Can a Bhc franchisee directly operate Master Franchised Bhc Restaurants under the MFA?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
As further described in Item 1, under the MFA, we grant to you within the Development Area both Development Rights (the right to grant subfranchises to Subfranchisees for the establishment and operation of Master Franchised BHC Restaurants) and Operating Rights (the right to own and operate (through Affiliate Franchisee) Master Franchised BHC Restaurants once opened, and to support, and receive fees from, as applicable, all existing Master Franchised BHC Restaurants within the Development once opened). You may not directly operate Master Franchised BHC Restaurants under the MFA, but may only do so through an affiliate that enters into a then-current Franchise Agreement with us. In addition, you must establish and operate at least one (1) Affiliate Franchised BHC Restaurants within the Development Area pursuant to separate Subfranchise Agreements before you may grant subfranchises to third parties for the establishment and operation of Subfranchised BHC Restaurants within the Development Area.
Source: Item 12 — Territory (FDD pages 38–39)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a franchisee cannot directly operate Master Franchised Bhc Restaurants under the Master Franchise Agreement (MFA). Instead, the franchisee must operate through an affiliate that enters into a separate Franchise Agreement with Bhc. This means the franchisee, as an individual or entity holding the MFA, cannot directly run a Bhc restaurant.
To operate a Bhc restaurant, the franchisee must establish a separate legal entity, referred to as an 'Affiliate Franchisee.' This affiliate then enters into a standard franchise agreement with Bhc, similar to any other franchisee. This structure allows the master franchisee to fulfill their Operating Rights, which include owning and operating Master Franchised Bhc Restaurants, but only through this separate affiliate entity.
Furthermore, the franchisee must first establish and operate at least one Affiliate Franchised Bhc Restaurant within their Development Area before they are allowed to grant subfranchises to third parties. This requirement ensures that the master franchisee has direct operational experience with the Bhc system before expanding by subfranchising to others. This condition is in place to ensure the master franchisee understands the brand standards and operational procedures before allowing others to operate Bhc restaurants within their territory.
In summary, while the MFA grants the right to operate Bhc restaurants, it mandates that this operation be conducted through a separate affiliate entity rather than directly by the master franchisee. This structure, along with the requirement to first operate an affiliate restaurant, is designed to ensure proper oversight and adherence to Bhc standards within the Development Area.