copyrights, And Proprietary Information (FDD pages 41–42)

Question 19

What condition must be met regarding management of the Bhc Restaurant for a transfer to a spouse, parent, or adult child to not be deemed an assignment?

Accepted Answer

#### **12.4 Transfers upon the Death or Incapacity of an Individual Franchisee or Majority Equity Owner.**

- (a) Notwithstanding the foregoing, in the event of Franchisee's death or legal incapacity if Franchisee is an individual, or the death or legal incapacity of a Principal Equity Operator of Franchisee owning a majority equity interest ("Majority Equity Owner") in Franchisee (if an entity), the transfer of Franchisee's or the deceased Majority Equity Owner's interest in this Agreement to his or her spouse, parent or adult children, will not be deemed Assignment by Franchisee, provided a qualified and trained General Manager remains employed at the Franchised BHC Restaurant or another responsible management employee or agent of Franchisee satisfactorily trained by Franchisor will be responsible for the Franchised Business.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 20

What condition is placed on the Lease for the Tenant to operate a Franchised Bhc Restaurant?

Accepted Answer

At or after the time Franchisor assumes Tenant's interests under the Lease, the Franchisor may, at any time, assign such interests or sublet the Premises to a BHC franchisee. Any such assignment shall be subject to the prior written consent of the Landlord, which Landlord shall not unreasonably withhold as it relates to a creditworthy franchisee who otherwise meets Franchisor's then-current standards and requirements for franchisees and agrees to operate the store as a Franchised BHC Restaurant pursuant to a Franchise Agreement with Franchisor.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 21

What is the consequence if the Indemnified Party fails to provide reasonable notice to the Indemnifying Party regarding a claim or loss related to a Bhc franchise?

Accepted Answer

- (c) For the indemnification to be effective, each indemnified party ("Indemnified Party") will give the indemnifying party ("Indemnifying Party") reasonable notice of each claim or loss for which the Indemnified Party demands indemnity and defense, except that failure to provide such notice will not release the Indemnifying Party from any obligations hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 22

Is Bhc currently requiring franchisees to pay the Marketing and Promotion Fee?

Accepted Answer

- (i) We have no obligation to conduct advertising.

If we conduct advertising, you must pay us a Marketing and Promotion Fee of 2.5% of your monthly Gross Revenue (section 4.4(a) of the MFA).

However, we are not requiring this contribution at this time because we do not anticipate brand marketing until we have at least 50 BHC Restaurants in operation.

Once BHC starts to require payment, Marketing and Promotion Fees collected from BHC franchisees less a 15% administration fee will be spent for national and regional advertising and promotional campaigns designed to promote and enhance the value of the BHC trademarks and their general public recognition and acceptance.

We need not ensure that any particular franchisee benefits directly or proportionately from the Marketing and Promotion Fee.

Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, And Training (FDD pages 29–38)

Question 23

Does the definition of 'Expenses' for Bhc franchises include taxes imposed on the indemnified person?

Accepted Answer

in individual cases in our discretion.
- (2) "Gross Revenue" means the gross amount of revenue, whether for cash, by redemption of gift cards or certificates or for credit, regardless of collection, earned or received by you from any source in connection with the operation of the BHC Restaurant or with any similar or related activity, whether on or off your business premises, arising directly or indirectly from whatever source, including but not limited to sales from delivery or deliver services such as Door Dash, Uber Eats, Postmates, etc. Gross Revenue also includes any amount received from business insurance proceeds. "Gross Revenue" does not include: (i) the amount of any tax imposed by any governmental authority directly on sales and collected from customers, provided that the amount of any such tax is shown separately and is in fact paid by you to the appropriate governmental authority; (ii) the amount of any bona fide customer refunds; and (iii) tips or gratuities paid or payable to your employees.
- (3) Subfranchisees must pay us a Royalty Fee of 4.5% from Gross Revenues derived from the Subfranchised BHC Restaurants. The royalty you charge to Subfranchisees shall not exceed seven percent (7%) of Gross Revenues of Subfranchised BHC Restaurants.
- (4) Because your failure to comply with the obligations under your MFA may cause immediate and substantial damage to our interests and cause us to incur administrative and other expenses, we reserve the right to use the Deposit to compensate ourselves for such damage and expenses in certain situations. If we deduct any amount from the Deposit, you must replenish the Deposit to its original amount within 10 business days of each deduction.
- (5) "Actual Costs", as used in this Disclosure Document, include our then-current daily allowance, travel, meals, and boarding expenses for our staff per our then-current daily allowance policy.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 24

What is the dependency between establishing an Affiliate Franchised Bhc Restaurant and granting subfranchises to third parties?

Accepted Answer

In addition, Master Franchisee must establish and operate at least one (1) Affiliate Franchised BHC Restaurants within the Development Area pursuant to separate Subfranchise Agreements before Master Franchisee may grant subfranchises to third parties for the establishment and operation of Subfranchised BHC Restaurants within the Development Area.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 25

For Bhc, what is the dependency between online ordering and the Franchisor's website?

Accepted Answer

Online ordering by customers of BHC Products may only be made through the authorized page on Franchisor's website.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 26

What is the dependency between providing notice and avoiding being deemed 'Abandoned' for a Bhc franchise?

