What payments are due to Bhc upon termination of the franchise agreement?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
(d) If this Agreement is terminated prior to the end of its term due to Franchisee's default hereunder, in addition to any amounts set forth in this Agreement, Franchisee shall promptly pay to Franchisor a lump sum payment (as damages and not as a penalty) for breaching this Agreement and for Franchisor's lost future revenue as a result of such breach in an amount equal to the average monthly royalty fees, advertising fees, and additional fees payable by Franchisee under Sections 4.3, 4.4 and 10.1 over the twelve (12) month period immediately preceding the date of termination (or, if the Store has been open less than twelve (12) months, the average monthly royalty fees and advertising fees payable by Franchisee for the period the Franchised BHC Restaurant was open) multiplied by the lesser of thirty-six (36) months or the number of months then remaining in the then-current term of this Agreement. If no Franchised BHC Restaurant has been opened at the time of termination, Franchisor's lost future revenues as a result of Franchisee's breach shall be an amount equal to the average monthly royalty fees, advertising fees, and additional fees payable by other similarly situated franchisees within twenty-five (25) miles of Franchisee's proposed locations multiplied by the lesser of thirty-six (36) months or the number of months then remaining in the then-current term of this Agreement. Franchisee acknowledges that a precise calculation of the full extent of the damages Franchisor will incur in the event of termination of this Agreement as a result of Franchisee's default is difficult to determine and that this lump sum payment is reasonable in light of the damages Franchisor will incur for Franchisee's material default causing the premature termination of this Agreement. This lump sum payment shall be in lieu of any damages for Franchisor's lost future revenue that Franchisor may incur as a result of Franchisee's default, but it shall be in addition to all amounts owed to Franchisor and other costs and expenses to which Franchisor is entitled under the terms of this Agreement. Franchisee's payment of this lump sum shall not affect Franchisor's right to recover damages other than lost future revenue and to obtain appropriate injunctive relief and other remedies to enforce this Section 15, its trademark rights, and the covenants set forth in this Agreement.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, if the franchise agreement is terminated early due to the franchisee's default, the franchisee must pay Bhc a lump sum for breaching the agreement and for Bhc's lost future revenue. This payment is calculated as the average monthly royalty fees, advertising fees, and additional fees payable by the franchisee under Sections 4.3, 4.4, and 10.1 of the franchise agreement, over the 12-month period before termination. If the restaurant has been open for less than 12 months, the calculation uses the average monthly royalty and advertising fees payable during the period the restaurant was open. This average is then multiplied by the lesser of 36 months or the number of months remaining in the agreement's term.
If no Bhc restaurant has opened at the time of termination, the lost future revenues will be calculated based on the average monthly royalty fees, advertising fees, and additional fees payable by other similarly situated franchisees within 25 miles of the franchisee's proposed location. This amount is then multiplied by the lesser of 36 months or the number of months remaining in the agreement's term. Bhc states that this lump sum payment is not a penalty but is meant to compensate for the damages Bhc will incur due to the early termination.
This lump sum payment is in place of damages for Bhc's lost future revenue but is in addition to all other amounts owed to Bhc and other costs and expenses Bhc is entitled to under the agreement. The franchisee's payment of this lump sum does not affect Bhc's right to recover damages other than lost future revenue or to obtain injunctive relief and other remedies to enforce Section 15, its trademark rights, and the covenants in the agreement. This means that even after paying the lump sum, a franchisee could still be liable for other outstanding debts and legal actions related to breaches of the franchise agreement, trademark infringements, or violations of covenants.