In the context of a Bhc franchise transfer, what constitutes 'all or substantially all' of the assets of the Franchised BHC Restaurant?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- (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 sect
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the term "all or substantially all of the assets of the Franchised BHC Restaurant" is used within the context of assignment or transfer restrictions. Specifically, Item 12.2(a) states that neither the franchisee's interest in the agreement, nor all or substantially all of the assets of the Franchised Bhc Restaurant, nor a controlling or non-controlling interest in the franchisee (if an entity) may be assigned, transferred, shared, or divided without Bhc's prior written consent. This clause aims to ensure that Bhc maintains control over who operates its franchises and that any transfer meets their standards.
This provision means that a franchisee cannot sell off a significant portion of the restaurant's assets, transfer ownership, or alter control of the business without first obtaining approval from Bhc. This requirement protects Bhc's brand and operational consistency by ensuring that new operators or owners meet their qualifications and standards. The FDD does not explicitly define what "substantially all" means in quantitative terms (e.g., a specific percentage of assets). Therefore, any transfer of a significant portion of the restaurant's assets could potentially trigger this clause, requiring franchisor approval.
For a prospective franchisee, this implies that any plan to sell the business, transfer assets, or change ownership structure must be carefully reviewed and approved by Bhc. Failure to comply with this requirement could result in a breach of the franchise agreement and potential termination. It is crucial to communicate with Bhc early in the process of considering any transfer to understand their specific requirements and to ensure compliance with the franchise agreement.
Given that the FDD does not provide a precise definition of "substantially all," a prospective franchisee should seek clarification from Bhc regarding what percentage or type of asset transfer would trigger the need for franchisor approval. Understanding Bhc's interpretation of this term is essential for avoiding potential disputes and ensuring a smooth transfer process.