Accepted Answer

**"Abandoned"** means cessation of operation of the Franchised Business for a period of five consecutive business days, without Franchisor's prior written consent. A repeated pattern of inactivity at Franchisee's Franchised BHC Restaurant for periods of less than five consecutive business days may result in the Franchised Business being deemed Abandoned by Franchisee if in Franchisor's judgment such inactivity adversely impacts the Franchised Business. However, Franchisee's Franchised BHC Restaurant will not be deemed Abandoned if the inactivity is due to natural disasters or other matters reasonably beyond Franchisee's control, provided that Franchisee gives Franchisor notice of any such closure within five business days after the initial occurrence of the event resulting in such inactivity, and Franchisee acknowledges in writing that such inactivity is due to one of the foregoing causes, and provided further that Franchisee re-establish the Franchised Business and be fully operational within 180 days after the initial occurrence of the event resulting in such inactivity, or such longer period as Franchisor may permit.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 27

For Bhc, what is the dependency between the retail prices and federal and state antitrust laws?

Accepted Answer

To enhance uniformity in the delivery of goods and services to retail customers by Franchisor's franchisees and the strength of Franchisor's Marks in inter-brand competition, and subject to applicable federal and state antitrust laws, Franchisor may recommend retail prices for specific BHC Products and other products and services Franchisor authorize for sale at Franchisee's Franchised BHC Restaurant.

If Franchisor does so, Franchisee may not advertise or promote (whether by telephone, printed materials, or any other media, including social media) retail prices that are inconsistent with these recommended prices.

Also, to the extent permitted by federal and state law applicable to the Franchised BHC Restaurant, Franchisor may designate maximum and minimum retail prices to be charged for BHC Products.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 28

What is the dependency between securing suitable premises and the timeline for commencing operation of the Bhc franchised business?

Accepted Answer

ation has been determined. In order to promote the orderly and timely service of BHC customers, Franchisee may not cater or deliver BHC Products through other channels without Franchisor's prior written consent. Due to landlord obligations under other leases or other restrictions imposed by government authorities, not all BHC Products may be available to be offered to customers at some Franchised BHC Restaurants (including Franchisee's Franchised BHC Restaurant).

#### **7.2 Building Out Franchisee's Franchised BHC Restaurant.**

(a) Premises acceptable to Franchisor where Franchisee's Franchised BHC Restaurant will be operated must be located and secured by Franchisee and reviewed and consented to by Franchisor within four (4) months after the Effective Date. Upon signing this Franchise Agreement, Franchisee must promptly locate one or more proposed sites which meet Franchisor's current standards and specifications. For each proposed site, Franchisee will submit to Franchisor certain information regarding the site that Franchisor requests. Upon receiving the information regarding a proposed site, Franchisor will review the information and either accept or reject the proposed site. For any site that Franchisor reviews, Franchisee must reimburse Franchisor for all costs and expenses that Franchisor incurs in reviewing the site. If Franchisor does not approve the proposed site within 30 days after Franchisee's complete submission of the requested information (or 15 days after Franchisee provides any supplemental information Franchisor requests), the site will be deemed rejected. If Franchisor disapproves, Franchisee must promptly propose an alternative location. Franchisor does not locate sites for Franchisee. However, Franchisor may, without, obligation, assist Franchisee in locating or evaluating a site for a reasonable fee. If Franchisee has not located a site for Franchisee's Franchised BHC Restaurant that is acceptable to Franchisor within four (4) months after the Effective Date, Franchisor may cancel this Agreement on the basis of Franchisee's failing to find an acceptable site.

- (b) Franchisee must build out Franchisee's Franchised BHC Restaurant (and commence operation of the Franchised Business there) within ten (10) months after Franchisor approves the Franchised BHC Restaurant premises, using architects, project managers, contractors, subcontractors, architectural plans, and key equipment suppliers reasonably acceptable to Franchisor. Franchisee must commence operation of the Franchised Business at Franchisee's Franchised BHC Restaurant as soon as practicable after Franchisee's receipt of a certificate of occupancy (or equivalent document) from the responsible local government authority. If after Franchisee has located and secured suitable premises (that Franchisor consents to) for its Franchised BHC Restaurant, Franchisee has not commenced operation of the Franchised Business within fourteen (14) months after the Effective Date, Franchisor may terminate this Agreement effective on written notice.
- (c) Franchisor may, but is not obligated to, assist Franchisee in the site selection process. However, Franchisor reserves the sole right of final review and consent to any location of the Franchised BHC Restaurant. Franchisor uses available demographic information to evaluate the site and the area in which it is located, and analyze area income figures, traffic patterns, visibility, population density, competition, zoning, parking, accessibility, and other related, relevant circumstances. Franchisor's final review and consent to the location of Franchisee's Franchised BHC Restaurant is not a guarantee that a BHC business can be successfully operated there or anywhere else.
- (d) Franchisor will provide Franchisee with a sample prototype layout for the Franchised BHC Restaurant. Franchisor will provide Franchisee a floor plan. Franchisee must pay Franchisor for all costs and expenses that Franchisor incurs in providing the site design review fee of \$2,500 ("Site Design Review Fee") and a separate site review fee of \$2,000 to \$4,000 ("Site Review Fee"). At Franchisee's sole expense, Franchisee must employ directly architects, designers, engineers, or others as reasonably acceptable to Franchisor to complete, adapt, modify, or substitute the sample plans and specifications for the Franchised BHC Restaurant, and review and monitor all licensing related matters. Developer shall be solely responsible for acquiring all of the necessary permits and licenses, including but not limited to permits related to structural reinforcement, grease interceptors, and parking. The architect must submit a complete set of final plans and specifications to Franchisor before commencing leasehold improvement of the Franchised BHC Restaurant. Franchisor will review these plans and specifications promptly and accept them as stated or provide Franchisee with Franchisor's comments on the plans and specifications. Franchisor will have complete and uncontested control over the design of the Franchised BHC Restaurant and Franchisee may not modify the design or choose third party designers without Franchisor's express written consent.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 29

Can Bhc establish advertising cooperatives comprised of groups of franchisees?

