Is abandonment of the franchised business by a Bhc franchisee considered a non-curable default?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
| 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. |
| Provision | Section in Multi-Unit Master Franchise Agreement | Summary Restaurants in the Development Area under the Development Schedule. |
| e. Termination by franchisor without cause | 13.1 | We can terminate the MFA if you are in breach of that agreement (This provision is subject to state law.) |
| f. Termination by franchisor with cause | 13.2 | We can terminate the MFA if you are in material breach of that agreement (This provision is subject to state law.) |
| g. "Cause" defined – curable defaults | 13.1 | You have 30 days after notice to cure monetary defaults and other defaults (including defaults under a lease for your Master Franchise BHC Restaurants) that can be cured. (This provision is subject to state law.) |
| h. "Cause" defined – non-curable defaults | 13.2 | Non-curable defaults: your bankruptcy or insolvency; your abandonment of the franchised business; you make material misrepresentations relating to your acquisition of the Franchise or you engage in conduct that reflects materially and unfavorably upon the operation and reputation of the Master Franchised Business or the BHC System; you and us agree in writing to terminate the Franchise; you fail, for a period of 10 days after notification of noncompliance, to comply with any federal, state or local law or regulation applicable to the operation of the Franchise; after curing any default, you engage in the same noncompliance whether or not such noncompliance is corrected after notice; you repeatedly fail to comply with one or more material requirements of the MFA, whether or not corrected after notice; the Franchised Business or your Master Franchise BHC Restaurant is seized, taken over, or foreclosed by a government official, creditor, lien holder or lessor, or that a final judgment against you remains unsatisfied for 30 days; you are convicted of a felony or any other criminal misconduct that is relevant to the operation of the Franchise; an audit or investigation conducted by us reveals that you knowingly maintained false books or records; or submitted false reports to us, or knowingly understated your Gross Revenue or withheld the reporting of any of your Gross Revenue (see further information in Section 13.2(a)(x)); we make a reasonable determination that your continued operation |
Source: Item 17 — Renewal, Termination, Transfer, And Dispute Resolution (FDD pages 43–49)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, abandonment of the franchised business is considered a non-curable default under the Multi-Unit Master Franchise Agreement (MFA). This means that if a Bhc franchisee abandons their franchised business, Bhc has grounds to terminate the MFA without providing an opportunity for the franchisee to correct the default.
This provision is significant for prospective Bhc franchisees because it highlights the importance of maintaining active operation of the franchised business. Abandonment, which is not specifically defined in the provided excerpt, could potentially include ceasing operations, neglecting the business, or otherwise failing to meet the obligations outlined in the MFA. Because abandonment is a non-curable default, the franchisee would not have the typical 30-day period to rectify the situation, as is the case with curable defaults like monetary breaches or other correctable issues under a lease.
Other non-curable defaults that could lead to immediate termination of the MFA include bankruptcy or insolvency, material misrepresentations relating to the acquisition of the Franchise, engaging in conduct that reflects materially and unfavorably upon the operation and reputation of the Master Franchised Business or the Bhc System, failing to comply with federal, state or local law or regulation applicable to the operation of the Franchise for a period of 10 days after notification of noncompliance, and other specific violations detailed in Section 13.2 of the MFA.
Prospective franchisees should carefully consider these non-curable default provisions and ensure they have the resources and commitment necessary to avoid such situations, as they could lead to the immediate loss of their franchise rights. Franchisees should seek clarification from Bhc regarding what specific actions or inactions would constitute abandonment to fully understand their obligations and potential risks.