What is the consequence of operating a 'Competitive Business' as defined in the Bhc agreement?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
11.1 Exclusive In-Term Dealing.
- (a) 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, 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 Franchisee and Franchisor that Franchisee maximizes the Franchised Business within the Territory, and any action of 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 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.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, operating a competing business during the term of the franchise agreement constitutes a material breach. Specifically, Section 11.1(b) states that any action that diverts business or diminishes the Franchised Business within the territory is a material breach of the agreement. This includes diverting customers to a competitor or performing any act that is injurious to the goodwill associated with Bhc's marks or system.
This means that as a Bhc franchisee, you are contractually obligated to focus solely on maximizing the success of your Bhc franchise. You cannot own, operate, or be involved in any other business that sells similar goods or services without prior written consent from Bhc. This restriction applies to both direct and indirect involvement, including acting as an employee, officer, director, shareholder, or partner in a competing business.
The franchisor's right to withhold consent is absolute. This clause protects Bhc's market position, trade secrets, and overall brand integrity. It prevents franchisees from using the knowledge and resources gained from the Bhc franchise to benefit a competing business.
Furthermore, after the termination, cancellation, or expiration of the franchise agreement, a franchisee is restricted from engaging in a competing business for a period of two years within a 25-mile radius of the former Bhc location or any other authorized retail location selling Bhc products. This post-term non-compete clause further protects Bhc's interests and prevents former franchisees from directly competing with the brand shortly after leaving the system.