Is the Bhc franchise agreement binding upon the Franchisee's successors and assigns, subject to restrictions on assignment by the Franchisee?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
12. ASSIGNMENT
12.1 Assignment by Franchisor.
Franchisor has the right to Transfer this Agreement and all of Franchisor's rights and privileges hereunder ("Assignment by Franchisor") to any other person, firm, or corporation ("Franchisor's Assignee"). Upon the effective date of the Assignment by Franchisor and thereafter, Franchisor will be relieved of all obligations or liabilities under this Agreement.
12.2 Assignment by Franchisee.
- (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 section 12.6 hereof.
Franchisor's consent to a specific Assignment by Franchisee is not cumulative and will not apply to any subsequent assignments, in respect of each of which Franchisee must comply with this section 12.2.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the franchise agreement is indeed binding upon the franchisee's successors and assigns, but with significant restrictions. Section 12.2(a) explicitly states that the agreement is based on the unique skills and qualifications of the franchisee and principal equity operators. Consequently, franchisees cannot freely transfer their interest in the agreement, the BHC restaurant's assets, or any controlling interest without Bhc's prior written consent. This consent isn't cumulative, meaning each subsequent assignment requires fresh approval from Bhc.
Before any assignment can occur, the franchisee must provide written notice to Bhc, including the proposed transferee's details, copies of all related agreements, and the transferee's application for approval as a successor franchisee. Bhc also retains a right of first refusal, allowing them to either consent to the assignment or take over the franchise themselves under the same terms offered by the proposed assignee. This provision ensures Bhc maintains control over who operates their franchises and protects the brand's reputation and standards.
Any attempt to assign the franchise in violation of these terms is considered a material breach of the agreement, rendering the assignment void and potentially leading to immediate termination of the franchise agreement. Upon approval of an assignment, the franchisee must settle all outstanding accounts with Bhc, transfer all service agreements to the assignee, and execute an agreement among the franchisee, Bhc, and the assignee, which includes a mutual release. Additionally, the franchisee must assign the lease for the BHC Restaurant premises to the assignee, including rights to telephone numbers and utilities. These measures ensure a smooth transition and protect Bhc's interests in the franchise.