What happens to the Bhc franchise agreement if Bhc becomes insolvent or declares bankruptcy?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
(a) This Agreement may be terminated unilaterally by Franchisor or Master Franchisee only "for cause", which for purposes of this Agreement means a material violation of this Agreement and
includes any failure of a party to substantially comply with any obligation, duty or promise under this Agreement, including those acts or omissions specified in sections 13.2 and 13.3 hereof. If Franchisor is in material breach of this Agreement, Master Franchisee may terminate this Agreement by giving Franchisor prior written notice setting forth the asserted breach of this Agreement and giving Franchisor 30 days in which to cure the breach. If Master Franchisee is in material breach of this Agreement, Franchisor may exercise Franchisor's right to terminate this Agreement in accordance with this Article 13. If Franchisor becomes insolvent or declares bankruptcy, Master Franchisee will continue to have the right to operate under this Agreement until and unless a court issues an order otherwise. If because of the nature of the breach, it would be unreasonable for Franchisor to be able to cure the breach within 30 days, Franchisor will be given additional time (up to 30 additional days) as is reasonably necessary to cure said breach, upon condition that Franchisor must, upon receipt of such notice from Master Franchisee, immediately commence to cure such breach and continue to use best efforts to do so.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, if Bhc becomes insolvent or declares bankruptcy, a Master Franchisee will retain the right to operate under the agreement unless a court issues an order stating otherwise. This clause provides a degree of protection for the Master Franchisee, allowing them to continue running the business even if Bhc faces financial difficulties. This is contingent on a court not intervening to alter the arrangement.
This provision is particularly important for Master Franchisees as it offers some stability during uncertain times for the Bhc brand. However, the ultimate decision rests with the court, which could potentially disrupt the Master Franchisee's operations. The Master Franchisee needs to be aware of the possibility that their agreement could be affected by a court order if Bhc faces insolvency or bankruptcy.
It is important to note that this protection applies specifically to Master Franchisees. The FDD excerpt does not detail what protections, if any, are afforded to individual franchisees in the event of Bhc's insolvency or bankruptcy. A prospective franchisee should seek clarification from Bhc regarding the specific terms and conditions that would apply to their franchise agreement should Bhc become insolvent or declare bankruptcy.