What are 'Operating Rights' for Bhc, and how do they relate to Affiliate Franchised BHC Restaurants?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
Under the MFA, you will be granted the right and license: (i) to grant subfranchises for the establishment and operation of BHC Restaurants, as defined below, within the Development Area ("Development Rights") to third party subfranchisees that meet our requirements ("Subfranchisees") by entering into Subfranchise Agreements (as defined below) ("Subfranchised BHC Restaurants"); and (ii) to directly own and operate through an affiliate of the Master Franchisee ("Affiliate Franchisee") ("Affiliate Franchised BHC Restaurants") within the Development Area once opened, and to support, and receive fees from, as applicable, all Master Franchised BHC Restaurants within the Development Area once opened ("Operating Rights").
"BHC Restaurant(s)" means a single retail dine-in, carry-out, drive-thru, and delivery restaurant, serving classic Korean flavor fried chicken (e.g., Korean cheese seasoning, Korean soy sauce, sweet & spicy sauce), sandwiches, wraps, Korean cuisines and other beverages, food, and related merchandise, products, and accessories, using designated concepts, designs, recipes, authorized equipment, and techniques.
"BHC Products" mean any product or service we authorize to be provided at BHC Restaurants under the System, as we may amend from time to time, with the understanding that any such products and services, including pre-packaged or ready-to-drink products and/or related merchandise or services, may only be offered to Affiliate Franchisees and Subfranchisees located within the Development Area, and not through any other distribution channels.
"Master Franchised BHC Restaurants" means Affiliate Franchised BHC Restaurants and Subfranchised BHC Restaurants opened and operated by Affiliate Franchisee or Subfranchisee respectively pursuant the Master Franchisee's Development Rights and Operating Rights.
Source: Item 1 — The Franchisor, And Any Parents, Predecessors, And Affiliates (FDD pages 7–10)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, 'Operating Rights' are granted to the Master Franchisee, giving them the ability to support and receive fees from all Master Franchised BHC Restaurants within their Development Area once those restaurants are opened. These rights are tied to the Master Franchise Agreement (MFA). Master Franchised BHC Restaurants include both Affiliate Franchised BHC Restaurants (owned and operated by an affiliate of the Master Franchisee) and Subfranchised BHC Restaurants (owned and operated by third-party subfranchisees).
In essence, the Master Franchisee has two primary avenues for establishing Bhc restaurants within their designated territory: through subfranchising to third parties and through direct ownership and operation via an affiliate. The 'Operating Rights' ensure that the Master Franchisee benefits financially from all Bhc restaurants operating within their Development Area, regardless of whether those restaurants are affiliate-owned or subfranchised. This creates a vested interest for the Master Franchisee to support all restaurants in their territory to ensure their success.
It's important to note that the Master Franchisee cannot directly operate a Bhc Restaurant themselves. They must do so through an affiliate that enters into a separate Franchise Agreement with Bhc. This distinction is crucial because it clarifies the roles and responsibilities of each party involved. The Master Franchisee focuses on development and support, while the Affiliate Franchisee focuses on the day-to-day operations of the restaurant. The Master Franchisee is responsible for preparing a Subfranchise FDD to offer and sell subfranchises for Bhc Restaurants to prospective subfranchisees, including affiliates.
Furthermore, the Master Franchisee's ability to grant subfranchises is contingent upon first establishing and operating at least one Affiliate Franchised BHC Restaurant within the Development Area. This requirement ensures that the Master Franchisee has firsthand experience with operating a Bhc restaurant before entrusting the brand to third-party subfranchisees. This also demonstrates a commitment to the brand and the Development Area.