Before granting subfranchises to third parties, how many Affiliate Franchised Bhc Restaurants must the Master Franchisee establish and operate?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Master Franchisee must first establish and operate at least one Affiliate Franchised Bhc Restaurant before they are allowed to grant subfranchises to third parties. This requirement ensures that the Master Franchisee has direct experience with the Bhc system before licensing it to others. The Affiliate Franchised Bhc Restaurant must be operated within the Development Area under a separate Subfranchise Agreement.
This prerequisite is designed to ensure that Master Franchisees are thoroughly familiar with Bhc's operational standards, procedures, and brand expectations. By successfully running an Affiliate Franchised Bhc Restaurant, the Master Franchisee gains practical knowledge that is crucial for effectively supporting and training Subfranchisees. This hands-on experience helps maintain consistency and quality across all Bhc locations within the Development Area.
The FDD also clarifies that Master Franchisees cannot directly operate Bhc Restaurants themselves, but can only do so through an Affiliate Franchisee that enters into a Subfranchise Agreement with the Master Franchisee. An Affiliate Franchisee is defined as any person or entity controlled by, controlling, or under common control with the Master Franchisee. This structure ensures a clear separation of roles and responsibilities within the franchise system.