Accepted Answer

We may establish advertising cooperatives comprised of groups of franchisees within regions or areas we designate and may modify boundaries of these groups in our discretion, effective on written notice.

You, your Affiliate Franchisee, and your Subfranchisees must participate in any advertising cooperative which encompasses your, your Affiliate Franchisee's, or your Subfranchisees' territory.

The members of each cooperative will adopt governing rules and voting procedures and determine procedures for assessing members; however, we have the right to attend any meetings and approve these rules and procedures and any amendments.

If any of our affiliates owns a BHC Restaurant within the boundaries of a cooperative, it will contribute to the cooperative at the lowest percentage contribution rate that any BHC franchisee in the same cooperative then pays and will have the same voting rights as franchisee members.

- (viii) We may require a cooperative to merge with another cooperative servicing an adjacent or proximate area, or to subdivide a cooperative into smaller groupings.

We may dissolve a cooperative when we simultaneously dissolve all advertising cooperatives.

For example, we may determine it is preferable to centralize all group advertising activities under the Marketing and Promotion Fee.

Advertising cooperatives must prepare quarterly and annual financial statements, which need not be audited, and make them available to all cooperative members and us.

We have no present plan to sell goods or services to any advertising cooperative.

Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, And Training (FDD pages 29–38)

Question 30

What factors determine the maximum and minimum retail prices for Bhc products?

Accepted Answer

rs by Franchisor's franchisees and the strength of Franchisor's Marks in inter-brand competition, and subject to applicable federal and state antitrust laws, Franchisor may recommend retail prices for specific BHC Products and other products and services Franchisor authorize for sale at Franchisee's Franchised BHC Restaurant. If Franchisor does so, Franchisee may not advertise or promote (whether by telephone, printed materials, or any other media, including social media) retail prices that are inconsistent with these recommended prices. Also, to the extent permitted by federal and state law applicable to the Franchised BHC Restaurant, Franchisor may designate maximum and minimum retail prices to be charged for BHC Products.

- (d) Franchisee's Franchised BHC Restaurant must be open on a full-time basis in accordance with the hours of operation as designated by Franchisor. The obligation to remain open will not apply if Franchisee experiences a Force Majeure.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 31

Does the Bhc financial statement include a balance sheet?

Accepted Answer

|                                                                          | PAGE    |  |
|--------------------------------------------------------------------------|---------|--|
| Independent Audit | 1 |  |
| Report | 2 |  |
| Consolidated Balance Sheet | 3 4 |  |
| Consolidated Statement of Income | 5 |  |
| Equity | 6 |  |
| Consolidated Statement of Cash Flows | 7 |  |
| Notes to Consolidated Financial Statements | 8 13 |  |
| Supplementary Information | 14 |  |
| Consolidated Schedule of Operating Expenses |  |  |

Source: Item 21 — Financial Statements (FDD page 52)

Question 32

Does the Bhc financial statement include a cash flow statement?

Accepted Answer

CHI & NAM LLP, CERTIFIED PUBLIC ACCOUNTANTS 3731 WILSHIRE BLVD., STE 777 LOS ANGELES, CA 90010

PHONE: 213-381-3239 FAX: 213-381-5152

#### INDEPENDENT AUDITOR REPORT

To the Member and Management BHC USA LLC and Subsidiaries

#### Opinion

We have audited the accompanying consolidated financial statements of BHC USA LLC (a California Limited Liability Company) and its subsidiaries, which comprise the consolidated balance sheet as of December 31, 2024, and the consolidated related statem , and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Source: Item 21 — Financial Statements (FDD page 52)

Question 33

Does the Bhc financial statement include an income statement?

Accepted Answer

We have audited the accompanying consolidated financial statements of BHC USA LLC (a California Limited Liability Company) and its subsidiaries, which comprise the consolidated balance sheet as of December 31, 2024, and the consolidated related statem , and cash flows for the year then ended, and the related notes to the consolidated financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BHC USA LLC and subsidiaries as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Source: Item 21 — Financial Statements (FDD page 52)

Question 34

Does the Bhc financial statement include statements for previous years?

Accepted Answer

Exhibit C to the disclosure document contains our unaudited opening balance sheet, BHC USA LLC's audited financial statements for the fiscal years ended as of December 31, 2024, with an independent accountant's compilation report. Our fiscal year-end is December 31st.

Source: Item 21 — Financial Statements (FDD page 52)

Question 35

Are the Bhc financial statements consolidated?

Accepted Answer

The Company is a wholly owned subsidiary of Dining Brands Group Co., Ltd. ( Dining Brands ), a Korea corporation. BHC USA was originally formed in the State of California on January 6, 2022. The Company s current business line is in licensing, franchising, and operating fast food restaurants under the name of bhc CHICKEN , as well as in retail distribution of food products through its subsidiaries. The Company owns 100% of BHC Farmers Market USA Inc ( BHC Farmers ) and BHC Chapman USA Inc both California corporations. The consolidated financial statements of BHC USA include BHC Farmers and BHC Chapman accordingly.

#### Consolidation Policy

The Consolidated Financial Statements include the financial statements of BHC USA and its wholly-owned subsidiaries: BHC Farmers and BHC Chapman. All significant intercompany balances and transactions have been eliminated in consolidation.

Source: Item 21 — Financial Statements (FDD page 52)

Question 36

Are Bhc's financial statements presented according to GAAP?

