Does the Franchisor reserve the right to approve potential Subfranchisees and Bhc Restaurants?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
and conditions of any individual Franchise Agreement or of any other agreement to which Master Franchisee and Franchisor or its affiliates are parties.
3.2 Subfranchise Rights and Obligation.
- (a) Prior to appointing any Subfranchisee, including an affiliate of Master Franchisee, Master Franchisee shall conduct an approval process to confirm that each potential Subfranchisee and each potential Subfranchised BHC Restaurants meets all of Franchisor's then current minimum requirements for new subfranchisees and new BHC Restaurants, as the same may be amended, replaced or supplemented by Franchisor from time to time. Franchisor also reserves the right to approve any or all potential Subfranchisees and potential BHC Restaurants. 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. To the extent Franchisor exercises its approval rights under this paragraph, Franchisor's approval of any potential Subfranchisee or potential BHC Restaurant is in no way a guarantee as to the success of that potential Subfranchisee or potential BHC Restaurant, but only an indication that the potential Subfranchisee or potential BHC Restaurant generally meets Franchisor's then-current minimum requirements.
- (b) Once a Subfranchisee and a potential BHC Restaurant have been approved pursuant to the approval process described in paragraph 2(b), Master Franchisee shall enter into a Subfranchise Agreement in relation to the relevant approved BHC Restaurant with the relevant Subfranchisee in the form approved by Franchisor, including only such amendments to such form as approved by Franchisor in writing (such executed agreement, "Subfranchise Agreement"). Prior to entering into any form Subfranchise Agreement or any other form agreements, including an area development agreement or lease addendum (collectively, "Other Agreements"), for the first time with a prospective subfranchisee or Subfranchisee, Master Franchisee shall submit to and receive Franchisor's approval of such proposed form Subfranchise Agreement or Other Agreement. In addition, once a form Subfranchise Agreement or Other Agreement has been approved, Master Franchisee shall not modify the terms of such form documents without submitting to and receiving Franchisor's prior written approval of such modified form documents.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, Bhc retains the right to approve potential subfranchisees and restaurant locations. Before a Master Franchisee can appoint a subfranchisee, they must conduct an approval process to ensure the potential subfranchisee and restaurant meet Bhc's minimum requirements, which Bhc may amend or supplement. Bhc also reserves the right to approve any or all potential subfranchisees and restaurant locations.
Bhc's approval of a potential subfranchisee or restaurant is not a guarantee of success but indicates that the candidate generally meets Bhc's minimum requirements. The Master Franchisee must use a Subfranchise Agreement form approved by Bhc, including any amendments approved by Bhc in writing. Master Franchisees must submit the proposed form Subfranchise Agreement or other agreements to Bhc and receive approval before entering into any agreements with a prospective subfranchisee.
Master Franchisees cannot modify the terms of approved form documents without Bhc's prior written approval. The Subfranchise Agreement must align with the Master Franchise Agreement and Bhc's requirements, including territory size. Executed copies of all Subfranchise Agreements and related agreements must be sent to Bhc before the restaurant opens for their records, and copies of other agreements must be sent within 30 days of execution. This ensures Bhc maintains control over the quality and standards of its subfranchised locations.