Is the Master Franchisee liable to Bhc for the acts or omissions of a Subfranchisee?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- i. undertakes to ensure that each Subfranchisee complies with the respective Subfranchise Agreement at all times, and to notify Franchisor promptly in writing if there is any breach of any term of any Subfranchise Agreement and/or this Agreement and, in any event, no later than fourteen (14) days of any such occurrence. Master Franchisee agrees that any act or omission of any Subfranchisee which is inconsistent with the terms of this Agreement or any Subfranchise Agreement will be deemed a breach of this Agreement by Master Franchisee;
- ii. is not discharged or relieved from any obligation or liability arising under this Agreement by entering into any Subfranchise Agreement;
- iii. is liable to Franchisor for the acts, omissions, defaults and negligence of each Subfranchisee, or each Subfranchisee's personnel, as fully as if they were the acts, defaults or negligence of Master Franchisee or Master Franchisee's personnel.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the Master Franchisee is indeed liable to Bhc for the actions of their Subfranchisees. Specifically, any action or failure to act by a Subfranchisee that violates the terms of the Subfranchise Agreement or the Master Franchise Agreement is considered a breach of the Master Franchise Agreement by the Master Franchisee. This means Bhc holds the Master Franchisee accountable for ensuring Subfranchisees comply with all agreements.
This liability extends to the acts, omissions, defaults, and negligence of the Subfranchisee or their personnel. Bhc views these actions as if they were committed directly by the Master Franchisee or their own personnel. This creates a significant responsibility for the Master Franchisee to carefully oversee and manage their Subfranchisees, ensuring they adhere to Bhc's standards and operational guidelines.
To mitigate this risk, the Master Franchisee must ensure each Subfranchisee complies with their Subfranchise Agreement and promptly notify Bhc of any breaches, no later than fourteen days after they occur. The Master Franchisee is not relieved of their obligations or liabilities under the Master Franchise Agreement simply by entering into Subfranchise Agreements. This underscores the importance of thorough Subfranchisee selection, training, and ongoing monitoring to protect the Master Franchisee from potential liabilities arising from Subfranchisee behavior.