Accepted Answer

We have audited the accompanying consolidated financial statements of BHC USA LLC (a California Limited Liability Company) and its subsidiaries, which comprise the consolidated balance sheet as of December 31, 2024, and the consolidated related statem , and cash flows for the year then ended, and the related notes to the consolidated financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BHC USA LLC and subsidiaries as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

Source: Item 21 — Financial Statements (FDD page 52)

Question 37

Does the Bhc franchise agreement allow for exceptions regarding third-party beneficiaries, and if so, under what conditions?

Accepted Answer

- (d) Franchisee does not have a right to pledge, encumber, hypothecate or otherwise give any third party a security interest in this Agreement in any manner whatsoever (except that with Franchisor's consent, which will not be unreasonably withheld, Franchisee may pledge a security interest in this Agreement in connection with a Small Business Administration loan), nor sub franchise or otherwise transfer, or attempt to sub franchise or otherwise transfer the Franchised Business, or to transfer or sub franchise a portion but not all of Franchisee's rights hereunder without Franchisor's express prior written consent, which may be withheld for any reason in Franchisor's sole discretion.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 38

Is the Bhc franchise agreement binding upon the Franchisee's successors and assigns, subject to restrictions on assignment by the Franchisee?

Accepted Answer

#### **12. ASSIGNMENT**

#### **12.1 Assignment by Franchisor.**

Franchisor has the right to Transfer this Agreement and all of Franchisor's rights and privileges hereunder ("Assignment by Franchisor") to any other person, firm, or corporation ("Franchisor's Assignee"). Upon the effective date of the Assignment by Franchisor and thereafter, Franchisor will be relieved of all obligations or liabilities under this Agreement.

#### **12.2 Assignment by Franchisee.**

- (a) This Agreement is being executed by Franchisor in reliance upon and in consideration of the unique skills and qualifications of Franchisee and the Principal Equity Operators and the trust and confidence reposed in them by Franchisor.

Therefore, neither Franchisee's interest in this Agreement and the Franchise granted hereunder, nor all or substantially all of the assets of the Franchised BHC Restaurant, nor a controlling or non-controlling interest in Franchisee (if an entity), may be assigned, transferred, shared or divided, voluntarily or involuntarily, in whole or in part, by operation of law or otherwise, in any manner (collectively, "Assignment by Franchisee"), without Franchisor's prior written consent and, except for any transfer of a non-controlling interest, subject to Franchisor's right of first refusal provided for in section 12.3 hereof, and transfer to an Affiliated Entity provided for in section 12.6 hereof.

Franchisor's consent to a specific Assignment by Franchisee is not cumulative and will not apply to any subsequent assignments, in respect of each of which Franchisee must comply with this section 12.2.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 39

Can a Bhc franchisee establish an account or participate in any social networking sites mentioning the Bhc Franchise without prior written consent?

Accepted Answer

You may not establish an account or participate in any social networking sites (including, without limitation, Facebook, Twitter or any other social or professional networking site or blog) or mention or discuss the BHC Franchise, us, or any of our affiliates, without our prior written consent and as subject to our online policy. Our online policy may completely prohibit you from any use of the Marks in social networking sites or other online use.

Source: Item 16 — Restrictions on What the Franchisee May Sell (FDD page 43)

Question 40

Can a Bhc franchisee offer for sale Supplies, including Products, through any other channels of distribution without Bhc's prior written consent?

Accepted Answer

You also may not offer for sale, and must ensure that your Affiliate Franchisee and your Subfranchisees do not offer for sale, any Supplies, including the Products, through any other channels of distribution, including grocery and convenience BHC Restaurants and other retail BHC Restaurants and locations, the Internet (or any other existing or future form of electronic commerce), and other types of resale, wholesale and distribution arrangements, without our prior written consent. Except as described above, you are not otherwise limited in the customers to whom you, your Franchisee, and your Subfranchisees may offer and sell products or services.

Source: Item 16 — Restrictions on What the Franchisee May Sell (FDD page 43)

Question 41

Is a Bhc franchisee required to pay license or maintenance fees for Designated Software?

Accepted Answer

- (b) Franchisor may designate the computer software to be used in the operation of the Computer System ("Designated Software"). If Franchisor does so, Franchisee must license or sublicense such Designated Software from Franchisor's designee and enter into a software license agreement on the software licensor's then-current form and pay any related license or maintenance fees. Franchisee may also be required to purchase any upgrades, enhancements, or replacements to the Designated Software. Franchisee must incorporate any required modifications or additions within such time as stated in the notice sent by Franchisor.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 42

Are Bhc franchisees obligated to purchase the 'Apron (BHC)' from a designated supplier, even though the exact specifications are 'to be determined'?

Accepted Answer

es the landlord to fully cooperate with Franchisor in completing de-identification of the Franchised BHC Restaurant if this Agreement is terminated or expires without being renewed and Franchisor does not exercise its option to assume the lease for the Franchised BHC Restaurant premises. The Addendum to Lease is attached as Exhibit 5.
- (h) Franchisor has the right to regularly inspect Franchisee's Franchised BHC Restaurant and any other site where Franchisee conducts the Franchised Business.

