What damages is Bhc entitled to recover from a franchisee who violates the restrictions in Article 11?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
(a) Franchisee acknowledges that the restrictions contained in this Article 11 are reasonable and necessary to protect Franchisor's legitimate interests, and in the event of violation of any of these restrictions, Franchisor is entitled to recover damages including, without limitation, Royalties, Marketing and Promotion Fees, Initial Franchise Fee, and other fees that would have been payable if such business were included in the Franchised Business, and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights and remedies will be cumulative and in addition to any other rights or remedies to which Franchisor is entitled at law or in equity.
- (b) Franchisee agrees to indemnify Franchisor and hold Franchisor harmless from and against all Losses which Franchisor may sustain as a result of any breach of this Article 11 by Franchisee, any Principal Equity Operator, or Franchisee's General Manager.
Franchisee further agrees that a breach of the confidentiality and non-competition covenants set forth above and, in the Confidentiality, and Non-Competition Agreement (see Exhibit 4 to this Franchise Agreement) will cause immediate and irreparable damage to Franchisor that would be impossible or inadequate to measure and calculate and could not be fully remedied by monetary damages.
Accordingly, Franchisor has the right to specifically enforce this Agreement and seek injunctive or other equitable relief as may be necessary or appropriate to prevent such breach or continued breach without the necessity of proving actual damages by reason of any such breach or threatened breach of this Agreement.
Franchisee further agrees that no bond or other security will be required in obtaining such equitable relief and hereby consents to the issuance of such injunction and to the ordering of specific performance.
Franchisee further acknowledges that such remedies are in addition to any other rights or remedies, whether at law or in equity, which may be available to Franchisor, including monetary damages.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, if a franchisee violates the restrictions outlined in Article 11 regarding non-competition, Bhc is entitled to recover specific damages to protect its interests. These damages include, but are not limited to, royalties, marketing and promotion fees, the initial franchise fee, and any other fees that would have been payable if the violating business activity had been included as part of the franchised business. Additionally, Bhc is entitled to an equitable accounting of all earnings, profits, and other benefits that the franchisee gained as a result of the violation.
This means that Bhc aims to recoup not only the direct financial losses resulting from the franchisee's breach of the non-competition agreement but also any unjust enrichment the franchisee may have experienced. The remedies available to Bhc are cumulative, meaning they can be exercised in addition to any other legal or equitable rights Bhc possesses. This provision underscores the importance Bhc places on protecting its market position and brand integrity by preventing franchisees from engaging in competitive activities that could undermine the franchise system.
Furthermore, the franchisee is required to indemnify Bhc and hold it harmless from any losses Bhc sustains due to a breach of Article 11, whether the breach is committed by the franchisee, a Principal Equity Operator, or the franchisee's General Manager. Bhc also has the right to seek injunctive or other equitable relief to prevent breaches of confidentiality and non-competition covenants, without needing to prove actual damages. This highlights Bhc's ability to quickly address and stop any actions that could cause immediate and irreparable harm to the brand. The franchisee also consents to the issuance of an injunction and specific performance orders, and waives any requirement for Bhc to post a bond or security to obtain such relief.
In practical terms, this section of the FDD makes it clear to potential Bhc franchisees that violating the non-competition agreements can lead to significant financial and legal repercussions. Franchisees should fully understand the scope and limitations of Article 11 and the Confidentiality and Non-Competition Agreement to avoid potential breaches and the associated damages. This also protects Bhc from unfair competition and ensures that franchisees remain committed to the success of the Bhc system.