What approval process must the Master Franchisee conduct before appointing any Bhc Subfranchisee?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
and conditions of any individual Franchise Agreement or of any other agreement to which Master Franchisee and Franchisor or its affiliates are parties.
3.2 Subfranchise Rights and Obligation.
- (a) Prior to appointing any Subfranchisee, including an affiliate of Master Franchisee, Master Franchisee shall conduct an approval process to confirm that each potential Subfranchisee and each potential Subfranchised BHC Restaurants meets all of Franchisor's then current minimum requirements for new subfranchisees and new BHC Restaurants, as the same may be amended, replaced or supplemented by Franchisor from time to time. Franchisor also reserves the right to approve any or all potential Subfranchisees and potential BHC Restaurants. Each potential Subfranchisee that Master Franchisee approves and Franchisor approves, to the extent Franchisor exercises its approval right, shall be referred to herein as a "Subfranchisee." For purposes of clarification, Master Franchisee may not directly operate BHC Restaurants under this Agreement, but may only do so through an Affiliate Franchisee that enters into a then-current Subfranchise Agreement with Master Franchisee. An "Affiliate Franchisee" means in relation to a Master Franchisee, any person controlling, controlled by or under common control with Master Franchisee, either directly or indirectly through one or more intermediaries. 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. To the extent Franchisor exercises its approval rights under this paragraph, Franchisor's approval of any potential Subfranchisee or potential BHC Restaurant is in no way a guarantee as to the success of that potential Subfranchisee or potential BHC Restaurant, but only an indication that the potential Subfranchisee or potential BHC Restaurant generally meets Franchisor's then-current minimum requirements.
- (b) Once a Subfranchisee and a potential BHC Restaurant have been approved pursuant to the approval process described in paragraph 2(b), Master Franchisee shall enter into a Subfranchise Agreement in relation to the relevant approved BHC Restaurant with the relevant Subfranchisee in the form approved by Franchisor, including only such amendments to such form as approved by Franchisor in writing (such executed agreement, "Subfranchise Agreement"). Prior to entering into any form Subfranchise Agreement or any other form agreements, including an area development agreement or lease addendum (collectively, "Other Agreements"), for the first time with a prospective subfranchisee or Subfranchisee, Master Franchisee shall submit to and receive Franchisor's approval of such proposed form Subfranchise Agreement or Other Agreement.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a Master Franchisee must conduct an approval process before appointing any Subfranchisee. This process is to confirm that each potential Subfranchisee and their BHC restaurant meets Bhc's current minimum requirements for new subfranchisees and restaurants. These requirements may be amended or replaced by Bhc from time to time.
Bhc also retains the right to approve any or all potential Subfranchisees and restaurant locations. A Subfranchisee is only considered approved if the Master Franchisee approves them and, to the extent Bhc exercises its right, Bhc also approves them. The Master Franchisee is not allowed to directly operate Bhc restaurants, but can do so through an Affiliate Franchisee that has a Subfranchise Agreement with the Master Franchisee. An Affiliate Franchisee is defined as a person controlled by, controlling, or under common control with the Master Franchisee.
Furthermore, the Master Franchisee is obligated to establish and operate at least one Affiliate Franchised Bhc Restaurant within the Development Area through a separate Subfranchise Agreement before granting subfranchises to third parties. Once a Subfranchisee and restaurant have been approved, the Master Franchisee must enter into a Subfranchise Agreement with the Subfranchisee, using a form approved by Bhc, including any amendments also approved by Bhc in writing. Prior to using any Subfranchise Agreement or other agreements for the first time, the Master Franchisee must submit the proposed form to Bhc and receive their approval. The Master Franchisee cannot modify the terms of approved forms without prior written approval from Bhc. Executed copies of each Subfranchise Agreement and related agreements must be sent to Bhc before the opening of the relevant Bhc Restaurant.