Does the Bhc franchise agreement require a franchisee to indemnify Bhc for losses resulting from a breach of the non-competition agreement by the franchisee's General Manager?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- (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.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the franchise agreement stipulates that franchisees must indemnify Bhc for losses resulting from breaches of non-competition agreements by the franchisee, any Principal Equity Operator, or the franchisee's General Manager. This means that if the General Manager violates the non-competition agreement, the franchisee is responsible for protecting Bhc from any resulting losses.
This requirement places a significant responsibility on the franchisee to ensure that their General Manager, as well as any Principal Equity Operators, adheres to the non-competition covenants outlined in Article 11 of the franchise agreement. The franchisee's obligation includes covering all losses Bhc may incur due to such breaches. These non-competition covenants are designed to protect Bhc's interests by preventing individuals associated with the franchise from engaging in activities that could harm the business, such as working for a competitor or starting a competing business.
The FDD also states that Bhc can seek damages including royalties, marketing and promotion fees, initial franchise fees, and other fees that would have been payable if the competing business was included in the franchised business. Additionally, Bhc is entitled to an equitable accounting of all earnings, profits, and other benefits arising from the violation. Bhc can also seek injunctive relief to prevent breaches of the non-competition agreement, without needing to prove actual damages.
For a prospective franchisee, this underscores the importance of carefully selecting and monitoring their General Manager and Principal Equity Operators. It also highlights the need to fully understand the scope and implications of the non-competition covenants to avoid potential liabilities. Franchisees should ensure their General Manager and Principal Equity Operators are fully aware of these restrictions and their obligations under the franchise agreement.