#### **7.3 Equipment and Inventory.**

(i) Throughout the term of this Agreement, Franchisee must purchase, and maintain equipment and inventory as needed to meet reasonably anticipated consumer demand of the BHC Products. Franchisee must also purchase and sell ancillary products, which may include books, specialty foods, packaged foods, books, hats, t-shirts, and novelty items, as we periodically specify, for sale at your Franchised BHC Restaurant ("**Ancillary Products**"). To ensure highest degree of consistency, service, and quality, Franchisee must practice and conform to the standards, operating procedures, specifications, and rules Franchisor has established for the operation of a Franchised BHC Restaurant, as modified by Franchisor from time to time) including specifications as to ingredients, brand names, preparation, and presentation ("**Standards**"). Franchisee must purchase all products that Franchisee offers from

Franchisee's Franchised BHC Restaurant, including products which bear any of the Marks, solely and exclusively from Franchisor, or Franchisor's designated supplier.

- (j) Before opening the Franchised BHC Restaurant, Franchisee must purchase opening inventory of merchandise and supplies that includes certain proprietary products that Franchisee must purchase from Franchisor and Franchisor's affiliates.
- (k) Franchisor will provide Franchisee with a list of approved manufacturers, suppliers, and distributors ("**Approved Suppliers List**") and approved inventory products, fixtures, furniture, equipment, signs, stationery, supplies and other items or services necessary to operate the Franchised BHC Restaurant ("**Approved Supplies List**"). The Approved Supplies List may specify a required manufacturer or supplier of a specific product or piece of equipment. Franchisor reserves the right to designate a required source of supply for certain products and supplies, and Franchisor or an affiliate may be a required source. The lists also may include other specific products without reference to a particular manufacturer or supplier, or they may set forth the specifications and/or standards for other approved products. Franchisor may revise the Approved Suppliers List and Approved Supplies List. Franchisor gives Franchisee the approved lists as Franchisor deems advisable. Franchisor generally does not give these lists to approved suppliers. Franchisor will provide contact information for Franchisee's distributors and/or manufacturers of all products offered at the Franchised BHC Restaurant. Except where Franchisor identifies a sole single source, if Franchisee proposes to use in the operation of Franchisee's Franchised BHC Restaurant any product, supply, material, furnishing or equipment which has not yet been approved by Franchisor as conforming to Franchisor's specifications and quality and system standards ("**Alternative Supplies**") and/or from a supplier not yet approved in writing by Franchisor ("**Alternative Supplier**"), Franchisee must first notify Franchisor in writing and must submit to Franchisor, upon request, sufficient information, specifications, and samples so that Franchisor can determine whether the item or service complies with System standards or the supplier meets Franchisor's supplier criteria. Franchisor will provide Franchisee with written approval or disapproval within a reasonable time period (typically 30 days).
- (l) Franchisee may not use any product, supply, material, furnishing or equipment that Franchisor has not approved. Supplier approval will depend on product quality, delivery frequency and reliability, service standards, financial capability, customer relations, concentration of purchases with limited suppliers to obtain better prices and service, and/or a supplier's willingness to pay us or our affiliates for the right to do business with Franchisor's System. Franchisor may inspect or re-inspect the facilities and products of any approved supplier and revoke Franchisor's approval if the supplier fails to continue to meet Franchisor's criteria and specifications.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 43

Does the Bhc Franchisor currently have a purchasing or distribution cooperative, and can they create one in the future?

Accepted Answer

(p) Franchisor may negotiate prices for numerous products for the benefit of the System but not on behalf of individual franchisees. Currently, there is no purchasing or distribution cooperative, but Franchisor reserves the right to create a cooperative and require Franchisee to participate. Franchisor may receive volume discounts for the System which Franchisor will pass through to the franchisees. Beyond these discounts, Franchisor do not provide material benefits to Franchisee because of Franchisee's use of approved suppliers.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 44

Does the Bhc franchisor have to exercise its right of first refusal before disapproving an assignment?

Accepted Answer

- (c) Within 15 days after Franchisor's receipt of such notice (or if Franchisor requests additional information, within 10 days after receipt of such additional information), Franchisor may either (i) consent or withhold Franchisor's consent to such Assignment by Master Franchisee, in accordance with section 12.2 hereof, or (ii) at Franchisor's option, accept the Assignment by Master Franchisee itself or on behalf of Franchisor's nominee upon the terms and conditions specified in the notice.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 45

Can the Franchisor extend the 180-day period for re-establishing a Bhc Franchised Business after an event causing inactivity?

Accepted Answer

**"Abandoned"** means cessation of operation of the Franchised Business for a period of five consecutive business days, without Franchisor's prior written consent. A repeated pattern of inactivity at Franchisee's Franchised BHC Restaurant for periods of less than five consecutive business days may result in the Franchised Business being deemed Abandoned by Franchisee if in Franchisor's judgment such inactivity adversely impacts the Franchised Business. However, Franchisee's Franchised BHC Restaurant will not be deemed Abandoned if the inactivity is due to natural disasters or other matters reasonably beyond Franchisee's control, provided that Franchisee gives Franchisor notice of any such closure within five business days after the initial occurrence of the event resulting in such inactivity, and Franchisee acknowledges in writing that such inactivity is due to one of the foregoing causes, and provided further that Franchisee re-establish the Franchised Business and be fully operational within 180 days after the initial occurrence of the event resulting in such inactivity, or such longer period as Franchisor may permit.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 46

Does the Bhc franchisor have to provide forms to the franchisee?

Accepted Answer

- (b) Prior to any Assignment by Franchisee, Franchisee must notify Franchisor of Franchisee's intent to sell, transfer or assign the Franchise, all (or substantially all) the assets of the Franchised BHC Restaurant, or a controlling or non- controlling interest in Franchisee (if an entity).

