Can Bhc deduct fees owed from the Initial Deposit?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
(e) Franchisor may deduct from the Initial Deposit all fees owed to Franchisor, including but not limited to, amounts under section 15.1(b)(v).
15.3 Cross-Defaults.
Any default by Master Franchisee (or any person/company or Affiliated Entity) under the terms and conditions of this Agreement or any lease or sublease, or any other agreement between Franchisor or its affiliate, and Master Franchisee, shall be deemed to be a material default of each and every said agreement, and furthermore, in the event of termination, for any cause, of this Agreement, or any other agreement between the parties hereto, including, but not limited to, the MFA, between the parties hereto, Franchisor may, at its option, terminate any and all said agreements. No right or remedy which Franchisor may have (including termination) is exclusive of any other right or remedy provided under law or equity and Franchisor may pursue any rights and/or remedies available.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, Bhc has the right to deduct fees owed from the initial deposit. This means that if a franchisee owes Bhc any money, Bhc can take that amount from the initial deposit, which is $20,000 for a single franchised BHC Restaurant.
This is a significant point for prospective franchisees because it means that the initial deposit is not necessarily fully refundable. The deposit is meant to secure against non-payment of obligations under the Franchise Agreement. If the franchisee fails to meet their financial obligations, Bhc can use the deposit to cover those costs.
The FDD specifies that Bhc may deduct from the Initial Deposit all fees owed to Franchisor, including but not limited to, amounts under section 15.1(b)(v). This clause gives Bhc broad authority to deduct various types of fees, so franchisees need to understand all potential fees and obligations outlined in the agreement to avoid deductions from their initial deposit. Franchisees are responsible for replenishing the deposit to maintain it at $20,000 per BHC Restaurant within ten business days of any deduction.