What is the definition of a 'Subfranchisee' in the context of Bhc?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
Each potential Subfranchisee that Master Franchisee approves and Franchisor approves, to the extent Franchisor exercises its approval right, shall be referred to herein as a "Subfranchisee." For purposes of clarification, Master Franchisee may not directly operate BHC Restaurants under this Agreement, but may only do so through an Affiliate Franchisee that enters into a then-current Subfranchise Agreement with Master Franchisee.
An "Affiliate Franchisee" means in relation to a Master Franchisee, any person controlling, controlled by or under common control with Master Franchisee, either directly or indirectly through one or more intermediaries.
In addition, Master Franchisee must establish and operate at least one (1) Affiliate Franchised BHC Restaurants within the Development Area pursuant to separate Subfranchise Agreements before Master Franchisee may grant subfranchises to third parties for the establishment and operation of Subfranchised BHC Restaurants within the Development Area.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a Subfranchisee is defined within the context of the master franchisee's rights and obligations. Specifically, a Subfranchisee is a potential franchisee that the master franchisee approves, and that Bhc also approves (to the extent Bhc exercises its right to do so). The master franchisee cannot directly operate Bhc restaurants under the agreement, but can do so through an Affiliate Franchisee that enters into a Subfranchise Agreement with the master franchisee. An Affiliate Franchisee is any person controlling, controlled by, or under common control with the master franchisee.
Before the master franchisee can grant subfranchises to third parties, they must first establish and operate at least one Affiliate Franchised Bhc Restaurant within the Development Area, using separate Subfranchise Agreements. This implies that the master franchisee must first demonstrate their ability to operate a Bhc restaurant successfully before licensing others.
This definition is important for prospective master franchisees as it outlines the structure they must follow in order to grant subfranchises. It highlights the requirement for initial operation through an affiliate and the approval process for potential subfranchisees. It also emphasizes Bhc's right to approve subfranchisees, giving Bhc control over who operates under its brand. The master franchisee must ensure that all potential subfranchisees meet Bhc's minimum requirements.