Regarding default notices served by Bhc, can Bhc specify additional breaches beyond those initially described in the notice?

According to Bhc's 2025 Franchise Disclosure Document, Bhc retains the right to specify additional breaches beyond those initially outlined in a default notice. Specifically, the description of any breach in a notice served by Bhc does not prevent Bhc from specifying additional or supplemental breaches in any action, arbitration, mediation, hearing, or suit relating to the Franchise Agreement or its termination. This clause applies both to franchisees and master franchisees.

This provision means that a Bhc franchisee could face legal action or other proceedings that cite breaches of the agreement not originally mentioned in the initial default notice. This could create uncertainty and potentially increase the franchisee's legal and financial burden if they have to defend against new claims that arise later in the process. It is important to note that this clause does not appear to be limited by materiality, meaning even minor or technical breaches could be added to the list of defaults.

While this clause grants Bhc broad latitude in specifying breaches, other sections of the Franchise Agreement may provide some limitations or protections for the franchisee. For instance, statutory limitations may apply if any valid law or regulation limits Bhc's rights of termination or requires longer notice periods. Additionally, Bhc may offer an extended cure period, not exceeding six months, to allow the franchisee to rectify the initial breach, although this is at Bhc's sole discretion and does not waive any of Bhc's rights.

Prospective Bhc franchisees should carefully consider this provision and seek legal counsel to understand the full scope of their obligations and potential liabilities. It would be prudent to inquire with Bhc about the circumstances under which they typically add supplemental breaches to a default notice and whether there are any internal guidelines or policies that govern this practice. Understanding Bhc's approach to enforcing this clause can help a franchisee better assess the risks and responsibilities associated with the franchise agreement.