Besides the right of first refusal, what is Bhc's obligation regarding consent for transfers of interest in the Franchise Agreement, the Franchised BHC Restaurant, or equity interest in the franchisee's entity?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
Except as otherwise provided in this Agreement and subject to Franchisor's right of first refusal provided in section 12.3 hereof, Master Franchisee or an Principal Equity Operator may consummate any Transfer of a direct or indirect interest in this Agreement, the BHC Restaurant or the economic benefits derived therefrom, or any equity interest in Master Franchisee's franchised entity, not permitted by the preceding section 12.4, only after written notice to Franchisor and only with Franchisor's written consent, which will not be unreasonably withheld.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, outside of Bhc's right of first refusal, a franchisee or principal equity operator can only transfer a direct or indirect interest in the Franchise Agreement, the Bhc Restaurant, its economic benefits, or any equity interest in the franchisee's entity after providing written notice to Bhc and receiving Bhc's written consent. Bhc states that it will not unreasonably withhold consent.
This means that while Bhc retains some control over who becomes a franchisee or equity holder, they cannot arbitrarily deny a transfer request. The 'reasonableness' standard provides some protection to the franchisee, although disputes over what constitutes 'unreasonable' denial could potentially lead to legal challenges.
It is important for prospective franchisees to understand the conditions under which Bhc might consider withholding consent. Investigating past transfer requests and outcomes, and discussing potential transfer scenarios with Bhc during the due diligence process, can provide valuable insight into Bhc's practical approach to these matters.