The notice must be in writing, delivered to Franchisor in accordance with section 16.1 hereof and include the following:

- (i) the proposed transferee's name and address;

- (ii) a copy of all agreements related to the sale, assignment, or transfer of the Franchise, the assets of the Franchised BHC Restaurant, or the controlling interest in Franchisee (if an entity); and

- (iii) the proposed transferee's application for approval to become the successor franchisee (this application must include all forms, financial disclosures and related information generally used by Franchisor when interviewing prospective new franchisees, if Franchisor makes those forms available to Franchisee.

If the forms are not readily available, Franchisee must request that Franchisor deliver the forms to Franchisee by business courier in accordance with section 16.1 hereof within 15 calendar days).

As soon as practicable after the receipt of the proposed transferee's application, Franchisor will notify, in writing, Franchisee and the proposed transferee of any additional information or documentation necessary to complete the transfer application.

If Franchisor's then-existing standards for the approval of new or renewing franchisees are not readily available to Franchisee when Franchisee notifies Franchisor of Franchisee's intent to sell, transfer, or assign the Franchise, all or substantially all of the assets of the Franchised BHC Restaurant, or a controlling or non-controlling interest in Franchisee (if an entity), Franchisor will communicate the standards to Franchisee within 15 calendar days.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 47

Can the Franchisor withhold consent if a Master Franchisee wants to operate a competing business to Bhc, and if so, under what conditions?

Accepted Answer

(a) Master Franchisee acknowledges it will receive valuable specialized training and access to Proprietary Information, including information regarding the operational, sales, promotional and marketing methods and techniques of the System and Franchisor's Trade Secrets. In consideration for the use and license of such valuable information, Master Franchisee agrees that it will not during the term of this Agreement operate, manage, own, assist or hold an interest in (direct or indirect as an employee, officer, director, shareholder, manager, member, partner or otherwise), or engage in, any competing business selling goods or offering services equivalent to BHC Products or the Franchised Business, without Franchisor's express prior written consent, which consent may be withheld in Franchisor's sole and absolute discretion.

(b) It is the intention of both Master Franchisee and Franchisor that Master Franchisee maximizes the Franchised Business within the Territory, and any action of Master Franchisee that diverts business to another entity or diminishes the Franchised Business being conducted in the Territory will be a material breach of this Agreement. Accordingly, neither Master Franchisee nor any Principal Equity Operator may, either directly or indirectly, for itself or themselves, or through, on behalf of, or in conjunction with, any person, persons, partnership, corporation or other entity, (i) divert or attempt to divert any business or customer of the Franchised Business to any competitor, by direct or indirect inducement or otherwise, or (ii) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks or the System.

#### **11.2 Post Termination Non-Competition Covenants.**

- (a) For a period of two years after the date ("Termination Date") this Agreement is terminated, is canceled, or expires without renewal pursuant to section 5.2 of this Agreement, Master Franchisee agrees that neither Master Franchisee nor any Principal Equity Operator will (either directly or indirectly, for itself or themselves, or through, on behalf of, or in conjunction with, any person, persons, partnership, corporation or other entity) operate, manage, own, assist or hold an interest in (direct or indirect as an employee, officer, director, shareowner, partner or otherwise), or engage in, any competing business selling goods or offering services equivalent to BHC Products or the Franchised Business, within a radius of 25 miles of Master Franchisee's Territory or any other authorized retail location selling BHC Products, without Franchisor's express prior written consent, which consent may be withheld in Franchisor's sole and absolute discretion. Following termination or expiration of this Agreement, Master Franchisee must always refrain from any use, direct or indirect, of any Proprietary Information or Trade Secrets.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 48

What may Bhc Franchisor's representatives do if deficiencies are not corrected after the initial re-inspection?

Accepted Answer

Franchisor's representatives may re-inspect Franchisee's Franchised BHC Restaurant (or other facility, if applicable) to ensure noted deficiencies have been corrected.

If the deficiencies have not been corrected by the time of the initial re-inspection, Franchisor's representatives may make additional re-inspections thereafter until noted deficiencies have been corrected or deem the Franchisee to be in material breach.

Franchisee shall be responsible for all accommodation, transportation, meals, daily allowances, and other costs and expenses for the Franchisor's personnel in connection with such re-inspections.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 49

What are the grounds for termination of the Bhc Master Franchise Agreement if the General Manager fails to complete initial training?

Accepted Answer

- (b) The failure of Master Franchisee's General Manager to complete Initial Training to Franchisor's satisfaction will be grounds for termination of this Agreement; provided, however, before this Agreement is so terminated, Master Franchisee's General Manager who fails to successfully complete Initial Training will be offered the opportunity to retake Initial Training or Master Franchisee may send a replacement General Manager, approved by Franchisor, to the next available Initial Training program.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 50

What happens if a Bhc franchisee fails to meet the initial opening advertising and promotion spending requirement?

Accepted Answer

ur expenditures on the initial opening advertising and promotion of a Master Franchised BHC Restaurant. If you fail to meet the initial opening advertising and promotion, you will be required to add the shortage toward the Marketing and Promotion Fee.
- (xv) Also, beginning the 3rd full calendar month after a Master Franchised BHC Restaurant opens for business, we require that you, your Affiliate Franchisee, and your Subfranchisees spend at least 1% of your, your Affiliate Franchisee's, or your Subfranchisees' annual Gross Revenue during the periods of January 1 through December 31 on the local advertising and promotion of your or your Subfranchisee's BHC Restaurant using marketing and promotional materials pre-approved or otherwise authorized in writing by us ("**Local Advertising**") (see section 4.4(d)) of the MFA).

Source: Item 23 — Receipts (FDD pages 52–230)

Question 51

What happens if a Bhc franchisee fails to take required actions after termination?

