What is the impact of section 12.3 on the Bhc franchisee's ability to assign the franchise?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
12.3 Right of First Refusal.
- (a) Except for a Transfer (i) to Franchisee's heirs, personal representatives, or conservators in the case of death or legal incapacity as provided in section 12.4 hereof, Franchisee's right to Transfer Franchisee's entire interest in the Franchise granted by this Agreement under section 12.2 hereof is subject to Franchisor's right of first refusal, which will be exercised in accordance with the terms of this section 12.3.
- (b) Franchisee must deliver to Franchisor a written notice setting forth (i) all of the terms and conditions of any bona fide offer relating to a proposed Assignment by Franchisee, and (ii) all available information concerning Franchisee's Assignee including a detailed summary of how the proposed assignee meets Franchisor's qualifications for a new BHC franchisee, and any other related information requested by Franchisor. If the specified terms and conditions include consideration of a non-monetary nature, such consideration must be expressed in reasonably equivalent monetary terms, and if it involves matters that cannot be stated in monetary terms, such consideration will not be considered in connection with Franchisor's right of first refusal.
- (c) Within 15 days after Franchisor's receipt of such notice (or if Franchisor requests additional information, within 10 days after receipt of such additional information), Franchisor may either (i) consent or withhold Franchisor's consent to such Assignment by Franchisee, in accordance with section 12.2 hereof, or (ii) at Franchisor's option, accept the Assignment by Franchisee itself or on behalf of Franchisor's nominee upon the terms and conditions specified in the notice.
- (d) If Franchisor elects not to exercise its right of first refusal and consent to the Assignment by Franchisee, Franchisee will for a period of 60 days, and subject to the provisions of section 12.2 hereof, be free to assign this Agreement to such proposed Assignee upon the terms and conditions specified in said notice. If, however, these terms are modified in any material manner (as determined by Franchisor), or if said 60-day period expires, Franchisor will again have such right of first refusal with respect thereto and Franchisee will again be required to comply with section 12.3(b) above. Detailed terms of assignment must be delivered to Franchisor no later than 72 hours following the close of escrow or other consummation of the transaction.
12.4 Transfers upon the Death or Incapacity of an Individual Franchisee or Majority Equity Owner.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, section 12.3 details the franchisor's right of first refusal, which significantly impacts a franchisee's ability to transfer their franchise. Before a Bhc franchisee can transfer their interest, they must provide written notice to Bhc. This notice must include all terms and conditions of the proposed assignment and detailed information about the potential assignee, ensuring they meet Bhc's standards for new franchisees.
Bhc then has the option to either consent to the assignment or exercise its right of first refusal. Within 15 days of receiving the franchisee's notice (or 10 days after receiving additional requested information), Bhc can choose to accept the assignment itself or designate a nominee to take over the franchise under the same terms and conditions initially offered. This clause allows Bhc to maintain control over who enters the franchise system and under what conditions.
If Bhc decides not to exercise its right of first refusal and consents to the assignment, the franchisee is then free to proceed with the transfer to the proposed assignee for a 60-day period, provided they adhere to the provisions outlined in section 12.2. However, if the terms of the deal change materially, or if the 60-day window expires, Bhc's right of first refusal is reinstated, and the franchisee must once again comply with the notification requirements in section 12.3(b). Upon approval of the transfer, the franchisee must pay Bhc a non-refundable "Transfer Fee" of 100% of Bhc's then-current Initial Franchise Fee per Franchised BHC Restaurant.
This right of first refusal does not apply to transfers to the franchisee's heirs, personal representatives, or conservators in the event of death or legal incapacity, as specified in section 12.4. The franchisee must also notify Bhc of their intent to transfer, providing details about the proposed transferee, copies of all related agreements, and the transferee's application for approval. This process ensures Bhc retains significant oversight and control over franchise transfers, protecting the brand's integrity and standards.