Can the Master Franchisee directly operate Bhc Restaurants under the Master Franchise Agreement?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a Master Franchisee cannot directly operate Bhc restaurants under the Master Franchise Agreement. Instead, they can only operate through an Affiliate Franchisee that enters into a Subfranchise Agreement with the Master Franchisee. An Affiliate Franchisee is defined as a person controlling, controlled by, or under common control with the Master Franchisee.
Before granting subfranchises to third parties, the Master Franchisee must first establish and operate at least one Affiliate Franchised Bhc Restaurant within the Development Area, adhering to a separate Subfranchise Agreement. This requirement ensures the Master Franchisee has practical experience with the Bhc system before overseeing other subfranchisees.
This structure means that while a Master Franchisee cannot directly run a Bhc restaurant, they can own and operate one through a separate legal entity (the Affiliate Franchisee) under a subfranchise agreement. This setup allows the Master Franchisee to gain operational experience and demonstrate the Bhc business model before subfranchising to others.