Accepted Answer

- (c) If Franchisee fails or omits to make or cause to be made any removal or change described in section 15.1(b)(i) – (v) above, then Franchisor will have the right within 15 days after written notice to enter Franchisee's Franchised BHC Restaurant or other premises from which the Franchised Business is being conducted without being deemed guilty of trespass or any other tort, and make or cause to be made such removal and changes at Franchisee's expense, which expenses Franchisee agrees to pay to Franchisor promptly upon demand.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 52

What happens if the Franchisor elects to assume the Lease for the Bhc restaurant?

Accepted Answer

If Franchisor elects to assume the Lease under paragraph 2, or unilaterally assumes the Lease as provided for in paragraphs 3 or 4, Landlord and Tenant agree that:

- A.

Tenant will remain liable for the responsibilities and obligations, including amounts owed to Landlord, prior to the date of assignment and assumption.

Further, Tenant shall be and remain liable to Landlord for all of its obligations under the Lease, notwithstanding any assignment or assumption of the Lease by Franchisor.

Franchisor shall be entitled to recover from Tenant all amounts it pays to Landlord to cure Tenant's defaults under the Lease, including interest and reasonable collection costs.

- B.

Franchisor, upon taking possession of the Premises, shall cure any default specified by Landlord within the timeframes noted herein and shall execute and deliver to Landlord its assumption of Tenant's rights and obligations under the Lease.

Franchisor shall pay, perform, and be bound by all the duties and obligations of the Lease applicable to Tenant, except that the Franchisor may elect not to assume or be bound by the terms of any Amendment to the Lease executed by Tenant without obtaining Franchisor's prior written approval, which shall not be unreasonably withheld or delayed.

- C.

At or after the time Franchisor assumes Tenant's interests under the Lease, the Franchisor may, at any time, assign such interests or sublet the Premises to a BHC franchisee.

Any such assignment

shall be subject to the prior written consent of the Landlord, which Landlord shall not unreasonably withhold as it relates to a creditworthy franchisee who otherwise meets Franchisor's then-current standards and requirements for franchisees and agrees to operate the restaurant as a BHC Restaurant pursuant to a Franchise Agreement with Franchisor. Upon receipt by Landlord of an assumption agreement pursuant to which the assignee agrees to assume the Lease and to observe the terms, conditions, and agreements on the part of Tenant to be performed under the Lease, the Franchisor shall thereupon be released from all liability as tenant under the Lease from and after the date of assignment, without any need of a written acknowledgement of such release by Landlord.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 53

What happens if the Bhc franchisor requests additional information to complete the transfer application?

Accepted Answer

As soon as practicable after the receipt of the proposed transferee's application, Franchisor will notify, in writing, Franchisee and the proposed transferee of any additional information or documentation necessary to complete the transfer application.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 54

What happens if the interest rate on delinquent payments for a Bhc franchise is limited by law in the state where the restaurant is located?

Accepted Answer

If an examination or audit discloses any underpayment of any fee, Franchisee must promptly pay the deficient amount plus interest calculated daily from the due date until paid at an APR of 18% (unless interest rates on delinquent payments in the state in which Franchisee's Franchised BHC Restaurant is located are limited by law to a lower APR, in which case that lower APR will apply).

Source: Item 23 — Receipts (FDD pages 52–230)

Question 55

What happens if a Bhc Master Franchisee fails to comply with the post-termination obligations?

Accepted Answer

- (c) If Master Franchisee fails or omits to make or cause to be made any removal or change described in section 15.1(b)(i) – (v) above, then Franchisor will have the right within 15 days after written notice to enter Master Franchised BHC Restaurant or other premises from which the Franchised Business is being conducted without being deemed guilty of trespass or any other tort, and make or cause to be made such removal and changes at Master Franchisee's expense, which expenses Master Franchisee agrees to pay to Franchisor promptly upon demand.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 56

What happens if the Master Franchisee fails to provide notice of closure within five business days for a Bhc franchise?

Accepted Answer

conditions contained in this Agreement, and other good and valuable consideration, Master Franchisee and Franchisor hereby agree as follows.

#### **1. DEFINITIONS**

**"Abandoned"** means cessation of operation of the Franchised Business for a period of five consecutive business days, without Franchisor's prior written consent. A repeated pattern of inactivity at Master Franchised BHC Restaurant for periods of less than five consecutive business days may result in the Franchised Business being deemed Abandoned by Master Franchisee if in Franchisor's judgment such inactivity adversely impacts the Franchised Business. However, Master Franchised BHC Restaurant will not be deemed Abandoned if the inactivity is due to natural disasters or other matters reasonably beyond Master Franchisee's control, provided that Master Franchisee gives Franchisor notice of any such closure within five business days after the initial occurrence of the event resulting in such inactivity, and Master Franchisee acknowledges in writing that such inactivity is due to one of the foregoing causes, and provided further that Master Franchisee re-establish the Franchised Business and be fully operational within 180 days after the initial occurrence of the event resulting in such inactivity, or such longer period as Franchisor may permit.

- **"Affiliate"** means in relation to a party, any Person Controlling, Controlled by or under common Control with such party, either directly or indirectly through one or more intermediaries.
- **"Franchised BHC Restaurant"** means a BHC Restaurant that is or will be established and operated by an Affiliate of Master Franchisee.
- "**Agreement**" means this Multi-Unit Master Franchise Agreement and all instruments amending this Multi-Unit Master Franchise Agreement.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 57

What happens if a Bhc Master Franchisee fails to return the signed termination document within 10 days?

