What is the definition of an 'Affiliate Franchisee' in relation to a Master Franchisee for Bhc?

According to Bhc's 2025 Franchise Disclosure Document, an 'Affiliate Franchisee' is defined in relation to a Master Franchisee. Specifically, it refers to any person or entity that controls, is controlled by, or is under common control with the Master Franchisee. This control can be exercised either directly or indirectly through one or more intermediaries.

In simpler terms, an Affiliate Franchisee is essentially a related party to the Master Franchisee, where the relationship is based on control. This could mean the Master Franchisee owns the Affiliate Franchisee, the Affiliate Franchisee owns the Master Franchisee, or both are owned by the same parent company or individual. The control can be exerted through various levels of ownership or management structures.

This definition is important because Bhc requires Master Franchisees to first establish and operate at least one Affiliate Franchised Bhc Restaurant before they are allowed to grant subfranchises to third parties. This ensures that the Master Franchisee has direct experience with operating a Bhc restaurant before expanding through subfranchising. It also allows Bhc to assess the Master Franchisee's capabilities and adherence to the Bhc system before they begin recruiting and training other franchisees.

For a prospective Master Franchisee, understanding this definition is crucial for structuring their business operations. If the Master Franchisee intends to operate their own Bhc restaurants in addition to subfranchising, they will need to do so through a separate legal entity that qualifies as an Affiliate Franchisee. This structure ensures compliance with Bhc's requirements and maintains a clear distinction between the Master Franchisee's role and the operation of individual Bhc restaurants.