After opening at least one Affiliate Franchised Bhc Restaurant, what is the Master Franchisee of Bhc permitted to do regarding subfranchises?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
erated in accordance with the provisions of BHC franchise agreements and Franchisor's Operations Manual, as periodically amended.
3. GRANT OF MASTER FRANCHISE
3.1 Grant of Master Franchise.
Subject to the terms and conditions of this Agreement, Franchisor hereby grants to Master Franchisee:
- (a) the exclusive, non-transferable right and license to, (a) establish and operate at least one (1) Franchised BHC Restaurant through Master Franchisee's Affiliate, and (b) after opening at least one (1) Affiliate Franchised BHC Restaurant, to grant subfranchises to Subfranchisees to establish and operate Subfranchised BHC Restaurants in accordance by entering Subfranchise Agreements to establish and operate BHC Restaurants using the BHC System and IP Rights, and in accordance with the Operating Manuals ("Development Rights") with the schedule of openings attached hereto as Exhibit 1 (the "Development Schedule") and within the geographical area (the "Development Area") indicated in the Development Schedule.
- (b) So long as Master Franchisee's obligations under the Development Schedule are being met on a timely basis and until this Agreement terminates, Franchisor will not itself operate a BHC Restaurant within the Development Area, nor allow any of its affiliates or other BHC franchisees to do so. Captive locations will be excluded from Master Franchisee's Development Area and Franchisor has the right to develop or franchise the following Captive location locations: (1) military bases; (2) public transportation facilities; (3) sports facilities, including race tracks; (4) student unions or other similar buildings on college or university campuses; (5) amusement and theme parks; (6) malls; (7) special events; (8) hospitals; (9) hotel, resort, or other lodging facility; (10) state or national parks; (11) exhibition hall; conference facility or convention center; (12) casino or gambling establishment; (13) esports events and venues; (14) street fairs; (15) delivery facilities (e.g.,, ghost kitchens) or (16) any similar area to the sites referenced herein n (collectively, "Captive locations"). Franchisor may not alter the Development
Area without Franchisee's written agreement. However, Franchisor may terminate the MFA if Master Franchisee (i) fails to meet the Development Schedule; (ii) fail to comply with any other terms and conditions of this Agreement;
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a Master Franchisee gains the right to grant subfranchises to third parties for establishing and operating Subfranchised Bhc Restaurants within a designated Development Area, but only after they have opened at least one Affiliate Franchised Bhc Restaurant under a separate Subfranchise Agreement. This is in accordance with the Operating Manuals and using Bhc's System and Intellectual Property Rights.
The Master Franchisee must follow an approval process to ensure that each potential subfranchisee and restaurant meets Bhc's current minimum requirements, which Bhc retains the right to approve. The Master Franchisee cannot directly operate Bhc Restaurants, except through an Affiliate Franchisee that has a Subfranchise Agreement with the Master Franchisee.
The Master Franchisee is also responsible for preparing, amending, and annually updating a Subfranchise FDD in accordance with all Franchise Laws for offering and selling subfranchises. They must register the Subfranchise FDD with the states, provide it to prospective subfranchisees, and comply with all applicable waiting periods before receiving any consideration or signing any binding agreements.
These regulations ensure that Bhc maintains control over its brand and standards, even while allowing Master Franchisees to expand the franchise network through subfranchising. The initial development schedule outlines the number of Bhc Restaurants (including Franchised Bhc Restaurants) that the Master Franchisee must secure, establish, and operate through its Subfranchisees.