Accepted Answer

- (d) If Master Franchisee and Franchisor agree to mutually terminate this Agreement, Master Franchisee must return a signed counterpart of any document Franchisor prepares to affect the termination not later than 10 days after Master Franchisee receives it, or the mutual agreement to terminate will be voidable by Franchisor, and Franchisor may thereafter immediately and unilaterally terminate this Agreement and require payment of all sums due and payable to Franchisor at the date of termination.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 58

What happens if the Bhc Master Franchisee's General Manager fails to complete the Initial Training to the Franchisor's satisfaction?

Accepted Answer

- (b) The failure of Master Franchisee's General Manager to complete Initial Training to Franchisor's satisfaction will be grounds for termination of this Agreement; provided, however, before this Agreement is so terminated, Master Franchisee's General Manager who fails to successfully complete Initial Training will be offered the opportunity to retake Initial Training or Master Franchisee may send a replacement General Manager, approved by Franchisor, to the next available Initial Training program.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 59

What happens if the proposed transferee does not meet Bhc's standards for new Master Franchisees?

Accepted Answer

- (b) Master Franchisee must deliver to Franchisor a written notice setting forth (i) all of the terms and conditions of any bona fide offer relating to a proposed Assignment by Master Franchisee, and (ii) all available information concerning Master Franchisee's Assignee including a detailed summary of how the proposed assignee meets Franchisor's qualifications for a new BHC Master Franchisee, and any other related information requested by Franchisor.

If the specified terms and conditions include consideration of a non-monetary nature, such consideration must be expressed in reasonably equivalent monetary terms, and if it involves matters that cannot be stated in monetary terms, such consideration will not be considered in connection with Franchisor's right of first refusal.

- (c) Within 15 days after Franchisor's receipt of such notice (or if Franchisor requests additional information, within 10 days after receipt of such additional information), Franchisor may either (i) consent or withhold Franchisor's consent to such Assignment by Master Franchisee, in accordance with section 12.2 hereof, or (ii) at Franchisor's option, accept the Assignment by Master Franchisee itself or on behalf of Franchisor's nominee upon the terms and conditions specified in the notice.

- (d) If Franchisor elects not to exercise its right of first refusal and consent to the Assignment by Master Franchisee, Master Franchisee will for a period of 60 days, and subject to the provisions of section 12.2 hereof, be free to assign this Agreement to such proposed Assignee upon the terms and conditions specified in said notice.

If, however, these terms are modified in any material manner (as determined by Franchisor), or if said 60-day period expires, Franchisor will again have such right of first refusal with respect thereto and Master Franchisee will again be required to comply with section 12.3(b) above.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 60

What happens if the terms of the Bhc franchise assignment are modified in any material manner after Bhc initially declines to exercise its right of first refusal?

Accepted Answer

specified in said notice. If, however, these terms are modified in any material manner (as determined by Franchisor), or if said 60-day period expires, Franchisor will again have such right of first refusal with respect thereto and Franchisee will again be required to comply with section 12.3(b) above. Detailed terms of assignment must be delivered to Franchisor no later than 72 hours following the close of escrow or other consummation of the transaction.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 61

What happens if the terms of a Bhc Master Franchise assignment are modified in any material manner after the Franchisor declines to exercise its right of first refusal?

Accepted Answer

If Franchisor elects not to exercise its right of first refusal and consent to the Assignment by Franchisee, Franchisee will for a period of 60 days, and subject to the provisions of section 12.2 hereof, be free to assign this Agreement to such proposed Assignee upon the terms and conditions specified in said notice. If, however, these terms are modified in any material manner (as determined by Franchisor), or if said 60-day period expires, Franchisor will again have such right of first refusal with respect thereto and Franchisee will again be required to comply with section 12.3(b) above.

Source: Item 23 — Receipts (FDD pages 52–230)

Question 62

What happens if a Bhc trainee does not successfully graduate from the Initial Training?

Accepted Answer

You and your attendees must complete the entire Initial Training to our satisfaction before you may open your Affiliate Franchised BHC Restaurant. If you or your attendees do not successfully graduate our Initial Training, you will have to attend the entire program again at your cost prior the opening of your Affiliate Franchised BHC Restaurant. We reserve the right to vary the length and content of the Initial Training based upon the experience and skill level of the individual attending the Initial Training.

Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, And Training (FDD pages 29–38)

Question 63

What happens to remodeling costs if an existing facility is remodeled for a Bhc Restaurant?

Accepted Answer

ent and do not include tenant improvement allowances, if any. If the Affiliate Franchisee remodels an existing facility, we expect the Affiliate Franchisee's remodeling costs to be lower depending on the condition of the premises. If the Affiliate Franchisee chooses to purchase the land or building, the Affiliate Franchisee will incur substantial additional costs and expenses, which we cannot meaningfully estimate.
- (3) Leasehold improvement / Remodeling. Leasehold improvement / remodeling costs, including floor coverings, wall treatments, counters, ceilings, painting, window coverings, electrical, carpentry, and similar work, and contractor's fees depend on the site's condition, location, and size; the demand for the site among prospective lessees; the site's previous use; the build-out required to conform the site for the Affiliate Franchisee's Franchised BHC Restaurant; and any leasehold improvement or other allowances the landlord grants. The lower figure assumes that the Affiliate Franchisee has a unique real estate model; the higher figure assumes a high square footage model.

Source: Item 7 — Estimated Initial Investment: (FDD pages 18–25)

Question 64

If a Bhc advertising cooperative is established that encompasses a franchisee's territory, what is the franchisee's obligation?

Accepted Answer